BROKER EXAM 4
When the state has given permission to a nonriparian owner of a farm to use a nearby lake, the owner has received permission by: (A) Eminent domain; (B) Estoppel; (C) Percolation; (D) Appropriation
D) Statement of fact.
Which of the following is true concerning promissory notes: (A) They are used as security for trust deeds; (B) They are recorded at the county recorder's office; (C) They are always used when real estate is sold; (D) They are the evidence of the debt •
D) Statement of fact.
Property is being sold whereby the purchaser is to continue the payments of an existing amortized loan secured by a first trust deed. In order for the buyer to assume the axis.ting trust deed without penalty, the real estate agent should check to be sure the trust deed does not include: (A) An acceleration clause; (B)A release clause; (C) A subordination clause; (D)A requite clause
A) The clause the agent would be concerned with is the alienation clause (due-on-sale). It is an acceleration clause.
Which of the following would be least necessary for a valid deed: (A) Acknowledgment; (B) Delivery; (C) Proper description of the property; (D) A grantee who is sufficiently identified, though not named in the deed
A) A deed does not need to be acknowledged to be valid. It needs to be acknowledged to be recorded.
Which of the following is not essential to the creation of an agency relationship: (A) Agreement to pay a consideration; (B) Agreement of the parties to the agency; (C) Competency on the part of the principal; (D) A fiduciary relationship
A) An agreement to pay consideration is not essential to establish an agency relationship. Many times the agent of the buyer will be paid by sharing the commission paid by the seller. The buyer does not have to promise to pay the agent in order for an agency to exist. The agent is still working for compensation.
All of the following items are included as a finance charge required by the Federal Truth-in-Lending Law (Regulation Z), except: (A) Appraisal fee; (B) Loan points; (C) Time price differential; (D) Finder's fee or similar charge
A) An appraisal fee is not considered part of the finance fee and therefore, is not disclosed under Truth-in-Lending.
An owner of a parcel of real property gave his neighbor a deed conveying an easement for ingress and egress. The easement was not specifically located in the deed. The neighbor's right to use the easement is: (A) Enforceable because the location of an easement need not be specified; (B) Enforceable only if the easement is an easement in gross; (C) Unenforceable due to the lack of a specific location; (D) Unenforceable because easements are created by written agreements, never by deed
A) An easement does not have to be specifically located in order to be valid.
An acquired legal privilege for the right of use or enjoyment, short of an estate, which one may have in the land of another is known as: (A) An easement; (B) A lease; (C) A devise; (D) A riparian right
A) An easement is the right to use another's land. It is not an estate.
Mr. Long purchased a brand new piece of income property for $180,000 ..The listed price was $220,000. Mr. Long considered this a good deal on his part, since he only put $10,000 down and acquired a new first trust deed for the balance. The tax assessed value was indicated at $150,000. Mr. Long's cost basis for income tax purposes would be: (A) $180,000; (B) $150,000; (C) $190,000; (D) $220,000
A) Cost basis equals the amount paid for the property by the buyer. These other figures are simply distracters.
A lender would likely not enforce the due on sale clause in a promissory note under which of the following circumstances: (A) When a new loan could be made at a higher rate of interest than the existing loan; (B) When inflation causes the value of real estate to rise rapidly; (C) When there are more buyers than sellers; (D) When deflation occurs and there are more houses for sale than there are buyers
A) Lenders will usually waive the prepayment penalty if a new loan can be made at a higher interest rate.
In May 1976, Mr. Marks leased a unit in his apartment building to a tenant for a two-year term. The tenant prepaid the last two months' rent at the time he entered into the lease agreement. For federal income tax purposes, that amount will be considered as income for Mr. Marks: (A) In May, 1976; (B) In May 1978; (C) Will be prorated throughout the term of the lease; (D) When it is actually earned
A) Rent is taxable when received by the landlord.
According to the Seller Transfer Disclosure Act, a broker can: (A) Visually inspect the property and reveal pertinent information; (B) Inspect the common areas in a condominium; (C) Inspect even the inaccessible areas and report his findings to the buyer and seller; (D) Pay for the pests control company's inspection
A) Statement of fact.
The annual property taxes an owner of a home must pay are determined by: (A) Assessing the land and improvements separately, then multiplying the total by one tax rate; (B) Assessing the land and improvements together, then multiplying by one tax rate; (C) Assessing the land and improvements separately, then multiplying by different tax rates; (D) None of the above
A) Statement of fact.
When the term "beneficiary statement" is used by those in real estate finance, it identifies a statement made: (A) By the lender, as to the current balance due to pay off the real estate loan; (B) Designating the one who will receive the property in the event of the borrower's death; (C) By the insurer, stating the amount that will be paid to the policyholder if the improvements are destroyed; (D) By the owner, listing the beneficial features of an assumable loan
A) Statement of fact.
