CA Broker Exam - Computrainer Exams 1-9

Question: The unit of comparison method of estimating the cost new of a structure involves: A: Lumping together the cost of all components of the structure on a unit basis, such as square foot or cubic foot; B: A calculation of the cost of all labor and materials, subcontractor's fees, etc.; C: Estimating the unit cost of major functional parts of the structure installed in place; D: Discovering the original cost and adjusting it to allow for inflation.

Correct Answer is : A

Question: A kiosk is the term used to identify: A: An information booth in a mall; B: A construction crane; C: An addition to a shopping center; D: A special compartment to hold a security key for use by the fire department.

Correct Answer is : A A kiosk is a small booth or building.

Question: A property would be reassessed for property tax purposes in each of the following cases except: A: Transfers from one joint tenant to another; B: Inheritance of a property by someone other than a spouse; C: A property is leased for 35 years or more; D: Transfer to an unrelated third party.

Correct Answer is : A A transfer between joint tenants would not cause a reassessment of the property.

Question: According to appraisal theory, depreciation is measured in proportion to the expired: A: Economic life; B: Chronological life; C: Physical life; D: Technical life.

Correct Answer is : A An appraiser is concerned about the economic life (the useful life) of the property and would measure the depreciation on the basis of the economic life.

Question: In settling an estate for a deceased person, the executrix is one who has been: A: Designated in the will of the deceased; B: Chosen by the heirs; C: Appointed by the probate court; D: Chosen by the local bar association.

Correct Answer is : A An executrix is a female chosen by the deceased and named in the will to "execute" (carry out) the provisions of the will.

Question: A prospective purchaser obtained a four-month option on a parcel of real property by paying $200 to the owner. All of the following are true except: A: The optionee has created a legal interest in the property; B: The optionor is totally restricted by having received a "valuable" consideration; C: The agreement imposes no obligation on the optionee to purchase the property; D: A unilateral contract has been created.

Correct Answer is : A An option is not an interest in property, it is a unilateral contract in which the optionor is bound, but the optionee is not.

Question: Broker Jones, who is not a member of any trade organization, has been using a new advertising slogan: "A new breed of Realtor." Concerning this practice: A: It is grounds for revocation or suspension of his real estate license; B: It is permissible, providing the word "realtor" is not capitalized; C: It is acceptable as long as he is not licensed in more than one state; D: It is a violation of the Fair Housing Laws.

Correct Answer is : A Anyone who is not a member of the National Association of Realtors cannot use the term "Realtor."

Question: Broker Knorr 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.

Correct Answer is : A Anything of value given to the buyer must be disclosed to all parties.

Question: A person who makes a statement under oath is an: A: Affiant B: Administrator C: Executor D: Attorney-in-fact

Correct Answer is : A By definition

Question: Provisions in a rental agreement for residential real estate that make the security deposit nonrefundable are: A: Prohibited by statute; B: Permitted only if the agreement includes a provision that the deposit may be used only offset damages to the property; C: Valid if printed in 12-point typeface and initialed by all parties; D: Enforceable if the security deposit does not exceed $300.

Correct Answer is : A California law provides that all security deposits must be refunded if the tenant fulfills all obligations under the lease.

Question: Of the following, in a well-planned residential community, which contributes most to the maintenance of value: A: Conformance to proper land use objectives; B: Deed restrictions; C: Variances to permit highest and best use of every parcel of land; D: Prevention of major thoroughfare construction through the community.

Correct Answer is : A Conformance with proper land use objectives is the primary factor in maintaining high property values. It might include the prevention of major thoroughfare construction, deed restrictions and variances to permit highest and best use, but since it is the broadest answer, it is the best.

Question: According to economic theory, if interest rates increase and rents are stable, what is the effect on the value of rental properties: A: Values will decrease; B: Values will not be affected; C: Values will increase; D: Interest rates do not affect value.

Correct Answer is : A If interest rates increase, the capitalization rates should also increase. If the cap rate increases and the rent stays the same, the value of the property will decrease.

Question: Of the following items, which one would normally appear on the seller's closing statement as a credit to the seller: A: The proration of prepaid taxes; B: The pay-off of an existing trust deed loan; C: The payment of a commission to the listing agent; D: The proration of prepaid rent.

Correct Answer is : A If the seller had paid the property taxes beyond the close of escrow, the seller would be credited for that amount. The other items listed are normally a charge to the seller, not a credit.

Question: Broker Hardy showed a buyer a property during the term of his 60-day nonexclusive listing. The buyer made an offer less than the listed price, which was rejected by the seller. The buyer then made a higher offer through a second broker, Snyder, who also had a nonexclusive listing, and this offer was accepted by the seller. Hardy, the first broker, sued the seller and the second broker for the full commission, claiming he was the procuring cause for the sale. Hardy would probably: A: Lose the lawsuit, because he was not the one whose efforts resulted in consummation of the transaction; B: Lose the lawsuit, because he did not have an exclusive agency listing; C: Win the lawsuit, because he was the broker that first introduced the buyer and the seller; D: Win the lawsuit, because he was the first broker to introduce the buyer to the property, but will be entitled to only one-half of the commission.

Correct Answer is : A In a nonexclusive listing, only the broker who is the "procuring cause" of the sale receives the commission.

Question: The most detailed and accurate method of estimating the cost new of an improvement is: A: Quantity survey method; B: Trade breakdown method; C: Unit-in-place method; D: Unit of comparison method.

Correct Answer is : A In the quantity survey method, the appraiser analyzes the building by the cost of each component and adds in the cost of labor, overhead and profit.

Question: According to federal laws, the interest rate on a renegotiable rate mortgage can fluctuate a maximum of: A: 5%; B: 10%; C: 15%; D: 20%.

Correct Answer is : A It is limited by law to 5%.

Question: A seller paid 7 points to enable the buyer of his property to obtain an FHA-insured home loan. In calculating the income-tax consequences of this transaction, the payment of points: A: May be used to reduce the amount of capital gain; B: Is treated in the same way as a pre-payment penalty; C: Would be regarded as a fee paid for services rendered, and is therefore not deductible; D: Would be deductible as interest.

Correct Answer is : A Points paid by the seller are regarded as an expense of sale, and are subtracted from the gross selling price, thus reducing the amount of capital gain.

Question: Which of the following statements concerning property taxes and special assessments is false: A: Both of them are used to support the general functions of government; B: Property taxes are ad valorem taxes and special assessments are for specific improvements; C: Property taxes and special assessments have equal priority; D: If the owner does not pay the special assessments, the property can be foreclosed in a method that is similar to a property tax sale.

Correct Answer is : A Special assessments are used to pay for local improvements with benefit a limited local area.

Question: When a listed property is located within a certain flood zone area, which of the following flood zone areas require disclosure of that fact by the seller or seller's agent: A: Special flood zone area B: Areas of moderate flood hazard C: Areas of minimal risk D: All of the above

Correct Answer is : A Special flood zone areas (100-year) must be disclosed to potential buyers.

Question: Waters which are below the ground but are not restricted to a bed or well-defined channel would be known as: A: Percolating waters; B: Alluvion; C: A subterranean lake; D: Non-riparian waters

Correct Answer is : A Such waters are accurately described as "percolating."

Question: Russell and Anderson hold title to farm land as tenants in common. Russell occupies and farms the land. He could be liable to Anderson for all of the following, except: A: Rental payments for Russell's use of the land; B: Income received from oil and mineral rights; C: Rent received from a third party who uses a portion of the land; D: Payments of principal under a second trust deed.

Correct Answer is : A Tenants in common need not pay rent to other tenants in common for their use of the land.

Question: When appraising a portion of an income producing property, the value of the portion is measured by: A: Its contribution to the net return of the project; B: Its construction cost minus depreciation; C: Its replacement cost; D: None of the above.

Correct Answer is : A The Principle of Contribution would apply. An example of "a portion of an income producing property" might be a swimming pool.

Question: When real property is being escrowed, the escrow holder may do which of the following: A: Accept written instructions from the seller and buyer to change the price and terms without the approval of any agents; B: Receive closing funds on the buyer's behalf from the broker's trust account; C: Try to settle a disagreement between the buyer and seller; D: Cancel the escrow if the buyer doesn't perform in a timely manner.

Correct Answer is : A The buyer and seller are the principals to the transaction and they may mutually change the escrow instructions without the approval of anyone else. The buyer's closing funds cannot be accepted from anyone except the buyer. Perhaps the buyer does not want to close the escrow for some reason which is unknown to the broker.

Question: For the appraisal purposes of an income property, the recapture of capital investments and improvements would be included in: A: The capitalization rate; B: The interest rate; C: The reconstructed operating statement; D: None of the above.

Correct Answer is : A The capitalization rate includes both a return on the investment (profit) and a return of the investment (for recapture of the investment in the buildings).

Question: The listing agent for a residential property can legally complete the entire Real Property Transfer Disclosure Statement: A: Under no circumstances; B: When authorized in writing by the seller; C: When the seller lives in another state and has not seen the property; D: If the buyer gives the agent a written waiver.

Correct Answer is : A The civil code prohibits an agent from completing the form for the seller.

Question: An application for a subdivision public report must state the degree of flood hazard, if any, which exists. The degrees of flood hazard are: A: Inundation, sheet overflow, and ponding of local storm water; B: Accretion, alluvium, and avulsion; C: Frequent, infrequent, and remote; D: Below flood stage, flood stage, and above flood stage.

Correct Answer is : A The degree of flood hazard is classified as inundation, sheet overflow, or ponding.

