Chapter 27 CA Law Update

Mike bought his home last year for $150,000. His property taxes would be assessed at:

$1,500

Sal bought a personal residence for $150,000. He made $150,000 of improvements during the three years he lived in it before he sold it. He sold the home for $750,000 and paid $50,000 in selling expenses, including the broker's commission. On what amount will he pay capital gains tax?

$150,000

Jake and Janet are required to pay 4 points on the $80,000 loan they are getting. What will they have to pay the lender?

$3,200

According to FIRPTA, what percent would a buyer need to withhold when purchasing a $200,000 home from a foreigner?

0%, The IRS keeps 15%

Under the amended Davis-Stirling Common Interest Development Act, in order to grant the exclusive use of a common area to one or more owner, there must be a passing affirmative vote of what percentage of the owners of that common interest development?

67% To grant the exclusive use of a common area to one or more owner, there must be a passing affirmative vote of 67% of the owners in a common interest development to grant this right of exclusive use to the member.

Each of the following types of housing, with one exception, falls under the heading of Common Interest Development. Which is the exception to this?

A manufactured housing community. A common interest development includes a condominium project, a community apartment project, a stock cooperative, and a planned development, but not a manufactured housing community.

Which of the following would not qualify as a 1031 exchange?

A rental condominium for a recreational vehicle

An association of two or more people who combine financial resources to achieve investment objectives is

A syndicate.

An association of two or more people who combine financial resources to achieve investment objectives is:

A syndicate.

Greg grew up in and lives in a rural area. He's very comfortable selling that type of property and knows he can work well with clients in that area. What property type will be his specialty?

Agricultural

Which of these lenders would be the likely to lend money for an investor to purchase an apartment building?

All of the above

Homeowners can deduct all but which of the following from their income taxes?

Although investors can deduct depreciation of improvements on their investment properties, homeowners can typically only deduct mortgage interest, property taxes, and prepayment penalties from their annual income taxes.

At a community meeting, Broker Amanda tells a group of families in an established neighborhood that several Indian families are planning to buy homes in their neighborhood. She tells them that this action could decrease their property values. Which statement is true?

Amanda is guilty of blockbusting.

When a person acquires new property, which is true?

Any person who acquires property that is subject to taxes must notify the county recorder or assessor by filing a change in ownership statement within 45 days of the date of recording or, if not recorded, within 45 days of the ownership change or pay a penalty.

Which of the following is a possible benefit of investing in real property?

Appreciation

Alice is an employee of Mid-State Realty Services. She would likely be required to do which of the following?

Attend weekly staff meetings at the office.

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 When a notary verifies the signing of the deed, the notary is declaring that an instrument has been executed in his or her presence according to the formalities required by law. It is not the same as an Acknowledgment, a statement by the maker of a document that verifies its authenticity.

Which document shows the assets and liabilities of a business?

Balance sheet

Bill and Brenda bought their home for $150,000 seven years ago and have lived in it ever since. They made $50,000 of improvements. They sold the home for $450,000 and paid $30,000 in selling expenses, including the broker's commission. On what amount will they pay capital gains tax?

Bill and Brenda are a married couple and can exclude up to $500,000 of the gain from selling their home. Consequently, their entire gain on this sale will be excluded from capital gains tax. Even if they weren't married the $250,000 exclusion would apply so the gain is still excluded.

Veteran Bill has applied and been approved for a non-VA-guaranteed CalVet loan. Which of the following statements is not true?

Bill is purchasing a 6-family apartment building.

All of the following are good newspaper sections to read for prospecting except which?

Business section Obituary column Classified rental ads Special announcements

What is one way the Federal Reserve System regulates the money supply?

Buying government bonds.

Which of the following is not a national real estate trade organization?

CAR

The IREM designation reserved for individuals who meet a certain level of education and experience is

CPM

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

California Statute of Frauds

A totally disabled veteran could be eligible for a property tax exemption of up to what amount?

California veterans are eligible for exemptions against the value of their homes. Depending on the level of disability, a disabled veteran could be eligible for an exemption up to $191,266 against the assessed value of the home.

Prospects Mike and Marge arrive with agent Elaine at a showing. Elaine parks across the street from the home and Mike is disappointed by what he sees. He's no longer interested in seeing the inside and Marge agrees. What should Elaine do?

Call the sellers immediately and let them know you won't be coming by.

Which of the following AIDA characteristics is the most critical in the ad?

Capturing attention

Which lender typically deals in interim financing?

Commercial bank

Under California Finance Code, what is defined as a consumer credit transaction that is secured by real property located in California, which is used, or intended to be used or occupied, as the principal dwelling of the consumer?

Consumer loan Under California Finance Code Section 4970, a consumer loan is a consumer credit transaction that is secured by real property located in California, which is used, or intended to be used or occupied, as the principal dwelling of the consumer that is improved by a one-to-four residential unit.

Which of the following Internet pages might not be of particular interest to buyers?

Curb appeal information

What was the important ruling in Jones v. Mayer?

