SAMPLE EXAM
Find the value by use of the income approach. (round to the nearest $100) 1. an older three-unit apartment rents for $1,000 per month per unit 2. vacancy factor of 5% 3. annual operating expenses $10,000 4. capitalization rate of 8% A. $302,500 B. $288,000 C. $276,500 D. $275,000
A. $302,500 $1,000 x 3 = $3,000 x 12 months = $36,000 $36,000 x .05 for vacancy factor = $1,800 $36,000 - $1,800 - $10,000 = $24,200 Net Operating Income $24,200 -:- .08 / Cap Rate = $302,500
If an owner files a proper Notice of Completion in the County Recorder's office, unpaid subcontractors have how many days to file a lien? A. 30 days B. 60 days C. 90 days D. 180 days
A. 30 days Statutory Time Periods: A. Notice of Completion filed Original Contractor = 60 days after filing All Others / Subcontractors = 30 days after filing B. No Notice of Completion filed Everyone = 90 days after completion C. Once Mechanic's Lien is filed Must execute in 90 days after filing.
Under the Trustee's Sale procedure, after a Notice of Default has been recorded, a borrower has how long to reinstate by making up past payments, penalties, late charges, and trustee expenses? A. 5 days prior to trustee's sale date B. 90 days C. 3 months D. 1 year
A. 5 days prior to trustee's sale date. In California, you can reinstate your defaulted mortgage loan and avoid foreclosure up to five days before your home's auction sale.
A purchaser of a lot in a rural land project can cancel the purchase contract and receive a full refund in how many days? A. 7 days B. 14 days C. 30 days D. 60 days
A. 7 days
An Act of Congress that specifically reaffirmed the Civil Rights Act of 1866 was the A. Civil Rights Act of 1870. B. Executive Order of 1962. C. Civil Rights Act of 1964. D. Civil Rights Act of 1968.
A. Civil Rights Act of 1870.
A real estate licensee can sell used mobile homes provided the mobile homes have been registered with the: A. Department of Housing and Community Development B. Federal Housing Administration C. Department of Veterans Affairs D. Department of Real Estate
A. Department of Housing and Community Development
A government agency which guarantees that holders of mortgage securities will get timely principal and interest payments is the A. Government National Mortgage Association (GNMA). B. FHA. C. Department of Veterans Affairs. D. Federal Reserve.
A. Government National Mortgage Association (GNMA). GINNIE MAE - only deals with unconventional loans, gov't backed loans. Wholly owned by the Federal Gov't. A Dept. within HUD. They guarantee timely payments of residential mortgage backed securities, insured by Federal Agencies.
Lessor A leases to Lessee B who legally subleases to Sublessee C. Which of the following is correct? A. Lessor A looks to Lessee B for payment. B. Lessor A looks to Sublessee C for payment. C. Lessee B does not have a contract with Sublessee C. D. There is only one contract in this transaction.
A. Lessor A looks to Lessee B for payment. SUBLEASE - Tenant 1 Assigns the Lease to Tenant 2 - is usually fine unless the lease agreement says you cannot sublet - just like an assignment. Tenant 1 only transfers a PART of the INTEREST. TENANT 1 = SUBLESSOR TENANT 2 = SUBLESSEE - No Privity of Estate between Landlord and Tenant 2. Tenant 1 / Sublessor remains entirely liable, or (aka SEVERALLY LIABLE) for the lease agreement.
Which of the following types of loans are made only to individuals who are intending to occupy the property as a personal residence? A. VA B. conventional C. purchase money D. jumbo
A. VA
By initialing the dispute resolution clause, the parties agree to A. a binding arbitration. B. waive arbitration rights. C. mediate rather than arbitrate. D. a non-binding arbitration.
A. a binding arbitration.
Which of the following is correct? A. a real estate salesperson and a broker may form a partnership to run a real estate brokerage business B. the fine for paying a commission to an unlicensed person is $5,000 C. appraisers need a real estate license D. the Real Estate Commissioner is appointed by the legislature
A. a real estate salesperson and a broker may form a partnership to run a real estate brokerage business - The fine for an unlicensed person who receives an illegal commission is $20,000 - Appraisers need appraisers licenses. - Real Estate Commissioner is appointed by the Governor.
On a seller's closing statement, a sale listing commission to be paid to a broker would generally be a A. debit to the seller. B. credit to the seller. C. debit to the buyer. D. credit to the buyer.
A. debit to the seller.
An easement with only a servient tenement is an: A. easement in gross B. easement appurtenant C. easement egress D. easement for encumbrance
A. easement in gross Easement in Gross - A right of use in the land of another without the requirement that the holder of the right own adjoining land. Think of a utility company with an easement in gross to access a telephone pole on your property.
