Real Estate Principles (Practice Exam 1)

What is the mill rate of .017?

17

The continuing education requirement in California is ____________hours every __________ years.

45, four

What is the California Statute of Limitations on bringing a court foreclosure to enforce a mechanic's lien? To bring action for removal of encroachments?

90 days after filing the lien; Three years

Lois is selling her needlework shop to Simon. Simon is also purchasing the name of the business from Lois, all of the fixtures, and the inventory. Lois is essentially handing over the entire business, from top to bottom, to Simon, who is planning continuing what she had started. What are the essential elements of this business opportunity sale?

A Bill of Sale

Karen and Jay need a larger home. They have two large dogs and a baby on the way. One day in the real estate section, they see their dream home. The couple view the home that very day, make an offer and it's accepted. There's only one problem: They haven't even put their home on the market. Which type of loan gives Karen and Jay their best option of paying two mortgages until their current home sells?

A Bridge Loan

In a general warranty deed, the implied promise: "If there is a defect, I promise to take care of any problems" is referred to as:

A Covenant of Further Assistance

What are the parts of a mortgage loan? What purpose does each part serve?

A Pledge and Collateral. A Pledge is a promise to pay; and Collateral allows a lender the right to foreclose if the borrower does not pay.

A Point of Beginning refers to:

A description starting at a designated place on a parcel using the Metes and Bounds System.

Which of the following is exempt from the Natural Hazards Disclosure?

A geological hazard

Appraiser Jones appraises one-to-four unit residential properties, and non-residential properties with a transaction value up to $250,000. What is this appraiser's level? How many hours of appraiser education were completed?

Certified Residential Real Estate Appraiser, 200 hours

Which act is known as the original fair housing statute?

Civil Rights Act of 1866

Brett lost his job last year. He has only been able to find temporary work and fell behind on his mortgage. His home is currently in foreclosure. He is confused as to what will happen and how the debts are paid. What is the order of payments in foreclosure?

Cost of Sale; Special Assessment Taxes and General Taxes; the First Mortgage which is determined by the order of recording; and whatever is recoded next would be paid.

Which is not a form of syndication?

An Equity Trust

Derek's new office is undergoing a minor renovation and he cannot conduct business in the location for approximately six months. He decided to lease a temporary office in Samantha's building from June 1 to December 30. Which type of lease has Derek signed?

An Estate For Years

Which of the following statements concerning real and personal property is true?

Annexation changes personal property to real property; severance changes real property to personal property.

Mr. Manning has owned a restaurant for forty years. He is in the process of selling his business to a group of investors who plan on revamping the restaurant and turning it into a destination. In the negotiation of the sale, Mr. Manning has stipulated he is willing to accept their offer on two conditions: There may never be any alcohol served on the property and there can never be dancing of any kind. Mr. Manning is insistent on these conditions due to his religious beliefs. If either of these activities ever takes place, Mr. Manning would have the right to take back the property. Which type of estate applies?

Fee Simple Defeasible

This step of the general plan, sometimes known as the master plan, should encompass all aspects of the projected growth, including the social, economic, and physical features. Due to this step, while considered long-range, the plan must allow for short-range flexibility. Which step is described?

Formulation of Community Goals

Caroline has been paying her mortgage steadily for fifteen years. She has just received a notice from her lender that the loan due date is approaching and she will owe a lump sum of $11,257 to pay off her mortgage loan. Which type of promissory note has Caroline NOT been paying?

Fully amortized

Which of the following statements referring to general taxes is true?

General Taxes are Ad Valorem taxes.

Georgina sat for the examination about two weeks ago. She believes she passed with flying colors and checks her mail immediately upon arrival home for her results. Today, they arrived and, as she opened the envelope, she saw her test score. Did Georgina pass or fail?

Georgina failed the exam. The exam is qualifying by nature and if you pass, you pass; your score is irrelevant and is not revealed.