Question: Which of the following statements concerning real estate options is false? A: If an option agreement to purchase property has been executed, the optionee has some rights to use the land; B: If there is a lease option, the terms of the lease are sufficient consideration for the option; C: An option could be a first right of refusal to purchase the property; D: Option rights are assignable unless the agreement states otherwise.

Correct Answer is : A The optionee has no rights to use the property until he exercises the option and purchases the property.

Question: 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 a of a specific location; D: Unenforceable, because easements are created by written agreements, never by deed.

Correct Answer is : A The specific location of an easement is not required for its validity.

Question: When the deposit receipt on the sale of a house states that the property is being sold "as is," it: A: Also requires a real estate transfer disclosure statement; B: Provides that the buyer should beware; C: Means that nothing is warranted; D: Does not require a real estate transfer disclosure statement.

Correct Answer is : A The use of the phrase "as is" in a real estate purchase contract really means nothing. The seller still must deliver the real estate transfer disclosure statement to the buyer revealing anything that is wrong with the property.

Question: Capitalization: A: Establishes the value of an asset by dividing the annual net income by the desirable rate of return; B: Is the effective interest return received by an investor in a first trust deed; C: Balances the assets and liabilities of an entity on a balance sheet; D: Results in net worth.

Correct Answer is : A This is a good definition of the term capitalization. You are arriving at the value of an asset or a property by dividing the annual net income by the rate of return.

Question: Which of the following is generally regarded as a factor which does not effect neighborhood change: A: Topography; B: Employment trends; C: Aging of the structures of a neighborhood; D: Availability and cost of transportation.

Correct Answer is : A Topography does not produce neighborhood change.

Question: Broker Daniel had an exclusive agency listing to sell a $65,000 home for owner Jones. Before the listing expired, the home was sold through Jones' own efforts to a friend, and Daniel was refused payment of any commission. Daniel is legally entitled to receive from Jones: A: No commission; B: One-half of a commission; C: All expenses he incurred when advertising the property; D: A full commission.

Correct Answer is : A Under an exclusive agency listing, an owner may sell his home and not be liable for a commission to the listing broker.

Question: When a lease is terminated by the mutual agreement of the lessor and the lessee, the lease is said to be: A: Surrendered; B: Rescinded; C: Completed; D: Released.

Correct Answer is : A When both parties agree to the termination, the lease is said to be "surrendered."

Question: When a real estate broker negotiates a loan on real property and creates a new deed of trust, he must see that the trust deed is recorded (or deliver a written recommendation to record) within what period of time: A: Seven days; B: Ten days; C: Two weeks; D: None of the above, because the broker has no responsibility to see that it is recorded.

Correct Answer is : B

Question: When estimating the value of an income property by the capitalization process, the difference between an annual net income of $30,000 capitalized at 5%, and the same amount capitalized at 6% is: A: $30,000; B: $100,000; C: $120,000; D: $300,000;

Correct Answer is : B $30,000 divided by 5% = $600,000 $30,000 divided by 6% = $500,000 $600,000 minus $500,000 = $100,000

Question: When a real estate salesperson is fired by an employing broker for possible violation of the real estate law, the employing broker must: A: Immediately provide the commissioner with all pertinent facts of the case by telephone B: File with the commissioner forthwith a certified written statement of facts C: Notify the commissioner in writing within three business days; D: Return the salesperson's license to the commissioner.

Correct Answer is : B A certified written statement of the facts must be provided forthwith

Question: Which of the following would not be considered a "capable party" to enter into a contract: A: A Trustee under a deed of trust B: A conservatee under a written will C: A designee under a land contract D: A grantee under a deed

Correct Answer is : B A conservatee is one whose interests have been assigned to a conservator, one designated to "conserve" or protect the assets of the conservatee.

Question: To calculate the cubic footage of an attic with a gable roof, an appraiser should use which of the following formulae: A: Width x length x height = cubic feet; B: Width x length divided by 2 x height =cubic feet; C: Width x length divided by 3 x height = cubic feet; D: Width x length divided by 3 x height x 2 = cubic feet.

Correct Answer is : B A gable roof is an "A" shaped roof with two sloping sides rising to a point (the ridge board). The volume of the attic is calculated by multiplying width times length divided by 2 times the height.

Question: By law and regulation, a real estate agent is obligated to communicate any offer to the principal: A: Unless the offer includes a condition precedent; B: Only if it is in writing; C: Whether the offer is verbal or written until the agency is terminated; D: Unless the principal has already accepted another offer.

Correct Answer is : B A licensee is required to communicate all written offers; the regulation does not require the communication of verbal offers.

Question: Sometimes a quiet title action is used to: A: Enforce the collection of delinquent rent; B: Clear the title of the seller under a recorded contract of sale that is in default; C: Protect the tenants from noisy neighbors; D: Remove the seller's novation in a purchase contract.

Correct Answer is : B A quiet title action could remove the cloud on title created by a recorded contract of sale which has been defaulted on by the buyer.

Question: When one holding a salesperson's license advertises the lease, sale, purchase or exchange of real property for another as an agent, the salesperson must include in the advertising: A: The salesperson's last name B: The employing broker's last name; C: The employing broker's last name and address D: Both A and B

Correct Answer is : B A salesperson must disclose, when advertising, that he is acting on behalf of the broker under whom he is licensed. A "blind" ad is one which does not properly identify the broker.

Question: When a man bought a property, he was not told about the septic tank installation. The buyer's right would be to: A: Sue the broker for disciplinary action; B: Rescind the contract; C: Demand that the seller pay for a percolation test; D: File a report with the local health department.

Correct Answer is : B A septic tank installation would be considered a material fact which could influence a buyer's decision. If not informed about it, the buyer could rescind the contract.

Question: When comparing a straight note with an installment note, the straight note: A: Will have equal annual principal reduction payments; B: Will have no principal payments during the term of the loan exception the last payment; C: Will have a total effective interest rate greater than if the loan were an installment loan; D: None of the above.

Correct Answer is : B A straight note is a promissory note in which there are no payments on the principal until the end of the loan. There may be payments on the interest during the term of the loan or the interest may be paid at the same time the principal is at the end of the loan.

Question: A seller accepted as partial payment a purchase-money note secured by a first mortgage which contained a subordination agreement from a prospective builder who purchased a tract of land. The subordination agreement would most likely: A: Result in liens being imposed against the property without the consent of the buyer; B: Result in priority for future liens to be placed on the property by the buyer; C: Be for the purpose of retaining priority for the first mortgage; D: Prevent the buyer from placing priority construction loans on the property.

Correct Answer is : B A subordination agreement, as stated in the question, would result in priority for future liens to be placed on the property by the buyer.

Question: The recording of a conditional/installment land sales contract on real property is: A: Possible only when the contract has been acknowledged by the vendee; B: Especially desirable for a vendee who does not take possession of the property; C: Impossible without the seller's prior approval; D: Always advantageous to the seller.

Correct Answer is : B A vendee who does not take possession of the property would be offered some measure of protection by the recording of the contract. Recording requires the signatures and acknowledgement of both vendor and vendee; recording sometimes creates inconvenience for the vendor (the seller).

Question: A voidable contract remains binding upon the parties until the contract is: A: Invalidated; B: Rescinded; C: Discovered; D: Qualified.

Correct Answer is : B A voidable contract is one which stands until such time as the injured party takes action to rescind it. It behooves the injured party to take action immediately upon a breach of the contract, or the court could find that the injured party has accepted the breach as a modification of the contractual terms.

Question: According to the bankruptcy code, the debts that are discharged are those that exist: A: On the day of the publication of notice of bankruptcy; B: On the day when the bankruptcy petition was filed; C: On the day of the discharge; D: On the day when the bankruptcy case is closed.

Correct Answer is : B According to the bankruptcy law, the debts that exist when the bankruptcy petition is filed are the debts that are discharged.

Question: The measure of distance which a parcel of property abuts on a street is called the: A: Front foot of the lot; B: Frontage of the lot; C: Street line of the lot; D: Width of the lot.

Correct Answer is : B According to the textbooks, this is the frontage of the lot.

Question: Sometimes an appraiser estimates the value of a property by using three approaches. After he has done this, his next step would be to: A: Average the value indications; B: Reconcile the value indications; C: Finalize the value indications; D: Amortize the value indications.

Correct Answer is : B An appraiser never averages. He reconciles. That means that he considers which approach applies most to this type of property and weights that heavier in the final estimate.

Question: Concerning option contracts, which of the following statements is most incorrect: A: If the optionee does not exercise the option right, the optionee loses the option money that was given the optionor for the right to purchase during the option period; B: If the optionee decides to buy the property, it will be necessary to enter into a separate sales contract before the expiration of the option in order for the two parties to be legally bound; C: The optionee must give the optionor some amount of valuable consideration; D: Separate from the purchase of real property owned by a business, an option may be used to buy the business separate from the property.

Correct Answer is : B An option contract should spell out the complete terms and conditions of the option, the time in which it is to be exercised, etc. Therefore, no additional agreement would be required. It is true that there must be some amount of valuable consideration involved in the option, and that if the option is not exercised during the specified time period, the optionee loses the amount of the option monies. Options can be used to purchase business opportunities.

Question: According to the principle of equal dignities, if a contract is required by law to be in writing, the authority to enter into that contract must also be: A: Acknowledged; B: Written; C: Notarized; D: Recorded.

Correct Answer is : B Because the sale or transfer of real property must be in writing (a deed or other written document), the authority to negotiate a sale (a listing) must also be in writing; hence, the listing has "equal dignity" with the deed.