A loss in value because of a busy street is an example of: A. economic obsolescence B. accrual for depreciation C. functional obsolescence D. physical deterioration
A. economic obsolescence
Which of the following would constitute a proper delivery of a deed: A. escrow mailing the deed to the grantee after seller signed B. the seller signed and gave to broker with instructions to give to buyer C. escrow delivers deed to buyer without seller signatures D. after signing the deed, grantee personal delivers to grantor
A. escrow mailing the deed to the grantee after seller signed A deed must be delivered before its considered valid and effective. ACCEPTANCE - the deed is considered accepted when the grantee accepts it, or obtains the mortgage. Acceptance has to take place while the grantor is still alive. The law presumes a valid delivery if the deed is found in the possession of the grantee or is recorded, but such presumption is rebuttable. A deed may be entrusted to a third party (such as an escrow agent) with directions that it be delivered to the grantee upon the performance of designated conditions.
A deeds a life estate to B and upon B's death, title returns to A. This is an example of what type of life estate? A. estate in reversion B. estate in reservation C. estate in remainder D. estate in severalty
A. estate in reversion = Property or estate ownership that reverts back to the grantor after a temporary ownership period. ESTATE IN REMAINDER - For Bob's life, then to X, (a 3rd person involved). Does not revert back to GRANTOR. Also a future right in possession or use. ESTATE IN SEVERALTY = an estate which the tenant holds in his own right, without being joined in interest with any other person; RESERVATION = A clause in a deed of real property whereby the grantor, one who transfers property, creates and retains for the grantor some right or interest in the estate granted, such as rent or an Easement ,a right of use over the land of another.
A type of deed that contains an after acquired clause is a: A. grant deed B. quiet deed C. quitclaim deed D. gift deed
A. grant deed
Advertising a home for sale in a minority area exclusively in a paper aimed at that minority group would MOST likely be regarded as: A. steering. B. blockbusting. C. redlining. D. subordination.
A. steering.
A real estate promissory note that reads "$200,000 principal payable interest only monthly at a rate of 7%" is what type of promissory note? A. straight B. installment C. principal and interest D. accommodation
A. straight STRAIGHT NOTE (TERM NOTE) - is interest only payments. With a straight note the entire principal is due on a certain date. It was this kind of note that got a lot of people in trouble during the financial crisis of 2008.
If a married person with one child dies intestate and leaves separate property, the descendant's interest passes to the: A. surviving spouse and child B. surviving child, and not the surviving spouse C. surviving spouse, and not the surviving child D. surviving parents
A. surviving spouse and child
"Bait-and-switch" advertising is specifically prohibited by the A. truth-in-lending law. B. Real Estate Settlement Procedures Act. C. Civil Rights Act of 1968. D. Holden Act.
A. truth-in-lending law. (TILA) - (aka REGULATION Z) The purpose is to help borrowers to understand how much its costing them to borrow money. Required for all loan documents. All lenders must show loan costs in the same way so that the borrower can do a comparison - called the Uniform Disclosure Statement - shows all the loan costs with APR - also provides a three day right to rescind for the home loan if its re-financed or a home equity. NOTE: with Purchase Loans, there is NO 3 Day Right to Rescind - because during the inspection period you have the opportunity, that window of time, to change your mind. REG Z also controls how the real estate finance terms can be advertised - also the ads that real estate agents can use.
Buyer makes a written offer to purchase, and seller signs the acceptance. A contract is first created: A. when buyer receives proper communication of seller's acceptance B. immediately upon seller's acceptance C. when the buyer and seller sign escrow instructions D. when the broker presents the offer to the seller
A. when buyer receives proper communication of seller's acceptance.
To settle the estate of the deceased, a probate sale is held on a mobile home. The first court bid is $30,000; the next minimum bid must be for at least: A. $31,000 B. $32,000 C. $33,000 D. $31,750
B. $32,000 The next minimum bid is typically for 105% + $500
The SE 1/4 of the NW 1/4, and the SW 1/4 of the NE 1/4, and the SW 1/4 of Section 22 contains: A. 2 1/2 acres B. 240 acres C. 45 acres D. 165 acres
B. 240 acres 1/16 + 1/16 = 1/8 + 1/4 = 3/8 = 640 acres 640 -:- 8 = 80 x 3 = 240 acres
"A" deeds to "B" and "B" takes possession but does not record the deed. "A" then tells a friend "C" about the deed to "B". "A" then deeds the same property to "C", who records the deed. Based on this information, title probably vests in: A. A B. B C. C D. both B and C
B. B RACE NOTICE JURISDICTIONS - In CA, this is how we operate. A combination of the Race Jurisdiction and Notice Jurisdiction rules. If the previous purchaser failed to record, and the subsequent purchaser lacked knowledge, ("C" does not have notice of "B's" deed), IN ADDITION TO the subsequent purchaser, "C", being the first to Record. Title would vest in "C" - But, since "A" told "C" about the deed to "B", title would likely vest in "B".