Molly, a successful real estate salesperson, took some time off to stay at home with her first child. Days turned into weeks, weeks into months, months into years, until Molly's child was starting school. She decided she needed to head back to her profession and pick up where she left off. During her at-home time, Molly hadn't kept up with any CE requirements, nor had she renewed her license after its expiration almost three years earlier. Can Molly simply pick up where she left off?

No, two years after the license expires, all license rights lapse. Molly must re-qualify through the examination process before being licensed in real estate once again.

Ramon did not pass his licensing examination. He didn't think it was a possibility to fail and doesn't know what to do to re-take the test. Ramon is not even sure he is allowed to take the examination a second time. What are Ramon's options?

He must repay

When can a violation that hasn't happened yet be a violation?

If the Commissioner believes that a person has or is about to commit a violation of law, order, license, permit, etc., the Commissioner has the authority to bring action against the person.

When is a real estate licensee considered a creditor?

If the licensee routinely assists sellers in determining whether a proposed buyer in a land contract or purchase-money mortgage is creditworthy.

Bob leased an apartment for three years from the Steiners. He was never late on his rent in those three years, kept the apartment immaculate, and never caused a moment of trouble. He has recently purchased his first home and moved out of the apartment. As expected, Bob gave the Steiners sixty days' notice he would be moving and left the apartment in perfect condition. It has been 45 days since he moved out and he's been watching for his security deposit refund to purchase a new sofa. When should he expect his security deposit refunded?

If there had been no damage or cleaning required, which seemed highly likely in Bob's case, the landlord should have refunded his security deposit within 21 days of Bob's vacating the property.

Shakeel and Shaheen have sold their home, made an offer on Derek and Kamisha's home, and the offer was accepted. All the details of the sale have been worked out, agreed upon and signatures obtained. Now, Shakeel and Shaheen must obtain a loan for the property. What is the best term to describe their position in the transaction's timeline?

In Contract

What is the difference between Southern California and Northern California in reference to escrow accounts?

In Southern California, escrow services are usually performed by independent escrow companies or financial institutions. In Northern California, the escrow services are usually performed by title insurance companies.

Which of the following is not an exemption to the federal fair housing laws concerning age and family status?

In a retirement community if 70% of the dwellings have one person who is 55 years of age or older, provided there are amenities for elderly residents.

Which of the following liens is both general, involuntary, and statutory? Which lien is specific, voluntary, and equitable?

Income Tax Lien; Mortgage Lien

Adeeb has listed his condo with Maria's broker and she is his listing agent. The listing agreement is signed and the day to begin showing his property is nearing. Adeeb decides the day before the open house to raise his asking price by $20,000. Maria disagrees with the decision but goes along with Adeeb's wishes. How must Maria take care of this contractual change in price?

Maria must change the listing price on a price change or extension form.

When an appraiser assumes that no one is being forced to sell at a reduced price because of an impending divorce or similar situation; and that both buyer and seller are well-informed customers, he is more than likely hired to determine:

Market Value

Christina is planning on getting married in the next year. She is a very successful business owner and is planning on buying some vacation property on the coast. She asks her agent, Martina, for advice on how she should take title to this new property. Should she hold the title alone, or jointly with her fiance? How should Martina advise?

Martina should discuss with Christina what she knows in reference to how title can be vested but give no advice except to consult an attorney for advice.

Which of the following is not a characteristic of the California mortgage market?

Mortgages are used instead of Deeds of Trust, which allows borrowers greater flexibility and protection.

Patrice and Cornell are completing a sales contract with Mary, their agent. The sales contract used at Mary's brokerage is preprinted. Mary, as a senior agent, has the authority to waive one of the brokerage's fees. The fee is explained and preprinted on the contract. Mary simply crosses it out, writes "waived," and both parties initial. Which overrules the other? The preprinted or handwritten portions of the contract?

Handwritten portions of real estate contracts always supersede preprinted forms.

What is the form of California State Real Estate licensing examinations?

Multiple Choice

Which of the following is not a requirement for an FHA loan?

Prepayment penalties are optional.