Question: None of the following statements about the metes and bounds method of land description is true except: A: Metes identifies the point of beginning; bounds describes the distance between the benchmarks and monuments; B: Metes refers to measures of length (i.e., feet, rods); bounds refers to artificial and natural parameters; C: Metes has to do with raw land; bounds has to do with developed property; D: Metes and bounds descriptions are short, brief, and easily understood by anyone.

Correct Answer is : B Bounds are the boundaries; metes are measures of length.

Question: Of the following actions, which one can require the prior written consent of the Real Estate Commissioner before the action is legally binding: A: The transfer of a licensed salesperson from one broker to another; B: An amendment or modification of a deed which materially changes the rights of a buyer in a condominium transaction; C: The formation of a partnership involving more than four California licensed brokers; D: The sale of stock by an incorporated real estate syndicate.

Correct Answer is : B By regulation, such amendment or modification requires approval, the others do not.

Question: An indirect method of estimating depreciation would include which of the following: A: Engineering; B: Capitalized income; C: Age-life; D: Breakdown.

Correct Answer is : B Capitalized income is an indirect method of estimating depreciation.

Question: One might normally expect to find reference to the CPI (consumer price index) in which of the following: A: Lease agreements for single-family residences; B: Commercial leases; C: Deposit receipts; D: Listing contracts.

Correct Answer is : B Changes in the consumer price index often result in adjustments to the rent charged in commercial leases.

Question: A trust deed note in favor of a state savings and loan association on a single-family owner-occupied residence could be prepaid without penalty: A: Only if the loan is more than 7 years old; B: If the lender exercises the due-on-sale provision in the note, even when the borrower has signed a waiver of right to prepay without penalty; C: If the loan is assumed by a buyer of the house; D: Any time, whether there is a written agreement to pay a prepayment charge or not.

Correct Answer is : B Concerning prepayment penalties on single-family owner-occupied residences, the civil code prohibits a lender from charging a pre-payment penalty when exercising the due-on-sale provisions of a note. The prohibition of pre-payment penalties after 7 years Applies to loans negotiated by real estate licensees, not by savings and loan associations.

Question: "Turnkey projects" are: A: Subdivisions that have been approved by the local authorities but not the state authorities; B: Construction projects that are ready for occupancy; C: The interior areas of subdivisions; D: Rural subdivisions.

Correct Answer is : B Construction projects which are ready for occupancy are called "Turnkey projects" because all that a tenant has to do is turn the key in the door and go in and he is ready for business.

Question: An example of economic obsolescence could be: A: Excessive construction costs for a superadequate building foundation; B: Excessive taxes on the property to support great unexpected civil expenditures; C: The lack of a bathroom on the second floor of a two-story home; D: Loss in value which resulted from neglect in maintaining the property.

Correct Answer is : B Economic obsolescence is outside the property lines; hence, only answer "B" meets that criteria.

Question: Effective gross income minus operating expenses minus debt service from a real estate management standpoint is referred to as: A: Accounts receivable; B: Cash flow; C: Net income; D: Trust cash receipts.

Correct Answer is : B From a real estate management standpoint, effective gross income reduced by operating expenses and debt service is referred to as cash flow.

Question: The transferor, the owner, or his agent, prior to the transfer of title to real property, must deliver to the transferee (buyer) a copy of the structural pest control report under which of the following conditions. The report must be provided: A: Only if the transferee requires it as a condition of purchase; B: If the transferee or the lender granting a purchase-money loan on the property requires such a report as a condition of purchase or granting the loan; C: If the structural pest control report indicates infestation by termites; D: Only if the lender requests it prior to making a purchase-money loan on the property.

Correct Answer is : B If either the buyer or the lender requires it as a condition of purchase or the granting of a loan, the report must be provided.

Question: If a broker takes an exclusive listing to negotiate a loan secured by a lien on real property, that listing is limited to a term of not more than: A: 30 days; B: 45 days; C: 60 days; D: 180 days.

Correct Answer is : B If the broker is the only one working on the loan (exclusive listing), the listing can be for no more than 45 days.

Question: A building that is an improper improvement to its site exemplifies: A: Curable physical obsolescence; B: Incurable functional obsolescence; C: Incurable physical obsolescence; D: Curable functional obsolescence.

Correct Answer is : B If the building does not fit the site, the obsolescence is functional rather than physical, and would be considered primarily incurable, because the cost to correct would be prohibitive.

Question: In an easement appurtenant, the dominant tenement: A: May transfer the easement rights independent of the land; B: May not retain the easement rights if the dominant tenement is transferred; C: May use the easement rights for purposes of ingress and egress only; D: Receives the burdens and the benefits of the easement.

Correct Answer is : B In an easement appurtenant, the owner of the dominant tenement may not retain the easement rights if the property is transferred. The rights of the easement would automatically transfer to the new owner.

Question: If a real estate investor wants to use the principle of leverage, he would: A: Invest in real properties where values are declining; B: Use borrowed money to the maximum extent possible; C: Use borrowed money and personal money on an equal basis; D: Use his personal money as much as possible.

Correct Answer is : B Leverage indicates the use of borrowed money so that the return can be maximized.

Question: Without charging a separate fee, an agent of the buyer of a house arranged for a private party to lend the buyer 15% of the down payment. This loan will be secured by a second trust deed on the property. What is the maximum interest rate the lender can charge on this loan: A: Current market rate only; B: This loan would be unregulated as to the maximum interest rate; C: 10%; D: Current prime interest rate plus 6%.

Correct Answer is : B Loans negotiated by a broker who is acting as agent for the buyer or seller of a house are not subject to the usury laws.

Question: The ultimate test of functional utility is the: A: Maintenance costs; B: Marketability; C: Design; D: Utility costs.

Correct Answer is : B Marketability and acceptability by the public is the ultimate test of style and design (functional utility).

Question: In the event of unpaid business debts, which of the following are personally liable: A: Limited partners in a limited partnership; B: Members of a general partnership; C: Stockholders in a corporation; D: None of the above.

Correct Answer is : B Members of a general partnership are personally liable for the debts of the business.

Question: An appraisal report has the three major subheadings of (I) Introduction, (II) Description of the area, neighborhood and property, and (III) Analysis, conclusions and opinions of value. This appraisal report is most likely a: A: Letter form report; B: Narrative report; C: Short form report; D: Judicial report.

Correct Answer is : B Narrative reports use those subheadings.

Question: None of the following would properly be deposited in the broker's trust account except: A: An earnest money deposit on an offer to buy a duplex owned by the broker B: Monthly rent collected on an apartment building managed by the broker C: A security deposit paid by a tenant on a single-family residence owned by the broker D: Unpaid commissions owed to salespersons working for the broker.

Correct Answer is : B Neither commissions nor funds from the broker's property belong in the trust account.

Question: Certain forms of real estate syndication are preferred by knowledgable investors because of limited liability to the investors and because of the flow-through to investors of certain tax deductions. Which of the following forms of syndication is so preferred: A: Publicly-traded stock corporation; B: Limited partnership; C: Real estate investment trust; D: Joint venture.

Correct Answer is : B Of the forms of syndication listed, a limited partnership offers the benefits sought.

Question: Broker Bob, who has an unrestricted license, negotiated the sale of a property, and in the process, defrauded the buyer. The buyer obtained a final judgment against the broker upon the grounds of fraud in a civil suit. The real estate commissioner: A: Can suspend the broker's license until a hearing is held; B: Can hold a hearing but cannot suspend or revoke the license until after the hearing; C: Can suspend the license of the broker when he receives a copy of the final judgment; D: Must wait to take action until the buyer files a formal complaint.

Correct Answer is : B On an unrestricted license, the commissioner must hold a hearing before he can suspend or revoke the license.

Question: An important difference between types of title insurance is that an extended coverage policy: A: Covers risks that cannot possibly be known to the insured; B: Covers risks that normally would be known through familiarity with the property or by personal inspection; C: Covers also loans against the property made after the policy date; D: Is available only to lenders who hold a recorded trust deed against the property.

Correct Answer is : B Risks covered by an extended coverage policy of title insurance include encroachments, rights of parties in possession, and unrecorded easements--conditions that might be discovered by a personal inspection of the property.

Question: Which of the following would usually be true concerning a hard money second trust deed: A: It always has lower than normal rates; B: It is secured by real estate and given to a third party to obtain a cash loan; C: It is carried back by a conventional lender; D: It is always repayable in three years.

Correct Answer is : B Since it is a hard money loan it provides cash for the borrower and would not be carried back by the seller. Since it is a trust deed it is secured by real estate.

Question: According to economic theory, during inflationary periods, investors usually do not take long-term positions because: A: They don't trust the Federal Reserve Board and its lack of control over interest rates; B: They fear erosion of capital from escalating interest rates and short-term investments usually provide a higher yield; C: Real estate is always the best investment; D: Mortgages and trust deeds provide a higher yield than long-term investments.

Correct Answer is : B Statement of fact.

Question: Following proper action by the local authorities, the zoning on a vacant lot was changed from "commercial" to "residential." Such an action is called: A: Retroactive zoning; B: Down zoning; C: Spot zoning; D: Blended zoning.

Correct Answer is : B Such a change would appropriately be called down zoning, because it is going from a higher use to a more restrictive use.

Question: Subdivisions are controlled by which of the following under the Subdivision Map Act: A: The real estate commissioner; B: The local city or county; C: Both (A) and (B); D: None of the above.

Correct Answer is : B The Subdivision Map Act gives control over subdivisions to the local city or county.