When water is returned to the "water table" by the percolation process, the water belongs to the: A. State B. People C. Water company D. The land owner next door
B. People
Which tax would be MOST difficult to evade? A. Income B. Property C. Inheritance D. Gift
B. Property Real Property tax is the most difficult to evade because it cannot be hidden.
The subdivision law administered by the California Real Estate Commissioner, who requires the issuance of a public report, is the: A. Subdivision Map Act B. Subdivided Lands Act C. Subdivision Report Act D. Subdivided Interstate Act
B. Subdivided Lands Act SUBDIVISION MAP ACT - was administered by local officials - concerns itself with the physical aspects of a subdivision. EX: where the sidewalks go, how the sewer works, how water will get in, etc... SUBDIVIDED LANDS ACT - administered by the CA Real Estate Commissioner and the Bureau of Real Estate. Concerned with the marketing, (fair housing and discrimination laws), and the financing aspect of any subdivision. They're looking for things like fraud or misrepresentation in the sale of the land. Also requires the BRE to issue the final public report - has to be issued before a new unit can be sold. The Final Public Report is good for 5 years or until there's a material change - then they can do an amendment. The public report rule only applies to the first sale of each unit in a subdivision. Any re-sales after that don't count.
An enforceable due-on-sale clause is correctly called a/an: A. acceleration clause B. alienation clause C. wraparound clause D. prepay clause
B. alienation clause ALIENATION CLAUSE = language in a mortgage or trust deed that allows the lender to call the loan immediately due and payable in the event the owner sells the property or transfers title to the property. Almost every loan today contains an alienation clause, which means title cannot transfer and a buyer cannot purchase subject to an existing loan without triggering a due on sale clause. A due on sale clause is the same thing as an alienation clause. ACCELERATION CLAUSE = a term that fully matures the performance due from a party upon a breach of the contract. Suppose, for example, the contract was for A to purchase Blackacre from B for $100,000, to be paid in 5 monthly installments of $20,000. If A makes the first two payments, but fails to make the third payment, an acceleration clause would require that A must immediately pay B the entire balance of $60,000, or lose his right to purchase Blackacre (without getting a refund of his $40,000). WRAPAROUND CLAUSE / mortgage = a form of secondary financing for the purchase of real property. The seller extends to the buyer a junior mortgage which wraps around and exists in addition to any superior mortgages already secured by the property.
All of the following are real property except: A. fruit trees B. chattels C. stock in a mutual water company D. built-in stove
B. chattels = personal property Stock in a mutual water company = real property
Which of the following best describes the requirements to acquire title by adverse possession? A. hostile, continuous use, pay mortgage, open and notorious B. color of title, continuous use, pay property taxes, hostile C. permission, color of title, pay property taxes, open and notorious D. claim of right, hostile, secret use, pay mortgage and property tax
B. color of title, continuous use, pay property taxes, hostile ADVERSE POSSESSION - a squatter. person comes onto property of another without permission = trespassing. If they fulfill the following elements, legal result is they receive title / ownership. Also, taking exclusive possession of property - not just ingress and egress. 1. Open and notorious. 2. Continuous and uninterrupted use. (Exclusive Use). 3. Hostility - in opposition to the true owner. 4. Under claim of right or color of title (see above). 5. Payment of property tax for 5 years - MOST TESTED!!!
Which of the following two terms do not go together? A. covenant - condition B. encroachment - lien C. grantor - grantee D. abstract of judgment - writ of execution
B. encroachment - lien Encroachment -An unlawful intrusion onto another's adjacent property by improvements to real property (ex: a swimming pool built across a property line). Lien - A form of encumbrance which usually makes specific property security for the payment of a debt or discharge of an obligation (ex: judgments, taxes, mortgages, deeds of trust, etc..).
Primary financing refers to A. loans made directly by lenders to borrowers. B. first trust deeds or mortgages. C. construction money loans. D. second trust deeds or mortgages.
B. first trust deeds or mortgages. Primary Financing = The original loan to purchase the property
With the permission of the seller, Broker A submits a listing to MLS inviting cooperating brokers to help find a buyer. This is an offer of: A. dual agency B. general agency C. subagency D. power of agency
B. general agency
Tax shelters refer to: A. property taxes. B. income taxes. C. inheritance taxes. D. sales taxes.
B. income taxes. Tax shelters are any method of reducing taxable income resulting in a reduction of the payments to tax collecting entities, including state and federal governments.