The assessment roll for real property taxes is the listing of all taxable properties in the assessor's jurisdiction with the assigned assessed value for the properties. The purpose of the assessment roll is for: (A) Establishment of the tax base; (B) Equalization of assessments; (C) Establishment of the actual tax amount; (D) Setting the tax rate
A) The assessment roll does establish the property tax base.
Mr. Albertson purchases a property from Mr. Chavez for $12,000. the property is encumbered by a first trust deed of $7,000 and a second trust deed of $2,000. Mr. Albertson pays $5,000 cash and agrees to assume the first trust deed. The documents that will be recorded, and the order of their recordation, are: (A) Reconveyance of the second trust deed and then the grant deed; (B) Grant deed and then the reconveyance of the first trust deed; (C) Grant deed and then the reconveyance of the second trust deed; (D) First trust deed and then the grant deed
A) The first step would be to file the reconveyance deed. This clears title of the lien. Then we would record the grant deed transferring title from the seller to the buyer.
Broker Keller advertised in the newspaper that anyone who bought a property listed with the broker would receive a free microwave oven valued at $500. Such action is: (A) Legal, provided full disclosure is made to all interested parties; (B) Illegal under any circumstances; (C) Legal, provided that only a chance to win the microwave in a drawing is actually given the buyer; (D) Illegal, since the value of such a gift cannot exceed $100
A) This ad states exactly what a person has to do to get the microwave oven. This ad is legal.
The sale.of real property by a conditional installment contract of sale gives the buyer: (A) Right of possession; (B) An estate of inheritance; (C) A freehold estate; (D) All of the above
A) This is another name for a land contract. The buyer gets possession of the property and equitable title. Legal title is retained by the seller.
If the trust account contains trust funds belonging to more than one beneficiary, the broker may not disburse any funds without the prior written consent of every principal who has funds in the account: (A) If such disbursal will reduce the balance of the total funds in the account to an amount less than the various owners have on deposit; (B) Except to pay a deposit to escrow; (C) Unless disbursement is for the purpose of refunding an earnest money deposit to an offeror; (D) Except when disbursement will be used to close a transaction of the broker
A) This is true. When the account goes below the total of all beneficiarie.s' money, the broker is using one beneficiary's money to pay another.
A broker advertises properties through the World Wide Web. Rules exist making it mandatory for the broker to do which of the following things: (A) Return all messages promptly; (B) Employ only real estate licensees to respond to queries; (C) Exercise proper supervision over non-licensees responding to queries; (D) None of the above
B Answering queries regarding ads requires a license.
George executes a deed to James and records it. Later, George seeks to set aside the conveyance, claiming that there had been no delivery to James. Why will he probably be unsuccessful in his effort: (A) James has come into possession of the property; (B) Delivery is presumed with recording; (C) The recording validates the deed; (D) Recording establishes the priority of the lien
B Statement of fact.
In computing the unspecified maturity date on a construction loan, the time for repayment of the loan starts running: (A) From the date of first disbursement of funds; (B)From the date of the note; (C) When money is placed in escrow; (D)According to the terms of the deposit receipt
B Statement of fact.
Under the Federal Truth-in-Lending Law, the cost of credit on certain loans is expressed as: (A) A maximum percentage rate; (B) An annual percentage rate; (C) A minimum percentage rate; (D)A monthly percentage rate
B Statement of fact.
When lenders used the term "debt-income ratio" they are referring to: (A) A requirement of the federal government; (B) A loan qualifying tool; (C) A formula used in appraising the property; (D) Part of the closing costs
B These are the ratios lenders use to qualify borrowers.
A lien may be created by recording: (A) A notice of non-responsibility; (B) A mortgage; (C) An easement; (D)A restriction
B) A lien relates to money and uses the property as security for payment of a debt. Of the choices, only a mortgage relates to money.
A husband, who owns separate property, dies without a will. Concerning that separate property, it would be distributed in which of the following ways: (A) One-half to wife and one-half to children; (B) One-third to wife and two-thirds to more than one child; (C) It would escheat to the state; (D) It would be divided equally among his heirs
B) According to the laws of Intestate Succession, separate property is divided one third to the wife and the remaining two thirds would be divided evenly among the children.
An easement may be by acquired prescription in a manner similar to acquisition of land by: (A) Eminent domain; (B) Adverse possession; (C) Both of the above; (D) Neither of the above
B) Adverse possession is similar to an easement by prescription, except that the one attempting to acquire title by adverse possession must pay property taxes for a period of five years. Adverse possession could result in the acquisition of title, whereas, prescription would result in obtaining an easement.