Question: As an element of value, an individual's purchasing power: A: Plays an insignificant role in affecting the value of real property; B: Plays an important role in affecting the value of real property; C: Is considered primarily when income properties are being appraised; D: Is considered primarily when commercial properties are being appraised.

Correct Answer is : B The ability of the average individual to purchase property does affect the value of that property.

Question: An appraiser is appraising a single-family residence, and notices an abandoned gas station next door. The appraiser would logically recommend which of the following: A: A structural pest control report; B: A toxic waste report from the EPA; C: Rezoning of the property; D: A soils report by a civil engineer.

Correct Answer is : B The appraiser would want to know if there had been any seepage from the gas tanks which might contaminate the property he was appraising.

Question: When a property is financed through the use of an all-inclusive note and deed of trust, which of the following statements would be correct: A: This method effectively voids any due-on-sale clause in the senior lien; B: Under the terms of the note and trust deed, the beneficiary agrees to make payments to the creditor on any senior obligation as they fall due; C: The trustor is obligated to discharge all senior indebtedness; D: None of the above.

Correct Answer is : B The beneficiary of the AITD must make the payments to the lender on the underlying note or notes.

Question: If a selling broker accepts the universal offer of sub-agency by virtue of the MLS listing, the broker would owe fiduciary duties to: A: Both the seller and the buyer B: The seller C: The buyer D: The Multiple Listing Service Correct Answer is : B The broker who accepts the universal offer of sub-agency would owe fiduciary duties to the seller.

Correct Answer is : B The broker who accepts the universal offer of sub-agency would owe fiduciary duties to the seller.

Question: An appraiser would use the "building residual technique" to establish the: A: Salvage value of the building at the end of its economic life; B: Present value of the building; C: Value of the land; D: Net income after depreciation.

Correct Answer is : B The building residual technique establishes the value of the building by capitalizing the land and improvements separately.

Question: When a contingency fails to be met, the buyer: A: Forfeits his deposit B: Receives a refund of his deposit C: Owes the broker a commission D: Is liable for damages

Correct Answer is : B The buyer's offer is often contingent upon a certain event.á If the event does not occur, the buyer is relieved of the obligation to purchase, and would be entitled to a return of áthe deposit.

Question: Accepted methods of appraising land are all of the following, except: A: Comparative method; B: Economic method; C: Abstractive method; D: Development method.

Correct Answer is : B The comparative method would compare the value of one parcel with another; the abstractive method would abstract from the total value of the property the value of the improvements, and hence the remaining value would be the value of the land; the development method estimates the value of the property when fully developed and subtracts the development costs, thus indicating the value of the land.

Question: Of the following, which is correct concerning past and/or future depreciation: A: The cost to cure method of estimating depreciation is mainly concerned with future depreciation; B: The straight line method may be used to measure past or future depreciation; C: The income approach provides for accrued depreciation in projecting net income into the future; D: The cost approach is concerned with accruals for past and/or future depreciation.

Correct Answer is : B The cost approach is concerned with accrued depreciation (past); the income approach would not project past depreciation (accrued); the cost to cure method is concerned with past depreciation, not future. However, the straight line method can be used to calculate either past or future depreciation.

Question: In the appraisal of a single-family residence, the appraiser takes into account the evolutionary stages of the life cycles of a neighborhood. This concept is most related to which of the following appraisal principles: A: Balance; B: Change; C: Diminishing returns; D: Progression.

Correct Answer is : B The evolutionary stages of integration, equilibrium and disintegration are related to the principle of change.

Question: In the government's exercise of the right of eminent domain, all of the following are correct, except: A: It is the right of the government to take property from the owner; B: It is an exercise of the government's zoning authority; C: Just compensation of fair market value must be paid for the property; D: The process of taking the property is known as condemnation.

Correct Answer is : B The exercise of zoning authority by a governmental body is under the police power, not the right of eminent domain.

Question: Two people own real property as joint tenants. The joint tenancy estate would be severed in each of the following instances except: A: The conveyance of the interest of one of the joint tenants to a third party; B: The execution of a trust deed securing a lien against the interest of one of the joint tenants; C: The gift of one joint tenant's interest in the property to a relative; D: The foreclosure by a lender against a trust deed securing a lien against one joint tenant's interest.

Correct Answer is : B The joint tenancy would be severed when equitable title is transferred, which does not happen when the trust deed is executed.

Question: The separate property of a person who dies intestate is divided: A: Equally between surviving spouse and children; B: One-third to the spouse, two-thirds to the surviving children; C: All to the surviving spouse; D: None of the above.

Correct Answer is : B The law of descent and distribution specifies that separate property be divided one-third to the surviving spouse and two-thirds divided equally among the surviving children.

Question: When a tenant under a 5-year lease abandons the property 3 years before the lease expires, the lessor can legally do all of the following except: A: Re-enter the property and take possession for the lessor's benefit; B: Leave the property unoccupied and immediately sue for the entire balance due on the lease; C: Find another tenant and re-rent the abandoned property for the original tenant's account with notice to the original tenant; D: Leave the property unoccupied and sue for each installment of rent as it becomes due.

Correct Answer is : B The lessor cannot sue for the entire balance due immediately; only for each installment as it becomes due.

Question: An appraiser uses sales prices of comparable substitute properties to estimate the value of the property. This technique is known as: A: Cost approach; B: Market comparison approach; C: Income approach; D: Cost price averaging.

Correct Answer is : B The market comparison approach uses the sales price of comparable substitutable properties in determining or arriving at the market value of the subject property.

Question: 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.

Correct Answer is : B The mortgage yield is the profit, or effective return that the lender receives from the loan.

Question: Which of the following would impair the security of a trust deed recorded on real property: A: The trust deed is recorded after a declaration of homestead; B: The trust deed is recorded after a work of improvement was commenced and a mechanic's lien is recorded on the work; C: A judgment lien is placed on the property; D: None of the above.

Correct Answer is : B The priority of a trust deed is established by the time of recording. The priority of a mechanic's lien is the commencement of work. If the work is begun before the trust deed is recorded, the mechanic's lien would have prior claim on any funds at a foreclosure sale.

Question: Golden Bank loaned $85,000 to Charles for one year. As part of the agreement, Charles agreed to keep $8,000 on deposit with the bank for the life of the loan.This is an example of: A: Declining balances B: Compensating balance C: Prepayment penalty D: Spreading

Correct Answer is : B The required deposit helps to compensate the bank for the risk in loaning the money

Question: The broker's right to accept and hold a deposit on the purchase price with an offer is normally contained in which of the following documents: A: The escrow instructions B: The listing agreement C: The deposit receipt D: The MLS by-laws

Correct Answer is : B The right to accept and hold a deposit is contained in the standard listing agreement

Question: A primary accomplishment of the secondary market for mortgages is: A: A reduction of inflationary trends in the housing market; B: New funds have been channeled into the primary mortgage market; C: Standardization of minimum property requirements; D: All of the above.

Correct Answer is : B The secondary mortgage market has increased the flow of money to the primary mortgage market because the lenders get their money back sooner and can make new loans.

Question: In using the market data approach to value, any differences in the: A: Subject property are adjusted to the standards set by the comparables; B: Comparables are adjusted to the characteristics of the subject property; C: Comparables are adjusted to the highest and best use; D: Subject property are adjusted to the market norm.

Correct Answer is : B The selling price of the comparison property is adjusted up or down to allow for the unique features of the subject property, the one being appraised.

Question: Which of the following answers best identifies the three phases normally involved in building a single-family dwelling: A: Construction proposal, map approval and buyer qualification; B: Land acquisition, development, and construction; C: Financing, building and resale; D: Syndication, subdivision and recordation.

Correct Answer is : B The three stages involved in building a residence are land acquisition, development and construction.

Question: When a property manager is employed to oversee a 14-unit apartment complex, the compensation for his services is normally A: A percentage of the net income from the property B: Flat fee plus percentage gross C: A discount on maintenance supplies purchased for the property D: Only a percentage of the first year's income from new leases he negotiates

Correct Answer is : B The usual agreement is a flat fee plus a percentage of the gross income

Question: It is generally recognized that as the depth of a parcel increases beyond the depth of a typical lot, what happens: A: The front foot and square foot values decrease; B: The value per front foot increases; C: The value of each square foot increases; D: The total value of the lot decreases.

Correct Answer is : B The value of each front foot increases because of the added depth of the lot; the value per square foot decreases.

Question: During normal economic times, investors who make long-term investments: A: Have less risk than those who make short-term investments; B: Have more risk than those who make short-term investments; C: Have a temporary solution to their money problems; D: Are wasting their money.

Correct Answer is : B There is more risk because rates of return can vary a great deal over the long-term and the investor is locked into a set rate of return.

Question: Definitions: (1) A sudden and dramatic loss of land by the action of water; (2) The addition of soil, by gradual deposit, through natural causes; (3) The gradual loss of land by the operation of water or wind; (4) Soil deposited on the shore or bank of ariver or ocean by action of the water. Choose the answer which arranges the words in the same order as the definitions: A: Accretion, erosion, avulsion, alluvion; B: Avulsion, accretion, erosion, alluvion; C: Erosion, avulsion, accretion, alluvion; D: Erosion, alluvion, avulsion, accretion.

Correct Answer is : B These are the definitions for avulsion, accretion, erosion, alluvion. Be sure to memorize the one for avulsion and you will get the right answer.

Question: In order to be entitled to a commission, a broker must show that he/she was the procuring cause of the sale under all of the following types of listings, except: A: Exclusive agency; B: Exclusive authorization and right to sell; C: Open listing; D: Nonexclusive listing.