When a special assessment is made on a piece of property under the Street Improvement Act of 1911: A. property owner can deduct principal and interest B. it is based on the front footage of the property C. it is appraised as per the amount of square footage D. assessment must be paid within six months
B. it is based on the front footage of the property
Conforming loans are A. loans on standard loan forms. B. loans which meet the underwriting standards for purchase by Fannie Mae or Freddie Mac. C. both a and b. D. neither a nor b.
B. loans which meet the underwriting standards for purchase by Fannie Mae or Freddie Mac. In order for a mortgage loan to be conforming, it must meet the specific criteria that allow Fannie Mae and Freddie Mac to purchase the loan. NOTE: a conventional loan is a mortgage that is not guaranteed or insured by a government-backed agency.
Which of the following is not correct? A. all real estate salespersons must have written employment contracts with their brokers. B. real estate salespersons are able to contract directly in their own name as an agent with the seller. C. the recovery fund may be used to reimburse qualified principals and buyers for damages suffered because of certain inappropriate acts by real estate licensees. D. most real estate agency agreements are between sellers and brokers, not buyers and brokers.
B. real estate salespersons are able to contract directly in their own name as an agent with the seller.
A valid joint tenancy must have the four unities of: A. time, title, interest, remainder B. title, time, possession, interest C. interest, right, possession, time D. time, title, occupancy, possession
B. title, time, possession, interest If someone wanted to challenge the Right of Survivorship upon death - then The Rules of Unity have to be observed. If not, then the courts may not deem it a joint tenancy or may consider it failing. UNITY OF POSSESSION - anyone who owns the property has a right to possess the whole property, (just like with Tenants in Common). UNITY OF INTEREST - all of the tenants must have an equal interest. If there are two joint tenants then they each own 50% (unlike Tenants in Common). UNITY OF TIME - all of the joint tenants have to acquire their interests at the same moment. UNITY OF TITLE - all joint tenants must have taken title through the same deed. Generally speaking, if one of the four unities are missing at any time during the co-ownership, then the joint tenancy will fail.
An opt-out mechanism is required A. for removal from the do-not-call registry. B. to be excluded from further unsolicited e-mail advertisements. C. in unsolicited fax messages. D. all of the above.
B. to be excluded from further unsolicited e-mail advertisements.
An investor who owned a 16-unit apartment complex has evaluated a new freeway close to the units as it's caused a decrease in rents of $320. Using an 11% cap rate, what is the loss in value the freeway has caused: A. $45,000 B. $40,908 C. $34,909 D. $32,468
C. $34,909 $320 -:- .11 = $2,909.09 x 12 months = $34,909
Every residential homeowner is entitled to an exemption from the full cash value of A. $4,000. B. $5,000. C. $7,000. D. $50,000.
C. $7,000.
The homeowner's exemption, excluding local assessments, saves approximately how much in property taxes? A. $100 B. $80 C. $70 D. $40
C. $70 California Homeowner's Exemption = $7,000 off full cash value. $500,000 full cash value - $7,000 = $493,000 - Reduces property tax $7,000 x 1% = $70.
Under the Real Property Loan Law, the maximum amount a borrower can pay for closing costs, excluding commission, regardless of the size of the loan, is: A. 5% B. $390 C. $700 D. $900
C. $700 The maximum amount of all costs and expenses for obtaining the loan, not counting actual charges for title insurance and recording fees, cannot exceed 5% of the principal amount of the loan or $390 if the 5% amount is less than $390. In no event can the fees exceed $700. Only costs and expenses that have actually been paid, incurred, or reasonably earned by the broker can be charged to the borrower.
For a single person, under 65 years and not of low income, the homestead exemption is: A. $25,000 B. $50,000 C. $75,000 D. $100,000
C. $75,000 If you are single, you have homestead protection up to $75,000 of equity. A head of household receives a $100,000 equity exemption. If you are over 65, physically disabled or have less than $15,000 annual income, your equity is protected up to $175,000.
When foreigners sell U. S. property, the Foreign Investment in Real Property Tax Act (FIRPTA) may require what percentage to be withheld from the sale proceeds? A. 3 1/3% B. 5% C. 10% D. 13%
C. 10% FIRPTA - Foreign Sellers of Real Property in the US shall withhold 10 percent of the total amount realized by the sale. CAL FIRPTA - The CA version of FIRPTA - the rate is 3.3%. If you are a foreign seller and you have real property in CA, you'll pay 10% to the Federal Gov't and 3.3% to State of CA. However, if you reside in the US, but have CA real property, under CAL FIRPTA you are still foreign to CA. So, you won't pay the 10%, but you will pay the 3.3%. EXEMPTION of both FIRPTA and CAL FIRPTA = the property is being sold for under $300,000
A lease on agricultural land cannot exceed: A. 15 years B. 37 years C. 51 years D. 99 years
C. 51 years A typical lease for a house or apartment cannot exceed 99 years.
Which of the following advantages are offered by a commercial sale-leaseback to the seller/lessee? A. Lease payments are deductible business expenses. B. Capital can be freed. C. Both a and b. D. Neither a nor b.