Broker Green obtained a listing from Brown to sell his home. Brown told Green the sewers were in and connected and signed a listing to that effect. Green was of the opinion that there were no sewers installed in that street, so he checked with the city and found he was correct. Green showed the house to Jones, who did not ask about the sewers, and Green made the sale without any comment. Later, Jones found that the sewers were not in. Which of the following is true: (A) Green had a right to rely on the listing; (B) Green has a duty to tell Jones, even though he did not ask; (C) Jones was to blame because he could have checked with the city, "caveat emptor"; (D) There is no provision in the law to cover this situation
B) Although broker Green is an agent of the seller, he owes the buyer "honest and fair dealings." Revealing material facts is regarded as honest and fair. Broker Green is obligated to reveal the information about the sewers, even if the buyer does not ask about it.
A broker sells a house advertised "as is". There are no obvious defects that would be evident to a prudent buyer on inspection. The sellers and broker, however, know that the plumbing is very defective. Neither the broker nor the sellers disclose this to the buyer. The buyer moves in and discovers the defects. He/she sues the broker and sellers. The suit will probably be the following: (A) Successful because the sellers and brokers withheld material information that should have been disclosed; (B) Successful, because the "as is" clause does not override the sellers' and brokers' duty to fill out a Transfer Disclosure Statement revealing all known material facts whether the defects are evident or not; (C) Unsuccessful, because selling the property "as is" gives constructive notice that there are defects; (D) Unsuccessful, because the defects would have been revealed if the purchase agreement had contained an inspection clause
B) Although choice "A" is correct; "B" is more complete, since it addresses the "as is" clause. Brokers and sellers must reveal material facts, period. The most "as is" can mean is that the sellers refuse to fix the problem. It does not mitigate the duty to disclose. Remember, on this exam, the directions tell you to pick the best answer!
A prospective buyer would be entitled to damages from a real estate broker in the event the broker: (A) Makes a misrepresentation based on information from the employing seller; (B) Acts in excess of the authority given the broker by the seller; (C) Executes a contract in the name of the seller after being properly authorized by a power of attorney; (D) Turns the buyer's deposit over to the seller, and thereafter the contract fails without the agent's fault
B) As long as the agent is acting under the authority conferred in the listing agreement the seller is liable for the agent's words and actions. If the agent acts in excess of that authority, the agent is directly liable to the buyer.
When a real estate licensee acts exclusively as a buyer's agent, he can: (A) Present offers directly to the seller; (B) Present offers to seller and seller's agent; (C) Withhold negative information about the buyer from the seller; (D) Act as an agent of the seller when his commission is paid by the seller
B) Buyer's agents should present offers to the seller and the seller's agent. Buyer's agent is a fiduciary for the buyer. The seller should also have his agent there when the offer is presented.
When depreciation is taken on real property: (A) The property has no salvage value; (B) The basis is reduced; (C) The value increases; (D) None of the above
B) Depreciation lowers basis by the amount taken each year.
Which of the following statements is true concerning escrow procedures: (A) A broker can hold an escrow for compensation for other parties when he has no interest in the transaction; (B) When the escrow requirements have been met, the escrow agency changes from a dual agency to a separate agency; (C) When the escrow holder is in possession of a binding contract between the buyer and seller, it is said to be a "complete escrow"; (D) The escrow officer acts as an arbitrator of arguments between the buyer and seller
B) Escrow is a dual agency during the escrow. When escrow closes, the need for neutrality ends. Escrow then becomes a single-agency.
In order to secure an FHA loan, a new buyer would normally do all of the following, except: (A) Find a lender who will be willing to grant him the loan; (B) Apply to the nearest office of the FHA for an appraisal; (C) Agree to pay for mortgage insurance protection;. (D) Buy a home which meets the FHA requirements and restrictions
B) FHA only insures loans. An approved lender does all the rest of the qualifying, including ordering an appraisal.
Government land use, planning and zoning are important examples of: (A) Eminent domain; (B) Police power; (C) Deed restrictions; (D) All of the above
B) Police power regulates land use. Eminent domain takes title away. These are both governmental powers, but they are different.
Which of the following would least influence a lender in establishing the eligibility of a borrower: (A) Wife's income; (B) Overtime earnings of husband; (C) Outstanding debts of the husband and wife; (D) Size of the downpayment
B) Since overtime can be temporary, it does not play a significant roll in qualifying borrowers for trust deeds.
The term used by lenders, "mortgage yield" best describes: (A) An increase in the value of a property which has a mortgage; (B) The effective interest return obtained from a first trust deed by an investor; (C) All of the money received by a lender after deducting closing costs and loan fees; (D) What the lender receives when a mortgage is paid off
B) Statement of fact.
When ordinary repairs are made to broken equipment in a building, such repairs are appropriately classified as: (A) Preventative maintenance; (B) Corrective maintenance; (C) Deferred maintenance; (D) Cosmetic maintenance
B) Statement of fact.