The Statute of Limitations is:

Prevents action from being taken against an individual after a prescribed period of time

Wallace and Melissa live in a small rural community of just over 15,000. They want to purchase a home and start a small home-based business. At the current time, they have a very limited income and need their own home. Where is the best place for Wallace and Melissa to turn for a home loan?

Rural Economic and Community Development (RECD)

Chip is a veteran who fought in Desert Storm. He has just retired from the military. He has been told he qualifies for a property tax exemption based on his military service during wartime. Which exemption applies to Chip?

Section 205

Although 16-year-old Tameka's goal is to be a licensed real estate salesperson in the State of California, she is currently living in Canada. Her long-term goal is to be a successful salesperson, manager, and to own a brokerage. She has been studying the Real Estate Principles Course for next week's exam. However, if she passes, she cannot apply for her 4 year salesperson's license. Why?

She is not 18

Ross, a newly licensed residential real estate appraiser, is on his way to appraise his very first piece of property. He is nervous on the way to the property and is going through the appraisal process in his head. Please help Ross put the appraisal steps in order.

State the problem. Gather, record and verify the necessary data. Analyze and interpret. Neighborhood analysis. Neighborhood cycle. Site analysis.

Agent Simpson tells residents of a neighborhood that minorities are moving into the neighborhood, and property values are sure to plummet. Simpson goes on to say, "resale values will suffer, the neighborhood will deteriorate, and if they don't sell their homes now, they will lose money." What form of illegal discrimination is Agent Simpson practicing?

Steering

Shivaram and Kiran are buying a home in a new subdivision. Due to all of the subdivisions in the area, a new elementary school is being built. Additionally, a new area park is planned. Shivaram and Kiran have been informed the taxes on their new home are substantially higher than their previous property. Why?

The Mello-Roos Community Facilities Act of 1982

Janet is a broker who negotiates a number of loans to specific subdivisions. Last year, she took part in 27 loans to homeowners in one subdivision. Due to this large number of loans to a subdivision, Janet has to report loan activities to the California BRE. What is the name of this reporting process, how often must the reports be made, and what is an additional requirement for making these reports?

The annual and quarterly process is Threshold Reporting. Additionally, if a broker negotiates more than $1,000,000.00 in loans annually, he must take part in Threshold Reporting.

In studying for her real estate license, Elise is reading about police power. She is confused and doesn't understand why law enforcement would have any role in real estate sales, transactions, and regulations. What does the term "police power" refer to in real estate?

The constitutional right of the government to regulate private activity to promote the general safety, health, and welfare of society.

Which of the following conditions does not apply in converting a mobile home into real property?

The homeowner is required to have a tag guaranteeing the mobile home's proper construction.

What is the major difference between an Estate for Years and an Estate from Period to Period?

The major difference is: in an Estate from Period to Period, the tenant must give notice to vacate whereas in an Estate for Years, there is no need to give any notice.

Along a non-navigable stream, does an owner own the land, the water, both, neither? What is this right?

The owner owns the land to the center of the stream and the government owns the water. It is a Riparian Right.

When an owner dies without a will or heirs, what happens to the property and why?

The property is transferred to the state. Property cannot be without an owner.

Zoning ordinances have changed in the area adjacent to a residential neighborhood. The residents are incensed a retail shopping area is being developed one block from their subdivision. They are concerned about the traffic, noise, and what this will do to their property values. The new zoning ordinances must ensure:

The provisions be clear and specific.

Tamara and her children live in a subdivision with a tennis court and swimming pool. Her children are thrilled to be able to use these wonderful amenities. Who actually owns the tennis court and swimming pool? Tamara and her children reside in which type of common interest development?

The tennis court and swimming pool are owned in common by all the property owners. It is a Planned Unit Development.

In early common law, transfers of land were only made when:

The transfer of land from father to son, upon the father's death.

The Brights are buying a home from the Stones. They are splitting the escrow service fees 50-50. Do they live in Northern or Southern California? How does the other region usually handle the escrow service fees?