C. Both a and b. Lease payments are deductible business expenses and Capital can be freed.
The California law that makes it unlawful for businesses to illegally discriminate is the: A. Fair Housing Act B. Rumford Act C. Unruh Act D. Housing Financial Discrimination (Holden) Act
C. Unruh Act Unruh Civil Rights Act - prohibits discrimination by businesses. Under this law, businesses cannot refuse to serve customers based on the customers' color, race, religion, ancestry, national origin, sex, blindness physical disability or age. It should be noted that there are certain exemptions for some housing accommodations which can be limited to senior citizens.
The Civil Rights Act that only applies to discrimination by a business is the: A. Civil Rights Act of 1964. B. Jones Act. C. Unruh Act. D. Holden Act.
C. Unruh Act.
A property tax bill is an example of: A. a voluntary lien B. a general lien C. an involuntary lien D. two of the above are correct
C. an involuntary lien INVOLUNTARY LIEN - a lien imposed against property without the consent of the owner. EX: Tax Lien, Mechanic Lien, Judgment Lien. TAX LIEN: An encumbrance against a property filed by the taxing jurisdiction for delinquency in paying real property taxes. Gov't Liens, including tax liens, ALWAYS take top priority over other liens!
A statement that shows the financial position of a business as of a certain date is called: A. profit and loss B. Schedule E C. balance sheet D. Schedule C
C. balance sheet
A real estate broker advertised a property for a principal. She did not advertise her name. Her action was proper because she included A. "agt." B. "bro." C. both a and b D. neither a nor b.
C. both a and b
A qualified acceptance of an offer A. is not an acceptance. B. would be a counteroffer. C. both a and b. D. neither a nor b.
C. both a and b. Qualified Acceptance. In contract law, an assent to an offer that is either conditional or partial and alters the offer by changing the time, amount, mode, or place of payment.
Which of the following are licensed by the Office of Real Estate Appraisers to do the most complex property appraisals? A. real estate agents B. certified-residential appraisers C. certified-general appraisers D. licensed appraisers
C. certified-general appraisers LEVELS of APPRAISERS 1. Appraisal Trainee 2. Licensed Residential Appraiser 3. Certified Residential Appraiser 4. Certified General Appraiser
Receiving a commission from both the buyer and seller without full disclosure and approval is called: A. dual agency B. single agency C. divided agency D. implied agency
C. divided agency DIVIDED AGENCY - Acting for more than one party in a transaction without the knowledge and consent of all parties.
According to the Real Estate Law, for supervising purposes, the relationship between a salesperson and a broker is: A. fiduciary B. independent contractor C. employer-employee D. Ostensible
C. employer-employee RELATIONSHIP BETWEEN SALESPERSON AND BROKER INDEPENDENT CONTRACTOR vs. EMPLOYEE The Broker is your Employer - But the Agent is an Independent Contractor to the IRS. The Broker is responsible for worker's comp. should you get hurt on the job. LIABILITY - both the principal and the broker could be held liable for the agent's actions.
A standard policy of title insurance covers all EXCEPT A. forgery. B. lack of capacity of a grantor. C. failure of delivery of a prior deed. D. right of parties in possession.
C. failure of delivery of a prior deed. A CLTA policy protects a homeowner from losses due to RECORDED TITLE ISSUES such as fraud, forgery, recorded claims to title by other parties, undisclosed heirs; lack of capacity (minors); Mistaken legal interpretation of wills; Misfiled documents, unauthorized acknowledgments; or even unpaid taxes . Because CLTA coverage is limited to matters of record, this is considered to be the more "basic" of the two policies.
The market approach would be given the most weight if appraising a: A. new home B. new apartment C. five-year-old home D. special purpose property
C. five-year-old home Market Approach = Sales Comparison Approach
A judgment is considered to be what type of lien? A. constructive B. voluntary C. general D. specific
C. general
A lease whereby the landlord receives a set rent and the landlord pays property expenses is A. net lease. B. percentage lease. C. gross lease. D. none of the above.
C. gross lease. GROSS LEASE - A lease in which the lessor pays all the costs of operating and maintaining the property and real property taxes. Taxes, Insurance, Maintenance, Mortgage. NET LEASE - A lease in which the lessee pays a fixed amount of rent plus the costs of operating the property. Net leases are commonly used in office buildings. TRIPLE NET LEASE (NNN) - LESSOR pays - Capital expenditures LESSEE pays- Monthly rent, Utilities, Taxes, Insurance, Maintenance. PERCENTAGE LEASE - A lease in which the rental amount is a combination of a fixed amount plus a percentage of the lessee's gross sales. Commonly used for retail spaces.