Correct Answer is : B Under an exclusive authorization and right to sell listing, the seller agrees to pay the broker if the property is sold at anytime during the term of the listing by anyone. Therefore, the broker would not need to prove that the broker was the procuring cause.

Question: Under California Subdivision Law, material changes occurring in a subdivision being offered within California, which is subject to an outstanding public report, must immediately be reported to the Real Estate Commissioner. All of the following would be considered a material change, except: A: A relocation of easements affecting unsold subdivision interests; B: Changes in prices for which public lots are offered for sale; C: Change in name of escrow or trust account depository handling money advanced by buyers of the lots within the subdivision; D: Changes in the means of furnishing the services to lots within the subdivision.

Correct Answer is : B Under the California Subdivision Law, changes in prices for which the public lots are offered for sale is not considered to be a material change and need not be reported to the Real Estate Commissioner.

Question: Of the following types of funds, which one does not have to be placed in the broker's trust fund account: A: Rents collected for the owner on properties managed by the broker; B: Unpaid commissions owed to salespersons; C: Advance fees received to cover marketing costs; D: Funds received from a borrower to cover appraisal fees and credit report costs.

Correct Answer is : B Unpaid commissions owed to salespersons are not deposited in the trust account; the other three types of trust funds must be so deposited.

Question: Roberts, the holder of a $70,000 first trust deed note, desires to borrow $25,000 to build a house. If the note is used as security for that loan, the arrangement would be regarded as: A: A chattel mortgage; B: A pledge; C: A subordinated trust deed; D: An illegal security agreement.

Correct Answer is : B When an existing note is used as the security for another loan, it is called a pledge agreement. The note is pledged for repayment of the new loan.

Question: When a real estate agent acts exclusively as a buyer's agent, he can: A: Present offers directly to the seller; B: Present offers to the seller and seller's agent; C: Withhold negative information about the buyer from the seller; D: Act as agent of the seller when his commission is paid by the seller.

Correct Answer is : B When the licensee is the agent of the buyer, he should present all offers to the seller through the seller's agent.

Question: In which of the following approaches to value is a separate evaluation of the land more important: A: Income; B: Cost; C: Comparison; D: All of the above.

Correct Answer is : B When using the cost method of appraising, the land is valued separately from the building and then added to the value of the building.

Question: Companies that issue private mortgage insurance normally secure a majority of their financial resources from: A: The Open Market transactions of the Federal Reserve Board; B: The Federal Savings and Loan Association; C: Premiums earned on pooled insurance policies and stock or debt issues; D: None of the above.

Correct Answer is : C

Question: When a seller is required to execute a contract as agreed, the court decree is a decree of: A: Mandamus performance; B: Equitable performance; C: Specific performance; D: Execution sale performance.

Correct Answer is : C

Question: The phrase "of indefinite duration" applies to: A: A less than freehold estate; B: An estate at sufferance; C: An estate of inheritance; D: All of the above.

Correct Answer is : C "Of indefinite duration" applies to a fee simple estate which is also known as an estate of inheritance.

MATH Question: The documentary transfer tax due when the selling price is $315,000, and the buyer will assume an existing first trust deed of $120,000 (as part of the purchase price) would be: A: Approximately $347 B: Approximately $512 C: Approximately $215 D: Not sufficient information given to be able to calculate the tax.

Correct Answer is : C $315,000 less assumed loan of $120,000=$195,000 consideration $195,000 divided by $500=390 taxable units $390 x $.55 per unit=$214.50 tax (round up to $215)

Question: Which of the following would be used to transfer a title or interest in trade fixtures when selling a business: A: A negotiable instrument; B: A chattel real; C: A bill of sale; D: None of the above.

Correct Answer is : C A bill of sale is used to transfer ownership of personal property.

Question: Unknown to the seller, the offeror died four hours prior to the seller's acceptance of the offer to purchase. Concerning the preceding, which of the following is most correct: A: A contract exists, but either party may rescind within a reasonable length of time; B: A contract exists and it may not be rescinded by the executor of the offeror's estate; C: The offer was revoked by operation of law upon the offeror's death; D: A contract exists, but it may be rescinded by the executor of the offeror's estate.

Correct Answer is : C A binding contract does not exist until an offer has been accepted and the acceptance of the offer communicated back to the offeror. Prior to such time, the offeror, for any reason whatsoever, could withdraw. In the case given, the offeror's death automatically terminates the offer.

Question: When may a real estate broker, serving as agent of the seller, refuse to transmit an offer to the principal: A: When the owner has already accepted a "back-up" offer; B: When the broker is acting as a gratuitous agent; C: When the broker is acting on the express instructions of the principal in his refusal; D: Never.

Correct Answer is : C A broker must present all offers unless acting on express instructions of the principal.

Question: A clearance receipt for a business opportunity transaction will protect the purchaser from: A: Unsecured creditors; B: Prepayment of taxes; C: Successor's liability; D: Secured creditors.

Correct Answer is : C A clearance receipt from the seller of the property protects the purchaser from successor's liability in the purchase of a business opportunity and the resultant tax collected by the State Board of Equalization. The buyers of such a business opportunity should make certain that they receive a copy of the State Board of Equalization receipt, not just a receipt from the seller.

Question: When buying his home, a purchaser was given a grant deed and a standard policy of title insurance. Which of the following items would be warranted by the seller but not covered by the policy of title insurance: A: That the grantor is legally competent; B: That the grantor actually signed the deed; C: That there are no undisclosed liens against the property placed there by the grantor; D: That there are no forged deeds in the chain of title.

Correct Answer is : C A grant deed carries an implied warranty that there are no undisclosed liens against the property placed there by the grantor. The standard policy of title insurance carries no such protection.

Question: Which of the following would be regarded as a disadvantage of joint tenancy: A: It can exist only between husband and wife; B: It cannot be created by will; C: It may be severed by a voluntary transfer or operation of law; D: It is always assumed to be the vesting if no other vesting is specified.

Correct Answer is : C A joint tenant can sell or transfer his interest without the knowledge or consent of the other joint tenant(s). It is never an assumed vesting, can be created by will, and can exist between any two or more natural persons.

Question: Which of the following would be true about a lis pendens: A: It can only be removed by a court order; B: It can be recorded no matter what the type of lawsuit is; C: It may affect title to real property based on the results of the lawsuit; D: None of the above.

Correct Answer is : C A lis pendens gives notice that the property may be involved in a lawsuit.

Question: Madison is a mortgage loan broker. When setting up a loan, Madison differs from Carter, a mortgage banker, in which of the following ways: A: Carter is authorized by law to make larger loans than Madison; B: Madison is exempt from the Finance Code of California; C: Madison does not normally use his own funds in arranging a loan; D: Carter deals primarily in loans which must be recorded; Madison's loans are normally not recorded.

Correct Answer is : C A mortgage loan broker normally does not loan his own funds, but negotiates the placement or sale of a loan with a particular lender. A mortgage banker generally has the funds with which to make a loan.

Question: When a borrower signs a promissory note for a purchase-money trust deed loan, he creates: A: A security device which hypothecates the property; B: A conditional promise to pay; C: A legally enforceable evidence of debt; D: All of the above.

Correct Answer is : C A note is not a security device, and it is not a conditional promise to pay, but an unconditional promise. The note is the evidence of the debt.

Question: A developer purchased 15 lots, adjacent to each other, paying 25% of the purchases price in cash and giving the seller a note and deed of trust for the balance of the purchase price. He is now ready to obtain a construction loan to build single-family homes on the lots. The construction lender, to insure that his loan will be adequately secured as the primary lien, could do each of the following acts. Which would be least effective: A: Order an ALTA policy of title insurance; B: Record a subordination agreement executed by the holder of the loan on the land; C: Record, publish, and post a notice of nonresponsibility; D: Have the property inspected for any construction work already evident.

Correct Answer is : C A notice of nonresponsibility is not to protect a lender, but rather protects an owner from liens created by work ordered by someone other than the owner, such as a tenant.

Question: Hayes is a tenant farmer with a 10-year lease on a farm known as Wildacre; Jones is the owner of the adjacent farm, Redacre. Jones has asked Hayes to grant him a right-of-way easement in writing. Can Hayes legally grant Jones the requested easement: A: No, because a tenant cannot grant an easement--only a fee owner can do so; B: Yes, subject to the ratification of the easement by the owner of Wildacre; C: Yes, but the easement so granted may not extend beyond the term of the lease; D: Yes, for if the lease has been duly recorded, the tenant can do anything that the holder of the title can do, such as granting any type of easement.

Correct Answer is : C A tenant has the right to grant an easement, but only for the term of the lease.

Question: In a lease, which of the following would not require either party to give termination notice to the other: A: An estate at will B: An estate from period to period C: An estate for years D: A month-to-month rental agreement

Correct Answer is : C An estate for years (a lease) has a termination date specified in the original agreement.

Question: In order for a broker to be able legally to claim a commission on an exclusive right to sell listing, which of the following termination dates would be appropriate: A: Until either principal or agent gives proper notice of rescission; B: For 120 days after completion of the improvements; C: For 180 days from the date the listing agreement is signed by the contracting parties; D: For 90days after a conditional commitment is issued by the FHA.

Correct Answer is : C An exclusive right to sell listing requires a specific termination date in order for the broker to claim a commission. Only answer "C" meets that requirement.

Question: Jones and Hanson own adjacent parcels of real estate. Jones tells Hanson: "You may cross my property until I tell you to stop." What type of interest does Hanson have in Jones' property: A: An easement in gross; B: An easement at will; C: A license; D: A right-of-way easement.