When comparing a straight note with an installment note, the straight note: (A) Will have equal annual principal reduction; (B) Will have no principal payments during the term of the loan except on the last payment; (C) Will have a total effective interest rate greater than if the loan were an installment note; (D) None of the above
B) Straight note is interest only. There are no principal payments until the final payment.
Community apartment projects and condominiums comes with the subdivision provisions of the California Real Estate Law when they contain how many units: (A) One or more; (B) Five or more; (C) Three or more; (D) Two or more
B) The California Real Estate law defines common interest developments as 5 or more.
In financing for a new construction, the lender will usually release the final payment to the builder when the: (A) Owner has accepted the property; (B)Lien period has expired; (C) Work has been completed; (D) Notice of completion has been filed
B) The lender will release the last payment after the mechanic lien filing period has expired.
A standard policy of title insurance protects the insured against: (A) Defects known by the insured to exist at the date of the policy that are undisclosed to the insurance company; (B) Lack of capacity of a party to any transaction involving title to the land; (C) The power of eminent domain; (D) Unrecorded easements
B) The only one who could sign a document involving title other than the designated person would be someone with a power of attorney. The power of attorney would have been recorded.
The Federal Truth-in-Lending Law (Regulation Z) gives the borrower a 3-day right of rescission when the loan is: (A) A purchase-money loan secured by a deed of trust on commercial property; (B) A loan secured by a second deed of trust on owner.c.occupied single-family residence when the money is borrowed subsequent to the purchase; (C) An FHA or VA loan to purchase a single family owner-occupied residence; (D) A conventional purchase-money loan secured by a deed of trust on residential property
B) The three day right of rescission applies only to non-purchase money loans and only on a refinance of the borrower residence.
A broker who is hired by an owner to sell his property must reveal all significant and material information to the principal. Which of the following would be considered material information and must be revealed: (A) The new lender will require the buyer to maintain an impound account; (B) Agent's knowledge that a better offer to purchase is imminent; (C) The prospective buyer is of oriental descent; (D) None of the above
B) This information would effect the seller's decision to accept the offer. It is in the best interests of the seller to be told of a better offer, therefore, it would be considered a material fact.
A real estate salesman went to a neighborhood to obtain listings of residential property. He made representations that because of the entry into the neighborhood of minority groups, property values would be. reduced by a decline in the quality of schools and an increase in the crime rate. These practices by the salesman are: (A) Permissible if the representations are true; (B) Grounds for disciplinary action; (C) Unethical, but beyond the jurisdiction of the Real Estate Commissioner; (D) Justified if his activities do not decrease property values for neighboring properties
B) This is panic peddling. Violations of the anti-discrimination laws can result in discipline by the real estate commissioner.
Assume that you are a real estate licensee who has just shown several houses to a young married couple. Together you find "just the right place for them." However, even with the best loan available, the down payment seems to be beyond their means. Conversing between themselves, the young couple speculate that they could obtain a loan on various personal items including their car and in this way, be able to come up with the down payment. They seek your advice. Which of the following would probably be a synopsis of a proper response: (A) Advise against the purchase; (B) Indicate that the decision is up to them but point out the pitfalls of their proposed financing; (C) Encourage them wholeheartedly because this. is the property they want; (D) Inform them that inflationary trends will undoubtedly increase the value of their interest in the property
B) This is the best advice the agent can give this couple. The final decision would be up to them.
Cassidy purchased one of 30 lots in a subdivision and signed a sales contract which stated, "No purchaser of a lot in this subdivision shall erect a 'for sale' sign on his lot until all of the lots owned by the subdivider are sold." If Cassidy wants to sell his lot before the subdivider has sold all of his lots, he may: (A) Not erect a 'for sale' sign because of the statement in the sales contract; (B) Erect a 'for sale' sign of reasonable dimensions because the statement in the sales contract is declared by law to be void; (C) Erect a 'for sale' sign of any dimension to get the best results because the statement in the sales contract is restraint of trade; (D) Not erect a 'for sale' sign without being held liable by the seller
B) This statement has been declared void because it is deemed to be restraint of trade.
A federal RESPA booklet and disclosures must be gjven to a borrower by a real estate licensee when the federally-related loan is a first lien and the money is used to: (A) Purchase 30 or more acres of farmland; (B) Build five or more residential units; (C) Purchase one-to-four residential units; (D) a room on to the borrower's residence
C Statement of fact.
The purpose of the Truth-in-Lending Act is to: (A) Regulate usurious charges for credit; (B) Establish a maximum annual percentage rate; (C) Assure a meaningful disclosure of credit terms; (D) Limit the cost of credit to the consumer
C Statement of fact.
Typically, when leasing real property, the commission of the leasing agent is based upon a percentage of: (A) Total annual rent collected during the first year of the lease; (B) Total cash paid by the lessee at the time of the negotiation of the lease; (C) Total rent collected over the term of the lease; (D) None of the above •
C Statement of fact.