They live in Southern California. In Northern California the buyer usually pays the escrow service fees.

Which of the following is not a prohibited escrow-related activity?

They may not permit, under any condition, any person to make any addition, deletion, or alteration of an escrow instruction.

Ben and Amanda are interested in a vacant, undeveloped lot. They are going to continue to live in their current home, pay off the lot's loan, and then build a new home on the lot. Before closing on the purchase of the lot, they discover the zoning regulations permit nightclubs to be built in the immediate area. They specifically asked the broker about this issue and were told there was no reason to worry. What are Ben and Amanda's options, if any?

They may rescind the transaction based on the misrepresentation of the broker.

Which form of payment is most common for a property manager?

Percentage of Income

Carol is studying for the California real estate license examination. She knows she has to know all areas covered in the examination extremely well to pass. Which portion of the examination, approximately, makes up the largest portion of the test?

Practice of Real Estate & Mandated Disclosures

Is a broker allowed (permitted) to accept lender funds unless that broker owns the loan? Which requirement under the California Business and Professions Code addresses the question?

Yes, it is permissible for a broker to accept those funds. They will eventually be used for a loan or to buy a specific note. The requirement is outlined in Article 5.

Tracy and Darnell are buying a home. They have a 15% down payment and have qualified for a thirty year fixed conventional rate mortgage. Will Tracy and Darnell have to pay PMI?

Yes, private mortgage insurance is required for all loans with less than 20% down payment.

A developer wants to build a sprawling two-story office complex. The developer's and architect's vision is something low, modern, and new. They are planning the complex in an urban area of town, replacing ten blocks of old high-rise buildings. Unfortunately, the zoning commission's vision does not coincide with either the developer's or the architect's. Which type of zoning regulation applies?

Aesthetic Zoning

Mobile homes manufactured ___________ are required to have tags guaranteeing proper construction. Who issues this tag?

After June 15, 1976; HUD

Anthony is adding a new deck to his home. He has obtained all the necessary building permits to construct his new deck. Anthony's neighbor, Steve, informed him he has to have a California State Contractor's License to even work on his own property. Anthony says that Steve is wrong. Who is right in this situation?

Anthony is correct. Anyone who does the business of a contractor must be licensed. Unless, the property owner is planning to sell the finished real estate project, he does not need a license to work on his own property.

Marcus wants to have the deed to his new home recorded to protect his ownership rights. In order to record the deed, it must be notarized. Marcus must go before a notary public and verify the signing of the deed. The notary then signs the deed. The verification of Marcus' signature in the signing of the deed is known as:

Attestation

Which of the following does NOT belong in listing agreement provisions?

California Statute of Frauds

In order to equalize business in their area, ABC Realty and RMH Realty have an unwritten agreement. They have agreed to split up their area with ABC taking everything north of the highway and RMH everything south. Under this agreement, the real estate agents licensed to each respective brokerage will not be competing and all will profit. Is this a violation? If it is a violation, what is it called and what is it violating?

Division of markets is a violation of the Sherman Antitrust Act.

What are the types of legal life estates?

Dower, a wife's interest in the husband's property; Curtesy, a husband's interest in a wife's property; and Homestead, protection against unsecured debts for the party who did not sign for the loan.

Judy is the listing agent for the Brandts' home. In the inspection of their home, she discovers a few issues of concern. The basement is very damp and smells of mildew. Judy noticed what appeared to be mold on the interior walls of the lower level. She also saw what she believed to be their main line overflowing in the utility area of the basement. State the case that is responsible for broker's conducting a diligent inspection of properties they are listing or selling.

Easton v. Strassburger

XYZ Corporation is interested in a piece of land for development. They are selling off a bit of company stock to buy the property without any debt. Is XYZ's sale of stock considered a form of financing?

It is actually considered a mortgage financing alternative.

When is it permissible for a broker to possess an out-of-state trust account?

It is only permitted if the FDIC insures the account, and the account is used only for specific first loans.