Correct Answer is : C Because it is personal and revocable, it is not an easement. Hence, it would be classified as a license.

Question: Bronson entered into a contract to sell his farm to Williams. The contract made no mention of personal property. Just prior to signing the contract, Bronson harvested the crops, for he had no intention of selling the crops to Williams. Williams now maintains that the harvested crops were part of the contract. Assuming only the above facts, which party is correct: A: Bronson, because no crops were mentioned, and the term "real property" refers only to buildings; B: Williams, because the crops were a part of the property at one time and were therefore part of the real property; C: Bronson, because harvested crops are treated as goods and will be covered by the commercial code; D: Neither is correct, because the laws of the county in which the farm is located will take precedence.

Correct Answer is : C Because the crops were harvested prior to the signing of the contract, they were not a part of the real property at that time, and therefore they remain the personal property of Bronson.

Question: Which of the following statements concerning the methods of appraising land is most nearly correct: A: The abstractive method analyzes the income imputable to the land and abstracts the value of any mineral rights held by others; B: The land residual method values the total property on the basis of market comparison and subtracts the cost of the improvements; C: The development method estimates the total value of land and improvements when sold and deducts the development costs; D: The comparative method compares the value of the improvements and the value of the land both together and separately.

Correct Answer is : C By definition

Question: When a parcel of real estate is being sold by a California corporation, who would sign the grant deed in behalf of the corporation A: All board members B: Any two board members C: The president and secretary of the corporation D: There is no law specifying the necessary signatures

Correct Answer is : C California law would recognize the signatures of the President and Secretary

Question: Which of the following items would not be deducted when computing net operating income for appraisal purposes :A: Vacancy losses; B: Fixed expenses; C: Capital expenditures; D: Management expenses.

Correct Answer is : C Capital expenditures are added to the basis of the property, not deducted from the gross income.

Question: Which of the following best exemplifies deferred maintenance: A: Reroofing of a home; B: An apartment unit that will need to be painted in the future; C: The need to rehabilitate a building; D: Demonstrated need for a larger hot water tank.

Correct Answer is : C Deferred maintenance is best exemplified by the need to rehabilitate a building.

Question: Of the following government agencies, which one would most likely be a primary lender on large tracts of land: A: Federal Reserve Board; B: Federal Home Loan Bank Board; C: Federal Land Banks; D: Federal National Mortgage Association.

Correct Answer is : C Federal land banks are primary lenders on large tracts of land; FNMA and GNMA are secondary market organizations; and the FHLBB is the regulatory agency for federal savings and loan associations.

Question: None of the following is false concerning appraisal reports except: A: The appraisal report must be dated; B: The subject property, or interest therein, must be clearly and sufficiently described; C: Certified appraisers charge standardized fees for all appraisal reports; D: Appraisal reports may be oral or written. Correct Answer is : C Fees for appraisal reports vary, even among certified appraisers.

Correct Answer is : C Fees for appraisal reports vary, even among certified appraisers.

Question: The Government National Mortgage Association (GNMA) issues pass-through securities. The phrase "pass-through" means that all interest and principle payments pass through GinnieMae to the investors. Ginnie Mae's role in this market is to: A: Act as a go-between and verify that the transactions are documented; B: Bring sellers and buyers together; C: Guarantee timely payment of interest on the mortgages; D: Qualify the properties that are used as security for the loans.

Correct Answer is : C GNMA guarantees timely payment of the interest.

Question: A buyer and seller initial the liquidated damages clause in a real estate purchase contract and then the buyer defaults. The deposit is: A: Given to the seller when escrow opens; B: Limited to 3% of the selling price; C: Divided equally between the seller and the listing agent; D: Used to pay any costs incurred and then returned to the buyer.

Correct Answer is : C If a buyer defaults and the liquidated damages clause is initialed, the deposit will be divided equally between the seller and the listing agent after expenses are paid. However, the listing agent will never get more than his agreed-upon commission.

Question: If the owner of a property thinks that his property has been over-assessed by the county assessor, he would contact the: A: California Bureau of Real Estate; B: Board of Supervisors; C: Assessment Appeals Board; D: County tax collector.

Correct Answer is : C If a homeowner feels that property has been assessed too high by the property tax assessor, the correct agency to appeal would be the Assessment Appeals Board.

Question: Which of the following best describes the actions of an agent under single agency: A: In a single agency transaction, the buyer cannot choose their own broker or represent themselves; B: In a single agency transaction, there is one agent representing both the seller and the buyer in the same transaction; C: A single agency broker is client-oriented; D: In a single agency transaction, both of the principals have employed the same agent to represent them.

Correct Answer is : C In a single agency, the agent represents only one party--his client.

Question: Barker, finding a cabin in the mountains that has been abandoned, has all of the legal requirements for adverse possession. In order to perfect his title to the property, Barker will find he can do so by: A: Collecting and submitting his evidence to a title insurance company; B: Recording a lis pendens at the county recorders office; C: Initiating and completing a quiet title action; D: Doing nothing, since title in his name is automatic once he has completed the legal requirements.

Correct Answer is : C In adverse possession, title is perfected by filing a quiet title action to ask the court to place title in the claimant's name.

Question: When opening an account to deposit and hold funds received on behalf of others, a real estate broker must: A: File a signature card with the signature of the principal for whom he is holding such funds; B: Obtain a fidelity bond; C: Designate the account with the depository institution as a trust account; D: Select a financial institution which pays the prevailing rate of interest on funds in the account.

Correct Answer is : C In setting up an account to receive and hold trust funds, the broker is required to designate it as a trust account.

Question: Of the following, which best characterizes the term "single agency": A: It is a misnomer; there are always two brokers in every transaction; B: One agent represents both seller and buyer in the same transaction; C: The agent represents one client in dealings with third persons; D: The agent serves two principals in a transaction in which the agent is the listing broker.

Correct Answer is : C In single agency, the agent represents one client--either buyer or seller--but not both.

Question: Under usual procedures, the property is to be delivered to the buyer vacant, unless agreed upon in writing. If the buyer moves in before escrow closes, or the seller remains in possession after escrow closes, that individual would be considered: A: In violation of the contract; B: A holder in due course; C: A tenant; D: A third party with recourse against the broker.

Correct Answer is : C In the scenario given, there is no mention of a written agreement; hence, no evidence of any violation of the contract. The occupier who does not own the property is properly termed a tenant.

Question: According to generally accepted practices, an escrow agent is authorized to: A: Give the buyers advice about the best financing which is available; B: Change the escrow instructions when asked to by the listing broker; C: Call for funding of the buyer's loan; D: Authorize a pest control company to make corrective repairs.

Correct Answer is : C In the usual escrow instructions, the buyer authorizes the escrow agent to call for the funding of the buyer's loan in order to close escrow. Termite repairs usually have to be authorized by the party who will pay for them, and the agent cannot change the escrow instructions without the written agreement of the buyer and seller. The agents, rather than the escrow company, would usually advise buyers concerning financing matters.

Question: Jones made a written offer to purchase a parcel of real property, including in the offer a clause indicating it would be good for five days. The day after he made the offer, before the seller had accepted it, Jones decided to cancel the offer. Which of the following best describes Jones' position: A: Jones cannot cancel the offer until after the five-day period; B: If Jones cancels, he will forfeit the deposit; C: Jones can cancel and recover the deposit; D: Jones can cancel if he pays the broker the commission.

Correct Answer is : C Jones can withdraw the offer without penalty at any time before he has received the seller's acceptance. If he does so, he is entitled to a return of the entire deposit.

Question: It is often easier to schedule maintenance work for a new property than for an older one because: A: Maintenance of older properties is largely to repair malfunctioning equipment, which is usually unpredictable; B: New properties do not require maintenance work; C: With a new property, owners manuals are usually available, with recommended schedules of maintenance procedures; D: There is no difference in maintenance schedules between new and older properties.

Correct Answer is : C Maintenance schedules for new properties are often easier to create because of the information contained in the owner's manuals.

Question: According to California law, which of the following documents must be recorded in order to be valid: A: Assignment of a second deed of trust; B: Grant deed; C: Abandonment of homestead; D: All of the above.

Correct Answer is : C Neither a grant deed or the assignment of a trust deed has to be recorded in order to be valid--but the abandonment of homestead must be recorded in order to be valid.

Question: To determine the net income for appraisal purposes, one would deduct which of the following from the scheduled gross income of the property: A: Vacancies, capital improvement costs, and depreciation allowance; B: Vacancies, reserves, and depreciation allowance; C: Vacancy charge, fixed expenses, operating expenses, and reserve charges; D: Vacancies, reserves, and debt service.

Correct Answer is : C Net operating income is determined by subtracting vacancies, fixed and operating expenses, and reserves from the scheduled gross income.

Question: When an existing contract is replaced by an entirely new contract, it is an act of: A: Reversion; B: Rescission; C: Novation; D: Reformation.

Correct Answer is : C Novation comes from the Latin word "nova," indicating something new.

Question: Which of the following documents is not normally recorded: A: An abstract of judgment; B: A notice of completion; C: A promissory note secured by a deed of trust; D: A conditional installment sales contract.

Correct Answer is : C Of the documents listed, the promissory note is rarely recorded. The trust deed that secures it is usually recorded, but the note is not.

Question: In creating a lease agreement on a commercial store building, the attorney drawing the lease agreement should be certain to include which of the following in order for the lease to be valid: A: The signature of a lessee if already in possession of the property and paying rent on it; B: The words "let and demise"; C: The term, consideration, and an adequate description of the premises; D: All of the above.