In a dispute over fixtures, courts tend to favor: A. sellers over buyers B. landlords over tenants C. lenders over borrowers D. grantors over grantees
C. lenders over borrowers Determining if an item is a fixture or personal property is at the center of many disputes between buyers and sellers. To determine if an item is a fixture, use the acronym - M.A.R.I.A M - Method of Attachment A - Adaptability R - Relationship of the Parties - If the two parties went to court to determine if an item is a fixture or not, the courts typically favor buyers over sellers, and tenants over landlords. I - Intention of the Parties A - Agreement between the Parties
In an ARM loan, the distance between the borrower's rate and the index is called the: A. cap B. adjustment C. margin D. teaser
C. margin
Under the rental offset rules, which of the following is true? The tenant can do housing code repairs up to: A. one month's rent, once per year B. two months' rent, twice per year C. one month's rent, twice per 12-month period D. one month's rent, twice per year
C. one month's rent, twice per 12-month period You can't spend more than one month's rent. You can't use the repair and deduct remedy more than twice in any 12-month period. You can't have caused the problem, and it can't be something that is your responsibility (such as taking out the garbage).
The legal purpose for zoning restrictions is to: A. keep all types of commercial property out of residential areas 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 the owner of a piece of leased property gives the lessee an option to buy, the option: A. requires the optionee to complete the sale B. is a lien on the seller's title C. requires no consideration or fee D. is not a purchase contract until exercised
C. requires no consideration or fee CONSIDERATION - becomes a big question with an Option, whether it requires Consideration. Legally NO! But, if there's No Consideration for the Option, then its revocable. If there are other buyers who step forward during the Option, then the Seller can simply revoke the Option. Can also revoke simply because they no longer like the offer. But, IF the seller doesn't revoke, then the Optionee could exercise it at that option date.
Financial enhancement, as compared to comfort and safety when purchasing a home, is considered: A. absolute B. primary C. secondary D. none of the above
C. secondary
Once a valid homestead is recorded, which of the following terminates the homestead? A. renting the property B. death of one spouse C. selling the home D. two of the above will terminate the homestead
C. selling the home The initial burden of proof to establish the existence of a homestead is on the claimant. Once a homestead is established, it is presumed to continue until it is terminated. The party asserting termination has the burden of proof. Termination can occur through death, abandonment, or voluntary alienation[i].
Which of the following is a physical force that influences value? A. rate of changes in population B. income levels C. size and shape of the parcel D. zoning changes
C. size and shape of the parcel The other 3 are examples of non-physical forces that influence value.
Regarding the sales comparison approach, which is false? A. the comps are adjusted to the subject property B. three is the minimum number of comps to use C. the subject property is adjusted to the comps D. this approach is best for valuing residential homes
C. the subject property is adjusted to the comps SALES COMPARISON APPROACH - used mainly in single family residences. Determining their value by the ACTUAL SALE of other similar properties in the immediate area or neighborhood, with any reasonable period of time. Proximity can't be too far off, within 1/2 mile. Sale dates should be current, past 6 months. Bedrooms, bathroom, sq. ft., how long on market are other comparable factors. Always adjust comps to subject property - KEY!
A mortgage broker negotiated a loan for $10,000 secured by a second trust deed to be paid in 30 monthly payments. The maximum commission the broker is permitted to charge is: A. $195 B. $390 C. $700 D. $1,000
D. $1,000 The maximum commissions that can be charged are determined by the lien priority and loan term as follows: • For a senior lien, 5% of the principal amount of the loan if the term is less than three years, and 10% if the term is for three years or more. • For a junior lien, 5% of the principal amount of the loan if the term is less than two years, 10% if the term is two years but less than three years, and 15% if the term is three years or more
The fine for an unlicensed person who receives an illegal commission is: A. $100 B. $1,000 C. $10,000 D. $20,000
D. $20,000 The fine for an unlicensed person who receives an illegal commission is $20,000 for an individual and $60,000 for a corporation.
A property was valued at $200,000 for property tax purposes. According to Proposition 13, what would be the maximum value for property tax purposes in two years, assuming the owner did not make capital improvements? A. $202,420 B. $204,010 C. $206,220 D. $208,080
D. $208,080 Prop 13 = 1% of cash value + 2% per year. Year 1 - $200,000 x 1% = $2,000 Year 2 - $200,000 x 2% = $204,000 x 1% = $2,040 Year 3 - $204,000 x 2% = $208,080 x 1% = $2,080 etc...
A change-of-ownership statement must be filed within how many days of change of ownership? A. 30 B. 45 C. 60 D. 90
D. 90 The change in ownership statement must be filed at the time of recording or, if the transfer is not recorded, within 90 days of the date of the change in ownership, except that where the change in ownership has occurred by reason of death the statement shall be filed within 150 days after the date of death.