Thad and Pierre made an appointment to view a condo for lease advertised in the newspaper. Thad phoned the landlord and set up a viewing for two hours later in the day. The couple thought the condo was perfect and informed the landlord they wanted to start the application process to lease the condo. The landlord then explained the condo had just been leased. The next Sunday in the classifieds, the condo was again advertised for lease. A friend of the couple phoned the landlord, pretending to be interested in the property. When asked if it had been leased, the landlord replied "No". What is going on in this situation?

It seems the landlord did not like the idea of leasing his condo to a same sex couple. This is not permissible. A landlord must live by federal and state fair housing laws.

Jack is leasing a home from Justin for a year. He has decided to lease until he gets a good feel for the area and knows where he wants to buy. In this relationship, who has the reversionary right and who has the possessory right ?

Jack has the possessory right and Justin the reversionary right.

Kim, Chris, and Beth are all partners in a cosmetics firm. Kim is leaving the partnership and wants to sell her shares of the business, including the property owned by the partnership, to Chris and Beth. The three partners own the property with the right of survivorship should one or more of them die. The remaining partners are not interested in buying Kim's interests. Kim has been unable to find a buyer for her share of the partnership. She has now resorted to asking the court to either sell her shares or sell the entire property. What form of concurrent ownership applies?

Joint Tenancy

Ken has just passed his licensing examination. However, he has been notified the DRE will not issue a full-term license. Ken is behind on child support payments and therefore has not complied with a court order to provide these payments. Will Ken ever be able to obtain his license?

Ken may be issued a 150-day temporary license while he is on the list of child support obligors. Only one 150-day temporary license may be issued. His full-term license may be issued if a release is obtained from the district attorney's office during the 150-day temporary period.

Calvin is buying his first home. He has been saving and saving for years. The home he is buying has a price of $300,000 and Calvin has a down payment of $75,000. Calvin's loan is considered:

Low Risk

Which are the four elements required for a valid contract?

Legally Competent Parties; Offer and Acceptance; Consideration; and Legality of Object

Lillian is buying Julia's home in Malibu. Julia, after selling her home to Lillian, is buying Anne Marie's condo in San Francisco. In these transactions, who is the grantor and who is the grantee?

Lillian is the grantee and Julia is the grantor. Julia is the grantee and Anne Marie is the grantor.

Dan has recently been transferred to San Diego, and only has a month to find a home, sell his condo, pack, move, close, and get to work. His agent shows him the Walsh home and it's perfect. He offers the asking price, along with all the kitchen appliances and window treatments to remain with the property. The Walsh's accept his offer exactly as it is written. Which contract term applies to this situation?

Mirror Image

Elliot has misrepresented himself by acting in the capacity of a real estate salesperson without being licensed by the State of California. Elliot had his license revoked three years ago for unethical actions. Elliot is guilty of what level of violation?

Misdemeanor

Due to the subdividing of lots on the lake, Jim's property is surrounded on three sides by Louise's property. The only other boundary is the lake. Jim can only get to his home by driving up Andrea's driveway and behind her lake home to get to his own. How was the easement in this situation created?

Necesity

Which of the following listing agreements is illegal in most states?

Net Listing

Deanna is buying one of Kay's fur coats and several handbags. They are old friends and sometimes purchase each other's items instead of selling to a consignment shop. Deanna agrees to pay Kay $650.00 for the items, writes a check, and collects her purchased items. Is this transaction legitimate?

No, in the State of California, an agreement for the sale of personal property must be in writing if the amount or value of the property exceeds $500.00.

Missy, a licensee, desperately wants to be appointed the next California Real Estate Commissioner. For the three years she has held her California real estate license, she has been ranked in the top five in new home sales in her office. Missy has never had her license suspended or revoked, and prides herself on being ethical in every transaction and interaction. Does Missy have a chance?

No, not at this point in her career. In order to be appointed to the post by the governor, she must have a minimum of five years' experience as a real estate broker.