A person sold his home and took back a note secured by a purchase-money deed of trust. He selected a real estate broker from the telephone book and asked him to service this loan. If the broker takes on this duty, state law requires him to: (A) Convey a broker's loan statement; (B) Be a real property securities dealer; (C) Have a written authorization from the holder of the note; (D) Be a loan correspondent or mortgage broker
C) A broker must have a written agreement with a principal · regardless of which part of the business is the broker's specialty.
An acceleration clause is in a note that is otherwise negotiable. The addition of this clause: (A) Causes the note to lose it negotiability; (B) Is required for negotiability; (C) Does not reduce the negotiability of the note; (D) Has no effect on negotiability, but is no benefit
C) An acceleration clause does not affect the note's negotiability and could enhance its desirability.
A real estate agent wrote up an offer for a buyer. The buyer was primarily interested in this particular home because it was located in a very good school district. The deposit receipt did not make the offer contingent upon the school district. The offer was accepted and escrow opened. During escrow, the buyer discovers the school district had just been changed and now the home is located in a poor school district. Which of the following is true: (A) Buyer can back out; (B) Buyer has the right to rescind; (C) Buyer is bound to the contract; (D) Buyer is not obligated to buy
C) Buyer did not make the school district a contingency of the sale, therefore, the contract is binding.
Which of the following state agencies is empowered to prevent acts of discrimination in housing accommodations in California because of race, color, sex, national origin, or ancestry: (A) Real Estate Commission; (B) Labor Commission; (C) Department of Fair Employment and Housing; (D) Division of Housing
C) Complaints are filed with the Department of Fair Employment and Housing on the state level. They are filed with HUD on federal level.
The inability of a corporation to qualify as a joint tenant in the ownership of real property is due to the fact that: (A) It is controlled by a board of directors; (B) It can be domestic or foreign; (C) It has perpetual existence; (D) Only community property can be held in joint tenancy
C) Corporations have the potential for perpetual existence, whereas human beings do not. For this reason, corporations may not be joint tenants
The owner of a single-family residence plans to sell, and wants to obtain an FHA appraisal to permit a sale with FHA financing. He should: (A) Contact the nearest FHA office for an appraisal of this property; (B) Have a lender apply for a firm commitment; (C) Have a lender apply for a conditional commitment; (D) Submit a recent appraisal of his home to FHA
C) FHA does not lend money, it insures mortgages. A lender will only give a conditional commitment until all the terms are met.
When a title company issues a California standard policy of .title insurance, the policyholder is insured against loss which occurs because of: (A) Unrecorded liens and encumbrances; (B) The rights of parties in possession; (C) Forgery in the chain of title; (D) A defect in the chain of title, already by the insured prior to the issuance of the policy
C) Forgery is one of the protections offered by the standard policy of title insurance.
A builder needs. a long-term loan of $3,000,000 to develop a new shopping center. Which of the following would usually be the best .source of such funds: (A) Mutual funds; (B) Credit unions; (C) Life insurance companies; (D) National banks
C) Insurance companies make large long term loans to individuals. The key words are long term. Most borrowers do not want to commit to a long term.
When acquiring an easement, which of the following methods would create an easement that could be most easily terminated for nonuse: (A) Express reservation; (B) A quitclaim deed from a valid owner; (C) Prescription; (D) Implication
C) Only an easement acquired by use (prescriptive) can be terminated by non-use.
The real estate financing instrument which transfers equitable title to real property, but retains legal title in the seller, is called'. (A) A security agreement; (B) A mortgage; (C) A real property conditional installment sales contract; (D) A trust deed
C) Real property conditional installment contract is still another name for a land contract.
The conscious charging by a private lender of more thalil the maximum amount of interest allowed by law is known as: (A). Penury; (B) Leverage; (C) Usury; (D) Assemblage
C) Statement of fact.
Which of the following is the purpose of the Federal Truth-in-Lending Act: (A) To limit interest rates; (B) To regulate fees charged by lenders; (C) To provide consumers information concerning the cost of credit; (D) All of the above
C) Statement of fact.
If a condominium owner lives in his condominium and pays all of the following, which of the following would be deductible for federal income tax purposes? (A) The cost of repairing the condominium unit; (B) Any assessments that he pays for the upkeep of recreational facilities; (C) Any interest that he pays on a mortgage for his share of the common areas; (D) All of the above
C) The condominium is a principal place of residence. The owner may deduct interest on the mortgage and property taxes.