Which insurance policy requires the title company to make a physical inspection of the property? A. CLTA B. standard C. RESPA D. ALTA
D. ALTA CLTA Policy (Standard Policy) - if something goes wrong with the title of the property its insured by the title insurance. Doesn't cover things that are not disclosed to the title insurer, or zoning and other gov't regulations, or any pre-liens (late tax bill but it hasn't become a lien yet). 2. ALTA Policy (Extended Policy) - is something that's for the lender's benefit. They're using the house as collateral for all the money they're lending, so naturally they want to make sure they have easy access should the buyer default on the loan if the lender needed to foreclose. Covers things like off-record easements, mining claims and water claims, unrecorded liens that may not have hit the property yet - things that the standard policy doesn't cover.
The second installment of real property taxes is delinquent if not paid by: A. November 1 B. December 10 C. February I D. April 10
D. April 10
The agency or office responsible for handling violations of the Rumford Fair Housing Act is the A. Bureau of Real Estate. B. Department of Fair Employment and Housing. C. Corporation Commissioner. D. Department of Housing and Urban Development.
D. Department of Housing and Urban Development.
An owner has been found guilty of discrimination under the Health and Safety Code. What actions would harmed parties be entitled to take? A. may purchase property if it is still available B. may purchase another like property, if original is not available C. may be awarded $500 if A) or B) do not apply D. all of the above
D. all of the above
For a valid 1031 exchange A. the property must be held for productive use in a trade or business, or for investment. B. real property must be exchanged for real property. C. the exchanger cannot have control of the buyer's money. D. all of the above are required.
D. all of the above are required. Any "boot" (cash) received from the exchange is taxable.
Escrow licensees are prohibited from A. paying referral fees to real estate brokers. B. permitting one party to make additions, deletions, or alterations to escrow instructions unless initialed by all parties. C. accepting escrow instructions containing blanks to be filled in after the escrow instructions are signed. D. all of the above.
D. all of the above.
Items, other than price, and terms for which agreement between buyer and seller MUST be reached, include: A. occupancy date. B. name of escrow. C. what does and does not stay with the house. D. all of the above.
D. all of the above.
The IRS will treat the real estate salesperson as an independent contractor if 3 criteria are met. These criteria include: A. the salesperson must be licensed as a real estate agent. B. reimbursement to the salesperson must be solely based on sales, not on hours worked. C. there is a written contract that states the salesperson shall be treated as an independent contractor for tax purposes. D. all of the above.
D. all of the above.
As to depreciation for tax purposes, purchasers must now use: A. the straight-line method. B. 27.5 years for residential property. C. 39 years for nonresidential property. D. all of the above.
D. all of the above. RESIDENTAL = 27 1/2 years NON-RESIDENTIAL COMMERCIAL = 39 years STAIGHT LINE DEPREATION = 40 years. A method of depreciation under which improvements are depreciated at a constant rate throughout the estimated useful life of the improvement.
The broker's exemption to the escrow licensing requirement applies when the broker A. represents the buyer. B. represents the seller. C. is a principal in the transaction. D. any of the above
D. any of the above Other people, besides Escrow Officer that can handle an escrow = banks, insurance companies, building and loan or savings and loan associations, title companies, attorneys at law, CA real estate brokers.
An owner sells and the buyer takes over the existing loan. To relieve the seller of primary liability, the buyer must: A. sign a non-recourse agreement B. take title contingent upon the note and trust deed C. take title subject to the note and trust deed D. assume the note and trust deed
D. assume the note and trust deed. In this case, they would be personally responsible for paying the principal balance.
A history of title transfers for a particular parcel of land is a/an: A. preliminary report B. title insurance policy C. abstracter index D. chain of title
D. chain of title
All of the following "run with the land," except: A. easements B. private deed restrictions C. water rights D. current harvest rights
D. current harvest rights
In a normal sale using both a grant deed and a trust deed (deed of trust) the buyer is the: A. grantor and trustor B. grantor and trustee C. grantee and trustee D. grantee and trustor
D. grantee and trustor GRANTEE = a person to whom a grant or conveyance is made. GRANTOR = a person or institution that makes a grant or conveyance. TRUSTOR = one who borrows money from a trust deed lender TRUSTEE = one who holds property in a trust for another to secure performance BENEFICIARY = lender
Private mortgage insurance (PMI): A. makes the payments if the borrower gets disabled B. is paid for by the lender C. pays the loan off if the borrower dies D. insures the lender for the top portion of the loan
D. insures the lender for the top portion of the loan Conventional loans with an LTV greater than 80% typically require PRIVATE MORTGAGE INSURANCE (PMI): A form of insurance coverage required for a conventional loan with a high loan-to-value ratio to protect the lender in case the borrower defaults on the loan payment.