Correct Answer is : C Of the items listed, only "C" would be necessary for validity. No specific language is required, and the signature of a lessee already in possession and paying rent is not required.

Question: The amounts applied to principal when a loan is amortized by equal monthly payments will result in: A: The interest remaining constant; B: A decrease, while the interest payments increase; C: An increase, while the interest payments decrease; D: An increase at a constant amount.

Correct Answer is : C On an amortized loan, the amount applied to the principal, monthly, increases, while the loan balance decreases; therefore, as the principal amount monthly applied to the loan is increasing, the amount for interest is decreasing.

Question: Legally and technically, property is defined as: A: Freehold estates; B: Things which buyers and sellers own; C: Rights or interests which a person has in the thing owned; D: Only personal property.

Correct Answer is : C Property is legally defined as the rights that a person has in the thing owned. This refers to the Bundle of Rights theory.

Question: A mechanic's lien filed today would usually have priority over: A: A trust deed loan recorded against the property before any work was done; B: A property tax lien to be filed tomorrow; C: An unrecorded deed delivered a week ago; D: Both "B" and "C".

Correct Answer is : C Recording gives priority; the first to record is generally first in right.

Question: Mr. Jones purchased vacant land "with riparian rights appurtenant thereto. " Such rights: A: Are owned by Mr. Jones apart from the land; B: Are specifically established by public record; C: Are only available to land adjacent to a stream and within the watershed; D: Convey to Mr. Jones absolute and complete ownership of the adjacent waters.

Correct Answer is : C Riparian rights "run with the land," are not specified in the public record, and do not convey absolute ownership, but only the right to a reasonable amount.

Question: Seller Horton listed a parcel of vacant land with Broker Jolly, who placed the listing in the local Multiple Listing Service The property was shown by Salesperson Carson of Red Maple Realty to prospective buyer Barton. Salesperson Carson is directly responsible to: A: Seller Horton; B: Broker Jolly; C: Red Maple Realty; D: Buyer Barton.

Correct Answer is : C Salesperson Carson is a sub-agent of the seller, but is directly responsible to his employing broker, Red Maple Realty.

Question: Broker Adams obtained an exclusive right to sell listing on Carson's home. This listing also gave Adams the option to buy the home for the listing price. Prior to or at the time of exercising the option, Adams must: A: Show a good faith effort to sell the property to a qualified buyer; B: Obtain Carson's permission to exercise the option; C: Reveal any profit in writing and obtain Carson's permission to exercise the option; D: None of the above.

Correct Answer is : C Since the broker has a listing, the broker has a fiduciary obligation to the seller and therefore must reveal any profit in the transaction and obtain the seller's written permission to exercise the option.

Question: The activities and direction of the money market are extremely important in real estate. As interest rates increase, the capitalized value of income property subject to a long-term lease: A: Becomes stable; B: Increases at a rate equal to the capitalization rate; C: Decreases; D: Is unaffected over the short run.

Correct Answer is : C Since the interest rate is one of the components in calculating a capitalization rate, as interest rates increase, the capitalization rate increases, and as the capitalization rate increases, the value decreases if the income remains the same.

Question: Funds can be withdrawn from a broker's trust fund account by which of the following authorized persons: A: Any unlicensed person employed by the broker; B: Any one of the corporate directors; C: Any person employed by the broker; D: Anyone who is officially authorized by the broker in writing.

Correct Answer is : C Statement of fact.

Question: When does a fictitious business name statement, filed with the county clerk in the county where the primary business is conducted, expire: A: Seven years from the date of filing; B: Four years from July 1 of the year in which it was filed; C: At the end of five years from December 3l of the year in which it was filed; D: Never, unless the corporation holding it is dissolved.

Correct Answer is : C Statement of fact.

Question: Which of the following statements about personal property is most nearly correct: A: All personal property that has been affixed to the real property is the property of the seller, and he/she may remove it without the buyer's permission; B: All personal property that has been affixed to the real property belongs to the buyer; C: No personal property that has been affixed to the real property should be removed without the written consent of all parties as specified in the purchase agreement; D: None of the above is correct.

Correct Answer is : C That which is affixed to the real property has become a part of the real property, and may not be removed without the consent of all parties.

Question: When budgeting for a real estate office, the phrase "company dollar" means: A: The money required to establish an office and run it for a given period of time; B: The income of an office after all expenses are subtracted; C: The income of an office after all commissions are subtracted; D: None of the above.

Correct Answer is : C The "company dollar" refers to the amount left over after all commissions are subtracted.

Question: A broker advertises the sale of "Mega Bucks Trust Deeds" in a newspaper. In the advertisement he offers a specific yield which he arrives at by looking at his yield for the past year. Which of the following is true concerning this advertisement: A: This is illegal according to the Truth-in-Advertising law; B: It is legal if the California Bureau of Real Estate has confirmed the yield that is stated; C: It is legal if he also gives the actual interest rate specified in the note and the discount from the outstanding principal balance; D: There is no law covering this subject.

Correct Answer is : C The Real Estate Law states that this is permissible if the advertisement also states the interest rate stated in the note and the amount of discount.

Question: When a person passes the examination for a real estate license and wants to obtain that license, he must file the required application and fee within: A: One year from the date of the notice notifying him that he has passed the examination B: Two years from the date of the notice notifying him that he has passed the examination C: One year from the date of the examination D: Two years from the date of the examination

Correct Answer is : C The applicant has one year from the date of the examination to apply for the license and pay the fees.

Question: A subdivider has a blanket encumbrance on many lots. The blanket encumbrance includes a release clause which states that when a certain amount is paid for each lot, it will be released from the blanket encumbrance. When the price of each lot is paid, the beneficiary will execute a: A: Partial reconveyance deed; B: Partial subordination clause; C: Request for partial reconveyance; D: None of the above.

Correct Answer is : C The beneficiary, or lender, would issue a request for partial reconveyance to the trustee who would then issue a partial reconveyance deed.

Question: The broker presented an offer to the seller for a listed single-family residence, with the buyer's uncle to provide the financing for the purchase. "The seller accepted the offer, and when the broker informed the buyer of that fact, the buyer told the broker that the uncle was out of the country and would not return until some indefinite future date." The broker's action would be classified as: A: Blameless, since he presented the offer to the seller in good faith B: Unethical C: Illegal D: Commendable, since he was exerting his best efforts to sell the property

Correct Answer is : C The broker's action was illegal, for failure to disclose a material fact of the uncertainty that the buyer was able to secure the necessary financing.

Question: A real estate appraiser would use accrued depreciation in connection with which of the following methods: A: The market data method; B: The income analysis method; C: The cost method; D: All of the above.

Correct Answer is : C The cost approach is the one which subtracts accrued depreciation from the cost to construct new.

Question: The property taxes on residential real property are determined annually by the: A: State Board of Equalization; B: Board of Supervisors; C: County assessor; D: County treasurer. Correct Answer is : C The county assessor, who determines the assessed value of the property, determines the amount of the tax obligation.

Correct Answer is : C The county assessor, who determines the assessed value of the property, determines the amount of the tax obligation.

Question: Jackson leased his home to Sullivan with a verbal agreement to sell the property to Sullivan. Jackson knows that Sullivan has been making significant improvements to the property in reliance on that verbal agreement. Jackson now declines to sell the property to Sullivan. Which of the following best describes the rights of the parties: A: Jackson must sell because he made an ostensible agreement; B: Sullivan has no right to enforce the verbal agreement; C: Jackson must sell because the doctrine of estoppel will apply in this case; D: Jackson does not have to sell because of the statute of frauds.

Correct Answer is : C The doctrine of estoppel says that actions must be consistent. If Jackson knows that Sullivan is relying on the verbal contract, it is not consistent for him to allow the substantial improvements. Jackson has to sell if Sullivan wants to buy.

Question: In order to maintain the natural state of the land, a landowner grants an easement which limits the future development of the property. Such an easement is classified as: A: Profit a pendre; B: A solar easement; C: A conservation easement; D: A highest and best use restriction.

Correct Answer is : C The easement described would be a conservation easement.

Question: Which of the following would be used by an appraiser in using the income approach when valuing an apartment house: A: Excess rent; B: Percentage rent; C: Economic rent; D: Contract rent.

Correct Answer is : C The economic rent is the rent the property will reasonably produce; hence, the market rent. Of the choices listed it is the most reliable information on which to base the value estimate.

Question: In order to calculate accurately a gross rent multiplier, the appraiser would obtain from comparable properties the: A: Net income and selling price; B: The original cost and the annual income; C: The annual rent and the selling price; D: The net income and the capitalization rate.

Correct Answer is : C The gross rent multiplier is arrived at by dividing the monthly or annual gross rent into the selling price of the property.

Question: A percentage lease indicates that rent is based as a percentage of: A: The net sales of the lessee's business B: The increased assets of the lessee's business; C: The gross sales of the lessee's business; D: The income from the business subject to federal tax.

Correct Answer is : C The gross sales of the business are the basis for computing percentage rent.

Question: The Franchise Investment Law is written primarily for the protection of: A: Franchisees and/or subfranchisors who have purchased rights to an exclusive geographic territory; B: Stockholders of franchisor corporations with a net worth of less than $500,000; C: Prospective franchisees when considering the purchase of a franchise; D: None of the above.

Correct Answer is : C The law requires extensive disclosures to prospective franchisees prior to the signing of the contract to purchase, so that there is full knowledge concerning the franchise. It does not protect stockholders or deal with territorial matters.