Which of the following statements, if any, is correct concerning the relationship between an effective interest rate and a nominal interest rate: (A) The effective rate is the rate the buyer will pay, the nominal rate is the rate named in the loan application; (B) The effective interest rate is always lower because the nominal interest rate includes charges other than interest; (C) The effective interest rate is the rate actually paid by th borrower for the use of the money; the nominal rate is the rate specified in the note; (D) None of the above is correct •
C) The effective rate is the annual percentage rate. It includes all the fees that must be paid by the borrower in order to obtain the loan. This is the cost of credit. The nominal rate is named in the note.
If an owner wanted to sell his property, extending credit himself, and retain legal title, the instrument used would be: (A) A security agreement; (B) A mortgage; (C) A real property installment/conditional sales contract; (D) A bailment
C) This is a name for a land contract. In this financing instrument, the seller retains legal title.
The Uniform Commercial Code, Division 6, which pertains to bulk sale transfers of business goods, exists primarily for the protection of: (A) Buyers; (B) Sellers; (C) Creditors; (D) Silent partners
C) This law requires creditors be notified of a bulk transfer. It gives the creditor a chance to make sure he will be paid.
A buyer made an offer on a property but refused to give a $500 deposit to the broker, as specified in the listing. He agreed to give the broker $500 as a deposit as soon as the seller accepted the offer. Which of the following should be written in the form: (A) Buyer agrees to deposit $500 upon . acceptance by the buyer; (B) Broker to collect $500 from buyer on seller's acceptance; (C) Buyer agrees to deposit $500 cash with broker immediately upon seller's acceptance; (D) This offer would be void since there was no consideration for the contract
C) This wording correctly describes· buyer and brokers responsibilities.
Where a broker shows a client's property to a prospective buyer that is listed with the broker under an open listing, the broker should: (A) Make up an office memorandum; (B) Confirm the showing to the buyer; (C) Notify the seller as to the prospect's identity; (D) Notify the local real estate board
C) With an open listing, the broker may have to prove that he is the "procuring cause" of the sale. This would be easier if the seller was notified each time the broker shows the property to a prospective buyer.
Lenders charge points in connection with FHA insured loans in order to: (A) Close the gap between the market rate and fixed rates; (B) Increase the effective yield; (C) Obtain the market yield; (D) All of the above
D Discount points on FHA does all of these things.
Under the provisions of the Federal Fair Housing Law (Title VIII of the Civil Rights Act of 1968), persons complaining of discrimination in housing are permitted an election of which of the following acts? They may file: (A) A civil action in federal courts; (B) A civil action in state or local courts; (C) A complaint with HUD; (D) Any of the above
D Statement of fact.
Which of the following defines a "mortgage loan"? (A) An instrument that is used only in the exchange of real property; (B) A financial obligation which is unsecured but is used to buy a building; (C) A promissory note that is unpaid; (D) A loan col!ateralized with real estate
D Statement of fact.
Which of the following would be the best and most complete definition of the term • encumbrance": (A) The degree, quantity, nature, and extent of interest which a person has in real property; (B) The use of property by a debtor to offer a creditor security for a debt; (C) Any action taken relative to property, other than acquiring or transferring title; (D) Anything which affects or limits fe simple title to property
D Statement of fact.
Who pay the points on a Cal-Vet loan: (A) Buyer; (B) Seller; (C) State of California; (D) No one
D There are no points on a Cal-Vet loan.
Mr. Nguyen owned an apartment building with an adjusted cost basis of $220,000 and a fair market value of $330,000. He exchanged the property for an apartment house which had a fair market value of $365,000. Both properties were free and clear and no adjustment was made for the difference in value. For federal income tax purposes, the new property will have a basis of: (A) $110,000; (B) $145,000; (C) $205,000; (D)$220,000
D) Since Mr. Nguyen paid no boot, his basis remains $220,000.
When a loan broker advertising for investors who wish to invest in "secured" loan on real property, such advertising would be regarded as misleading unless: (A) The advertiser offered a personal guarantee to each investor; (B) Each borrower were furnished a standard policy of title insurance covering the properties to be liened; (C) The broker secured the borrower's signature on the loan disclosure statement; (D) The advertising fully explained the extent to which such funds would be secured
D) A buyer would have the right to know to what extent the loan is secured. If the loan is not fully secured by one property, the holder-in-due course would not have foreclosure rights.
A lender who refers to a loan as "seasoned" is referring to the: (A) Quarter of the year in which the loan was made; (B) Maturity date of the loan; (C) Loan quality; (D) Record of consistent payments on the loan
D) A seasoned loan is one on which the payments have been made consistently over a reasonable period of time - usually 3 years.
A straight note: (A) May be used in a real estate transaction; (B)Is a note providing that the principal owing is to be paid at one time; (C) May be secured by a mortgage; (D)May b any of the above
D) A straight note is interest only. All three choices are correct.