When an escrow officer receives conflicting instruction that cannot be resolved by the parties, the escrow officer can file a legal action in court called: A. holographic will B. arbitration C. hold harmless D. interpleader
D. interpleader An equitable proceeding brought by a third party acting in the capacity of a stake holder wherein there are rival claimants to the same money and/or property requesting the court to determine such properties disposition. "Equitable Proceeding" = NOT asking for money or monetary legal damages. What you ARE asking for is some other kind of relief. Either compelling someone to DO / NOT DO something, OR avoid liability. "Third Party" = not a person to the original contract. "Acting in the Capacity of a Stake Holder" = EX. an Escrow - they hold something of respective value in relation to the contracting parties. "Rival Claimants" = the original parties who are doing the transaction.
As to ethical conduct, a good rule of thumb is A. if it is illegal, it is unethical. B. if it is legal, it is ethical. C. both a and b. D. neither a nor b.
D. neither a nor b.
An escrow has a duty to warn parties to the escrow of A. possible fraud. B. risks of the transaction. C. both a and b. D. neither a nor b.
D. neither a nor b. ESCROW - A third neutral party. Escrow Officer has a fiduciary relationship to BOTH parties. What they tell one party, they must tell the other. Kind of like a dual agency. Even if the Escrow Agent suspects fraud, they cannot reveal that (by law). That's not their job. Their job is to make sure that a clear title gets to the buyer and money gets to the seller.
Who is paid the PMI on a VA loan: A. the broker B. the mortgage company C. the Veteran's Administration D. no one
D. no one Private Mortgage Insurance PMI - Mortgage guaranty insurance available to conventional lenders on the first, high risk portion of a loan. VA loans are considered "Unconventional" and are backed by the federal gov't.
A lease whereby the tenant pays the landlord a set rent and also pays taxes, insurance, and other property expenses is a A. gross lease. B. net lease. C. percentage lease. D. none of the above.
D. none of the above. GROSS LEASE - a lease in which the lessor pays all costs of operating and maintaining the property and real property taxes. LESSOR Pays: Taxes, Insurance, Maintenance, Mortgage LESSEE Pays: Monthly Rent - most residential leases are gross leases as the tenant pays a fixed rent each month. NET LEASE = a real estate lease in which the tenant pays, on top of his rent, one or more of the following expenses: property taxes, property insurance premiums or maintenance costs. There exist three basic types of net leases. A SINGLE NET LEASE requires the tenant to pay only the property taxes in addition to rent. With a DOUBLE NET LEASE, the tenant pays the property taxes and insurance premiums. A TRIPLE NET LEASE, also known as an NNN or net-net-net lease, requires the tenant to pay rent plus all three additional expenses.
All of the following are non-institutional lenders, except: A. credit union B. mortgage company C. private lender D. pension fund
D. pension fund INSTITUTIONAL LENDERS = Savings banks, Commercial banks, Life insurance companies, Pension Funds. NON-INSTITUTIONAL LENDERS = Mortgage Companies, Private parties (lenders), Real Estate Investment Trusts, Credit Unions. FOR BRE EXAM REMEMBER: Institutional Lenders are subject to government regulations. Banks / Savings & Loans. In CA - If a person doesn't have enough to put down on a conventional loan, they'll probably have to pay PMI Insurance through the big banks.
The appraisal principle that states that the value of a property is dynamic, not static, is the: A. principle of supply and demand B. principle of highest and best use C. principle of substitution D. principle of change
D. principle of change THE PRINCIPLE OF CHANGE - property goes through a "life cycle" of growth, equilibrium, decline and restoration. GROWTH = a migration to a newly developed neighborhood. EQULIBRIUM = development staves off / flattens and eventually there is DECLINE - because things get old. RESTORATION = the people who live and work there decide to reinvest in their neighborhoods and renovate their homes.
An extended coverage policy of title insurance covers all EXCEPT: A. water rights. B. rights that a correct survey would reveal. C. rights that a physical inspection would reveal. D. zoning regulations.
D. zoning regulations. ALTA - American Land Title Association - "Extended Insurance" - covers things like unrecorded liens, unrecorded easements, encroachments, and items covered by a survey, items covered by a surveyor who would determine the boundary lines of a property.
Gross Monthly / Rent Multiplier (GRM) $54,000 = Gross Annual Rental Income ($4,500 mo.) 8.5 = Gross Rent Multiplier (GRM) $459,000 = Property Price
Gross Rent Multiplier (GRM) = Property Price -:- Gross Annual Rental Income Property Price = Gross Annual Rental Income x Gross Rent Multiplier (GRM) Gross Annual Rental Income = Property Price -:- Gross Rent Multiplier (GRM)