Discrimination on the basis of race is strictly prohibited, meaning no exceptions whatsoever.

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. The Sherman Antitrust Act and other anti-trust legislation were designed to protect competitive trade. When businesses agree to divide a market and have each company only do business in one section of the market, this is a Sherman Antitrust Act division of markets violation.

How can a seller lessen the tax impact of selling a home for enough profit that he or she will be boosted to a much higher tax bracket?

Do an installment sale

When can a landlord enter a tenant's property to make repairs or show it?

During business hours and only after giving the tenant 24 hours notice.

Which statement is not true about a Real Estate Investment Trust?

Easy to qualify for.

Which of the following newspaper information is not helpful in developing a Prospecting Plan?

Editorials and Bid Proposals

Eric is acting as a disclosed dual agent in a transaction. Which statement is true?

Eric may not represent the seller's interests to the detriment of the buyer.

A lease that has no time limit is an:

Estate at will

The listing type that assures a broker that he or she will receive compensation no matter who procures the buyer is what kind of agreement?

Exclusive-authorization-and-right-to-sell agreement

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 A Fee Simple Defeasible estate is a conveyance of property that has conditions placed on it.

When is the first installment of property taxes due?

First of November

When all members have unlimited liability for debts and obligations of the group, the organization is a:

General Partnership

After six months time, manager Tim wants to terminate the lease of one of his month-to-month tenants. What must Tim do?

Give the tenant a 30-day notice.

Kathy is a personal assistant at Action Realty. She doesn't need a license to perform many activities at the firm, but which of the following would require her to have a license?

Giving information about a listing to prospective buyers.

Which of the following represents an intangible business asset?

Goodwill

Seller Kim tells her agent Greg that she would be willing to accept $185,000 on her $205,000 listed home. There are no offers on the property during the 6-month listing period and the listing expires. Several weeks later when showing another home to a buyer, Greg mentions that Kim would have accepted less for her home. Which is true?

Greg has violated the duty of confidentiality to Kim.

Which one of these statements would not be considered a measurable goal?

I will practice my listing presentations.

How long must buyers and brokers keep the documentation on a foreign sale?

In California, brokers and buyers must keep the documentation on the sale of real property by foreign persons for 5 years.

Buyer Kirk submits an offer to seller Larry. Later that day, Kirk finds a home he likes better; so he withdraws his offer to Larry. Which is a true statement?

Kirk's offer to Larry is legally cancelled.

Paul is filling out the Natural Hazard Disclosure Statement. Which of the following conditions is Paul not required to report on this form?

Lead-based paint was used in the home.

Which of these lenders would be most likely to finance a large shopping mall?

Life insurance company

Broker Tami has a very low advertising budget. Which of these forms of advertising is she most likely to avoid?

Magazine ad

Formerly, the Unruh Civil Rights Act protected people from being discriminated against because of their sex, race, color, religion, ancestry, national origin, disability, or medical condition. However, recent changes have added two new bases for discrimination that are illegal in California. These are:

Marital status and sexual orientation. The updated version of the Unruh Civil Rights Act includes marital status and sexual orientation in addition to sex, race, color, religion, ancestry, national origin, disability, and medical condition as protected classes.

Remember that there is a $250,000 exclusion on capital gains tax for the sale of an individual's personal residence. So, $750,000 sale price - ($150,000 + $150,000) = $450,000 - $50,000 selling expenses = $400,000 - $250,000 exclusion = $150,000 capital gain to be taxed.

Minimize expenses while maximizing profits for the owner.

What is one of the major objectives of professional property management?

Minimize expenses while maximizing profits for the owner.

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. In California, deeds of trust are used rather than mortgages.

Residential property includes all of the following EXCEPT which?

Motel

Once signed, escrow instructions can be changed only by:

Mutual consent of both parties

Agent John just listed a home in a mid-range priced neighborhood. Which of these ad headlines would probably be the least effective for this home?

Needs Paint

When a tenant agrees to pay all taxes, insurance, maintenance and repairs, that tenant has what kind of lease?

Net

Seller Patsy wants to net $150,000 from the sale of her home. She tells Broker Al that he can list the property for whatever price he wants and anything he gets above the $150,000 he can keep as his commission. What is this agreement called?

Net listing

Prospecting ends:

Never

The Truth-in-Lending Act requires lenders to disclose all costs related to a real estate mortgage loan, including financing costs, interest rates, loan payments, etc.

Never

When setting up a rent schedule, a property manager should analyze all but which of the following?

New home sales

Tim thinks his buyers are ready to make an offer. He asks, "Which one of the children gets the basement bedroom with the private entrance?" What kind of closing technique is Tim using?

Ownership

Agent Pam receives an offer on one of her listings for less than the asking price. The home has been listed for several months; so Pam does a CMA and determines that the offer is more than reasonable in today's market. However, she believes the sellers will not be willing to accept the offering price. What would be a good approach for Pam to take?

Pam should recommend that they counteroffer with a price halfway between asking and offering price.

When doing a competitive market analysis, the recently sold properties you include should have sold within what timeframe?