When a buyer signs an exclusive authorization to acquire a property there is usually a clause in the form which allows the broker to: (A) Incur expenses on behalf of the buyer; (B) Collect a commission whether a property is found or not; (C) Act exclusively for that buyer and no other buyer during the time limits of the agreement; (D) Represent other buyers during the time limits of the agreement
D) Agents who work strictly with buyers may be working for more than one buyer at the same time. The contract must inform buyers of that possibility.
A real estate agent may legally represent all principals in the same transaction if: (A) He has informed all principals that is the agent for each principal; (B) He has obtained consent of all of this agency relationship; (C) He is collecting commission from each principal with the knowledge of the others; (D) All of the above
D) All principals must be informed and give consent for a dual agency. Both must also be informed and consent to the agent collecting commissions from each.
Which of the following would not be legally proper for a licensee to do? (A) Tell a prospective buyer that the listed farm is the nicest in the county; (B) Refuse to give his principal serious verbal offer to purchase; (C) Show a property only on sunny days; (D) Keep the client's secret that the roof leaks
D) Although offers should be in writing, if there is a serious verbal offer and the agent refuses to deliver it to the seller, it would not be legally proper.
Cook gave Ford a power of attorney to sell his home. Which of the following statements is false: (A)If a court ruled that Cook is incapable of contracting and Ford was notified, the power of attorney would be terminated; (B) The power of attorney must be recorded before Ford may sell the home; (C) Ford cannot convey the property if he discovers that the property is the subject of a declaration of homestead; (D) If the selling price is equal to or exceeds the fair market value, Ford may legally deed the property to himself
D) An attorney-in-fact may not deed the property to himself. This is a conflict of interest and illegal.
An "open-end" provision in a mortgage would benefit the borrower the most if he: (A) Prepaid the loan; (B) Allowed a subsequent buyer to assume the loan; (C) Had a loan subordinated to a construction loan; (D) Borrowed additional money
D) An open end provision allows a borrower to borrow more money and add the additional money to the original loan. The borrower would continue paying at the same rate and terms.
Mr. Ramirez paid an owner $10 for an option containing this clause: "Option to be for 60 days from June 1, 1967. Upon exercise of option, holder is to purchase within 30 days thereafter for all cash consideration." On July 10, Mr. Ramirez sold and assigned this option for $2,000. On July 28, the new holder notified the owner that he would purchase on August 15. The owner claimed the option was void. The option was: (A) Void, because the holder sold it; (B) Void, because date of purchase was not within the option period; (C) Valid, even though Mr. Ramirez sold it; (D) Valid, and assignee would purchase on August 15.
D) In order for an option to be assigned, consideration must have been paid to the optionor by the optionee. In this case, $10 was paid by Ramirez. He was, therefore, able to assign the option. As long as the new optionee exercises the option on time, the owner must sell the property. August 15 was within the specified parameters of the option.
Among the choices available to an investor, stocks and bonds, when compared with real property, are usually thought to be: (A) More difficult to sell; (B) More difficult to determine the current value; (C) Less inclined to change in value; (D) More liquid in the marketplace
D) Liquidity is measured by the time it takes to turn an investment into cash. Stocks are definitely more liquid than real estate since they can be turned into cash within days.
Under federal income tax regulations, an individual may not deduct a loss on the sale of residential property unless: (A) The loss exceeds 20% of the individual's adjusted gross income; (B) The property was also used for business purposes and showed a profit for the 3-year period immediately preceding the sale; (C) The individual shows an additional capital gain which would be offset by the sale; (D) The property was bought as investment and was rented or leased out as such
D) Losses on the sale of an owner occupied residence would not be tax deductible, however, losses on the sale of a rental would be.
A man is buying a residence. After signing a valid agreement for sale, he asks the broker for permission to move into the property before the sale closes. The broker should: (A) Deny the buyer permission; (B) Give the buyer oral permission; (C) Have the buyer sign a temporary lease on the property; (D) Obtain written permission from the owner
D) Of these choices, (D) is the best. The escrow instructions should also be amended to reflect this agreement.
Mike Coogan, a new real estate salesperson, made strong efforts to obtain listings in a non integrated community. He found success by insinuating to property owners that should minorities move into the area, the value of their homes would decrease. Which of the following terms best describes the activities of Salesperson Coogan: (A) Steering; (B) Panic peddling; (C) Blockbusting; (D) Both B and C
D) Panic peddling and blockbusting are inter-changeable terms.
Hawkins wanted to purchase 200 acres of !and for future subdivision, but did not have the necessary $65,000 cash. He persuaded his friend, Warner, to pay the $65,000 and purchase the land, and Warner immediately signed a land contract for sale of the property to Hawkins for $88,000. This transaction would be: (A) A discounted mortgage; (B) A violation of the Real Estate Commissioner's regulations; (C) voidable; (D) A valid purchase and resale
D) Statement of fact. Remember, in this question, no one is licensed.