Janice has given her broker an earnest money deposit check with written instructions to hold the check until the seller has accepted her offer. Her broker follows instructions and informs the seller, through a telephone conversation with the seller's agent after the initial offer was presented, the buyer's check is being held awaiting offer acceptance. Did Janice's broker handle this situation correctly?

No, the broker must inform the seller in writing the buyer's check is being held until acceptance of the offer.

Drew is leasing his apartment from Reggie. The lease is for one year and they have agreed on all areas of the contract. The lease is in written form, and Reggie is the only party that has signed. Without Drew's signature, is the lease now invalid?

No, the lessee is not required to sign, only the lessor. The lessee's occupation of the property is proof the lease agreement was accepted.

John and Thom are purchasing their dream home. Due to the expiration of escrow instructions, the escrow has been terminated. Have they lost the contract on the house of their dreams?

No, the termination of an escrow does not terminate the associated contract.

Which of the following parties are not exempt from the real estate licensing requirements in California?

Off-Site Property Managers

Brian and Leslie have made an offer on Rudy and Judith's home. The first offer was rejected by the sellers. Brian and Leslie made another offer; Rudy and Judith rejected that offer. Never quitters, Brian and Leslie decided to try one last time and present their last and best offer. Rudy and Judith decide the prospective buyers are close, and make a counteroffer. What's the situation after a counteroffer is made by the sellers?

Once the counteroffer is made by the seller, the buyer's original offer becomes invalid. If the buyers accepts the offer the seller has made, the same process takes place as with a regular offer.

Katie and Rich own a rental home they have put up FSBO. They've noticed the same woman has accompanied several potential buyers viewing the home. Katie and Rich discover she is a broker that has been "showing" the home on the sly without their permission. Instead of fighting this aggressive salesperson, the couple just go along. In which manner was agency created?

Ostensible Agency

Agent Sims needs one more new home sale this month to receive a bonus. She has one more that could possibly close and help her meet the goal. However, today she was informed the financing fell through for the buyer. Agent Sims has a lender friend that owes her a favor. She calls the lender, offers the friend one-quarter of her bonus if he will finance the buyers who were turned down. Which penal code section addresses this crime?

PC 639-639a

Ted and Lisa are selling their home and have signed a listing agreement. Client or customer? Steven visits Ted and Lisa's open house, and he is interested in purchasing their home. What happens next? Is Steven a client or customer?

Ted and Lisa are clients, and Steven is a customer. The listing agent must disclose to Steven that he/she represents Ted and Lisa and explain customer relationships.

Broker Burns is negotiating a first trust deed loan for buyers. The buyers have signed a contract for a fifteen-year loan. What is the maximum commission for Broker Burns?

Ten percent of the principal of the loan.

The Western Acres neighborhood is a highly desirable area in which homes very seldom go on the market. The Western Acres properties placed on the market sell very quickly and usually for or above asking price. Which principal of real estate applies to the homes in Western Acres?

The Law of Supply & Demand

Agent Green is faced with an ethical dilemma. He was present when two brokers were having an unethical discussion that could be considered collusion. He doesn't know if he should act as if it never happened, or report the incident to his broker. What steps should he employ when making this decision?

Think about who stands to gain and lose by his decision.

An undeveloped acre of land sits in the middle of a secluded rural community. How many separate owners could this acre have?

Three owners: One could own the subsurface rights, one the surface rights, and another the air rights.

Which of the following is not a goal of a real estate appraiser?

To determine the marketability of a property.

Ensuring consumers are fully informed of all finance changes and aware of the true annual interest rate are requirements of which regulation?

Truth in Lending

Agent Peters has qualified buyers to purchase a new home. Now he needs to qualify the property they wish to buy. He understands the human qualification process. Can you help Agent Peters with steps to qualify the property?

Type of property and area zoning

Timothy has been hired by the estate of Tyler Wilbanks, who is recently deceased. Timothy has Power of Attorney and will be handling all the real estate affairs of the deceased estate. Which type of agent is Timothy?

Universal Agent

Which of the following is not a fourfold unity?

Vesting