Past three to six months

What kind of lease contains a recapture clause?

Percentage

Glenna and Amanda just bought their first home. They will have a number of new expenses as a result of this purchase. Which of these expenses is not associated with owning a home?

Personal property tax

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

Prepayment penalties are optional. With an FHA loan, the property must be appraised by an FHA appraiser, the lender can charge points, and the buyer may agree to a selling price that is higher than the appraised value if the buyer pays the difference between the appraised value and the selling price in cash so it does not become part of the loan. Prepayment penalties are not allowed on FHA mortgage loans.

Alex makes an offer to purchase one of Bill's listings. Bill cannot contact the seller. In the meantime, Bill gets another offer on the property from another buyer at a higher price. What should Bill do?

Present both offers to the seller.

Fair Housing laws are designed to:

Prohibit discrimination.

Which proposition limited the maximum amount of tax on real property?

Proposition 13

In some counties, certain funds are collected and then distributed to be used only for the exclusive purpose of deterring, investigating, and prosecuting real estate fraud crimes. This fund is the:

Real Estate Fraud Prosecution Trust Fund.

If a person believes that her property has been placed under an unlawful restriction, covenant, or other provision, based on an arbitrary reason as defined in the Government Code, she may:

Record a Restrictive Covenant Modification document. An update to the California Government Code Section 12956.2 regarding the Conditions, Covenants, and Restrictions allows a property owner to record a Restrictive Covenant Modification document if the county counsel makes the determination that a previously recorded covenant contains an illegal restriction.

Examining the economic soundness of a property means looking at all of the following except which?

Refinancing

Greg and Wanda Sandler purchased their home 35 years ago and it was paid off at the end of thirty years. In order to supplement their fixed income, the Sandlers receive monthly checks from their bank. Most likely, what did they get?

Reverse annuity mortgage

Which of the following is a credit to the seller on the settlement statement?

Sales price

Which of the following is NOT a condition of the safe harbor test?

Salespersons must perform all of their activities on behalf of their employing broker.

The title report on a property shows there is a lien on the property. Who is responsible for removing the lien to clear the title?

Seller

When doing research to recommend a reasonable listing price for a home, the most critical part of the research deals with analyzing:

Selling prices of recently sold homes

There has been very little interest in the Bowers' home this past week. What should agent Phil do?

Send the weekly report as usual, emphasizing what your upcoming plans are for the week.

Which of these Internet pages might be of particular interest to sellers?

Staging a home Inspection tips List of sold homes

Certain disclosures must be made within the Subdivided Lands Public Report Notice of Intention. Recently, an amendment to these disclosures has added which of the following to the required disclosures under this notice?

Supplemental Property Tax Notice

Which of the following economic characteristics is true?

Supply cannot be moved to a high demand area.

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. Once a listing contract is signed, the seller becomes a client. With no contract, the buyer is a customer. Agency relationship disclosure requirements state that the listing agent must disclose to the customer his or her agency relationship with Ted and Lisa.

Agent Will has had a listing with the Bryants for 6 weeks. They called Will's office and told the secretary they are upset and need to speak with Will. Which of these actions might have caused their upset?

The Bryants have not received any feedback from any showings in the past month.

Which of the following statements best describes what happens in a mortgage loan transaction?

The borrower gives the lender a note and a mortgage in exchange for the funds.

Tim and Sue have obtained a buydown loan on their newly built home. Which of the following statements is not true?

They will have to make a very high down payment.

What is the Federal Housing Administrations primary role in the mortgage market?

To insure loans made by approved lenders

What is the primary role of Fannie Mae?

To purchase conventional, FHA and VA loans

What is the most common reason that owners try to sell their homes themselves?

To save on commission

San Diego tenant Jack Stone is a full-time slacker. The guy has not paid rent in months and refuses to give up possession of the property. After many attempts to solve the problem outside of a courtroom, landlord Tom Crick gives up, files an eviction notice, and obtains a judgment to obtain possession of the property. Three weeks later, however, Jack tells Tom that just that morning he's filed for bankruptcy--so the eviction is off. Which of the following statements is true of this situation?

Tom is in luck. Since he has already taken the appropriate actions and obtained a judgment to obtain possession of the property before Jack filed his bankruptcy petition, the previously filed eviction remains in effect. Under U.S. Code Section 362(b)(22), the automatic stay that allows eviction proceedings to be set aside when the tenant has filed bankruptcy does not apply if the landlord obtained a judgment of possession before the tenant filed a bankruptcy petition. This law allows the continuation of the eviction proceeding.

Mortgage lenders are required to disclose financing costs and annual percentage rate to the borrower under which law or regulation?

Truth in Lending

How often can a tenant call his or her own professional to make repairs and then deduct the amount from the next month's rent?

Twice in a 12-month period

The manager of a large hotel refuses to rent a room to a blind person with a guide dog. What California Fair Housing law has the manager violated?

Unruh Civil Rights Act

Assembly Bill 1099 does not require a property tax reassessment for the construction or addition of

an active "solar energy system" in a new subdivision.