Which of the following does not buy loans in the secondary mortgage market: . (A) Federal Home Loan Mortgage Corporation; (B) Federal National Mortgage Association; (C) Government National Mortgage Association; (D) Federal Housing Administration
D) The Federal Housing Administration insures FHA loans. It does not buy on the secondary market.
Four months ago, a seller accepted a proper offer to purchase his real property. The contract was in writing. Later, the seller refused to complete the transaction, since he felt the value of the property would increase in the near future. Under these circumstances, the Statute of Limitations could affect the rights of the buyer to prevail in a civil action due to a breach of a written contract, within: (A) 90 days; (B) 1 year; (C) 2 years; (D) 4 years
D) The Statute of Limitations is four years on a written contract and two years on an oral contract.
A broker who solicits and accepts a deposit on the purchase price of a parcel of real property without express written authorization from the owner to sell the property, is: (A) Guilty of violation of his fiduciary duty to the owner; (B) Guilty of commingling a customer's funds with his own funds; (C) Acting under a restricted listing; (D) Acting as agent for the buyer and not the seller
D) The agent of the buyer does not have authority directly from the seller. The agent is working for and liable to the buyer only.
Anderson sold a farm to Barnes on May 1, 1986. The real property taxes for the 1986-1987 tax year: (A) Attach to the purchase price Anderson received; (B) Become a personal obligation of Barnes; (C) Would normally be pro-rated by the escrow agent; (D) Are a lien on the property
D) The real property taxes became a lien on the property, March 1. 1986.
The right to foreclose a trust deed, under a trustee's power of sale, outlaws: (A) In four years; (B) In three years; (C) In two years; . (D) Never
D) The right to foreclose on a mortgage outlaws in four years. It is a written contract and written contracts must be enforced within four years, according to the Statute of Limitations. A deed never outlaws (runs the Statute of Limitations). A trust deed is a deed.
If a tenant moved out of a rented store building because access to the building was blocked as a result of the landlord's negligence: (A) The tenant would have no legal recourse against the landlord; (B) The landlord would be liable for the rent until the expiration of the lease; (C) The landlord would have to provide substitute space; (D) The tenant would be entitled to recover damages from the landlord
D) This is an example of "constructive eviction." The owner has made the premises unusable by tenant. The owner would be liable for damages.
To qualify a real property sales contract for recordation, it must: (A) Be signed by the buyer and acknowledged; (B) Be signed by seller and acknowledged; (C) Contain a granting clause; (D) Be signed by both buyer and seller and be acknowledged
D) This is another name for a land contract. Both the buyer and seller would have to sign the loan and both signatures would have to be acknowledged in order to be recorded.
A broker, under the authority of an exclusive authorization and right to sell listing collected a $10,000 cash deposit on a selling price of $120,000. Through no fault of the seller, the purchaser failed to complete the transaction, and the owner declared that the deposit was to be forfeited. The purchaser agreed to the forfeiture of the deposit. Under these conditions, the broker: (A) Would be entitled to the entire deposit as his share of liquidated damages; (B) Could retain no part of the deposit; (C) Could deduct from the deposit any amount of actual out-of-pocket expenses incurred by the broker; (D) On a residential property, could retain no more than 3% of the selling price as liquidated damages
D) This wording appears as part of our liquidated damages clause
It is proper business practice for a real property manager to be compensated in all of the following ways, except: (A) Percentage of gross receipts; (B) Commission on new leases; (C) Commission on major repairs or alterations; (D) Receipt of discounts on purchases or supplies
D) This would be considered a secret profit. Property managers must pass along to the owners any discounts on purchases or supplies.
An interest in real property can be acquired by an individual by all of the following methods, except: (A) Patent; (B) Prescription; (C) Succession; (D) Escheat
D) When a person dies intestate and has no heirs, his property will escheat to the state of California. The state may acquire title through escheat, and individual may not.
Compliance with t.he agency relationship law enacted as part of the civil code would be required in which of the following transactions: (A) A single-family residence offered for sale by owner; (B) A foreclosure sale by a trustee under the provisions of the trust deed; (C) A transfer of the husband's interest to his wife in a divorce proceeding; (D) A lease for a period of longer than one year
D) When an agent negotiates a lease for longer than one year, he is acting as a property manager. His agency relationship with the owner of the property would have to be disclosed.
One advantage of an installment sale for federal income tax purposes, is that: (A) The gain from a sale will be recognized in the year of the sale; (B) No taxes are due for the year of the sale; (C) Successive payments on the gain for the sale will be at the same tax rate; (D) The gain realized will be taxed in the year it was received
D) When using an installment sale for federal income tax purposes, the gain is spread over many years. The taxes are due as the gain is received, not all in the year of the sale. The tax rate may or may not be the same each year.