Question: A real estate salesperson's license has been suspended because money was paid out of the Recovery Account to a person who had a judgment against the salesperson. His license will not be reinstated until he: A: Pays the person any amount not paid by the Recovery Account; B: Pays the Recovery Account for half of the money plus interest; C: Pays the Recovery Account for the money it paid plus interest; D: Pays the Recovery Account and the person all money due plus interest.

Correct Answer is : C The licensee must reimburse the Recovery Account for all of the money it paid out plus interest before the license can be reinstated.

Question: In appraising, the term "market value" is most nearly synonymous with A: Assessed value B: Inherent value C: Market price D: Utility

Correct Answer is : C The market value of a property is what it would sell for, given a ready, willing and able seller and a ready, willing, and able buyer, and sufficient time on the marketplace. "Market price is what a property sells for." Of the choices given, it is the best choice

Question: Where both local and federal minimum housing requirements apply to a specific property, contractors building there must: A: Observe the local building code; B: Comply with the federal housing specifications; C: Comply with the more stringent of the two laws; D: Choose which law they will obey.

Correct Answer is : C The more restrictive of the two laws would be enforced.

Question: If a person obtains a contract through duress, that contract is: A: Valid; B: Void; C: Voidable; D: Unenforceable.

Correct Answer is : C The party upon whom the duress was placed has been legally injured and can void the contract if he so desires.

Question: The owner of a 5-unit apartment complex has decided to sell each apartment in the building to the five present tenants. He has decided that each tenant will own his own unit in fee, but will own the common areas of the building and land in undivided joint ownership. In all probability, the plan would be legally interpreted to be a: A: Lot split; B: Stock cooperative; C: Subdivision; D: Variance.

Correct Answer is : C The plan would not necessarily involve a variance; nor would it be a lot split, since the land is not being divided. A stock cooperative would involve a corporation and common ownership of both the building and the land. By elimination, it would be a subdivision.

Question: When escrowing a business opportunity transaction, the escrow agent is careful to record the notice of the transfer in the county where: A: The buyer lives; B: The seller lives; C: The goods are located; D: The sale is to be conducted.

Correct Answer is : C The proper place to record the notice is in the county where the goods are located.

Question: 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.

Correct Answer is : C The purpose of the Federal Truth-in-Lending Act is to assure consumers that they are provided information on the cost of credit.

Question: A prospective buyer signs an offer to purchase a parcel of real property, and gives the salesperson a $1,000 personal note as an earnest money deposit. In relation to this transaction, which of the following is most nearly correct: A: A personal note is just the same as cash for a deposit on real property; B: The salesperson should always refuse a deposit unless it is cash or check; C: The salesperson should inform the seller, when presenting the offer, that the deposit is in note form; D: The salesperson should not have accepted the note without the express permission of the seller.

Correct Answer is : C The salesperson can accept any deposit, but must inform the seller of the form and amount of the deposit when presenting the offer.

Question: When Salesperson Miller shows a residence owned by Owens and listed by his employing broker Park, Salesperson Miller is related to Seller Owens as: A: An independent contractor; B: A direct employee; C: A subagent of the seller; D: An agent of the seller.

Correct Answer is : C The salesperson is such a scenario is a subagent of the seller.

Question: The vendor under a real property conditional sales contract would be unable to enforce which of the following, even if included in the contract; A: A forfeiture clause if payments are not made as agreed B: Vendee's liability if the improvements are damaged C: An agreement by vendee not to record the contract D: All of the above

Correct Answer is : C The seller (vendor) under a land contract cannot enforce an agreement not to record

Question: When property is being purchased and financed by a new loan through the Cal-Vet loan program, the seller will (in order to consumate the sale and have the chain of title read correctly), execute a grant deed to the: A: Escrow agent, to be held in trust for the veteran buyer; B: Trustee designated in the deed of trust; C: Department of Veterans Affairs; D: Veteran purchaser, who assigns an equitable title to the Department of Veterans Affairs.

Correct Answer is : C The seller sells the property to the California Department of Veterans Affairs, who then sells the property to the veteran under a conditional installment sale contract.

Question: When the first party agrees to pay for a financial loss arising from a specific event, and the second party agrees to make periodic payments to the first party, the agreement is known as: A: A lease agreement; B: A management contract; C: An insurance policy; D: A performance bond.

Correct Answer is : C The stem of the question describes an insurance policy.

Question: In the event of a default, legal enforcement of the terms of a trust deed may be done by: A: Trustee's sale; B: Judicial foreclosure; C: Either "A" or "B"; D: None of the above.

Correct Answer is : C Trust deeds can be enforced by either a trustee's sale or a judicial foreclosure.

Question: In order for a transaction to be subject to the Federal Truth-in-Lending law, it must meet all of the following criteria except: A: Credit is offered or extended to consumers; B: Credit is offered or extended regularly; C: The purpose of the credit is for the purchase of personal property only; D: A charge is levied against the borrower for the extension of credit, or the debt is to be repaid in more than four installments.

Correct Answer is : C Truth-in-Lending (Regulation Z) applies to both personal and real property loans.

Question: Which of the following would be considered real property: A: Less-than-freehold estates; B: Mortgages; C: Vegetation; D: Trade fixtures.

Correct Answer is : C Vegetation is affixed to the soil and would ordinarily be considered real property.

Question: Gibson sued his former tenant, Andrews for one months rent, claiming that Andrews left without giving the 30-day notice required by statute. Andrews asserted that he had notified Gibson to repair a broken water pipe, but the request had been ignored, and therefore did not need to give the 30-day notice. Assuming only these facts, the court will probably decide: A: Andrews is liable, because he failed to have the repairs done and deduct them from his rent; B: Despite the defect, Andrews was required to give notice, and therefore must pay; C: Andrews is not liable for the rent, since Gibson's failure to make necessary repairs is sufficient grounds for termination of the tenancy without notice; D: Andrews is not liable under any circumstances.

Correct Answer is : C When a property becomes untenantable (a broken water pipe qualifies), the tenant must notify the landlord. If the landlord does not repair the property within a reasonable time the tenant may either have it fixed and deduct the costs from the rent (up to one month's rent) or may vacate the property. If the tenant chooses to vacate the property he has no further obligations under the rental agreement.

Question: When auctioning off real property, the auctioneer is always required to accept a bid only if: A: The sale is being made under the force of law; B: The sale is as a result of judicial foreclosure; C: The auction is being conducted without reserve; D: The bid is within 15% of the announced minimum bid.

Correct Answer is : C When a property is sold at auction and there is no reserve, any legitimate bid must be accepted.

Question: In advertising a mortgage loan which bears a fixed rate of interest and is fully amortized by means of monthly payments, if a specific monthly payment is included in the ad, it must also contain: A: The amount of each payment which is applied to principal; B: The estimated closing costs; C: The principal loan amount, the annual percentage rate, the amount, number, and period of payments scheduled to the date of maturity; D: The annual percentage rate and the total amount of interest and finance charges to be paid over the life of the loan.

Correct Answer is : C When a specific monthly payment is advertised, the principal amount of the loan, the annual percentage rate, and the repayments required must also be included in the ad.

Question: When a salesperson takes a listing which does not authorize the listing broker to accept a deposit from an offeror toward purchase of the property, the broker should advise his salesperson that: A: The broker will not be able to accept a deposit from an offeror; B: It is an implied right of a broker to accept a deposit in behalf of the seller on any offer; C: A deposit will be accepted and retained by the broker from the offeror, but only as agent for the offeror; D: None of the above.

Correct Answer is : C When the listing does not authorize the broker to receive a deposit for the seller, he becomes the buyer's agent in the receipt and holding of the deposit.

Question: An appraiser is using the market data approach comparing the prices of comparable properties to the subject property. If the comparable properties have a feature that is not present in the subject property, the value of that feature will be: A: Identified in the report but given no consequences; B: Ignored since no two properties are alike; C: Subtracted from the sales price of the comparables; D: Added to the sales price of the subject.

Correct Answer is : C When using the market data approach to appraising, an appraiser finds comparable properties that are comparable to the subject property being appraised. If the comparable properties have a feature (for instance, a swimming pool) which the subject property does not have, then the value of that feature will be subtracted from the sales prices of the comparables in order to arrive at the value of the subject property.

Question: A buyer has presented an acceptable offer to the seller for the purchase of 8 acres of raw land. "The seller accepted the offer and the transaction is in escrow." The buyer and his broker visit the property, and discover an uninhabitable mobile home on the property. Concerning title insurance, which of the following is most nearly correct: A: The buyer is fully protected by a standard policy of title insurance B: The buyer should get a separate policy of life insurance C: The buyer would be protected by an ALTA policy D: No title insurance is needed.

Correct Answer is : C an ALTA buyer's policy protects against risks which are revealed by an inspection.

Question: In appraising a shopping center, which of the following approaches to value would be given most weight: A: Comparison - income; B: Income - gross rent multiplier; C: Cost - income; D: Gross rent multiplier.

Correct Answer is : C Either the cost approach or the income approach would be appropriate for the appraisal of a shopping center.

Question: If an investor desires limited personal liability, along with centralized management and special tax benefits, he should look for which of the following forms of business organization: A: Sole proprietorship; B: General partnership; C: Limited partnership; D: Corporation.

Correct Answer is : C Statement of fact.

Question: When loaning money to two or more co-borrowers on a single promissory note, the lender would be best advised to increase the security on the note by inserting which of the following phrases after the names of the co-borrowers: A: Personally and corporately; B: Together as individuals; C: Individually and severally; D: Jointly and severally.

Correct Answer is : D "Jointly and severally" would mean that the co-borrowers were obligated both together and individually for the repayment.

Question: When the term "warehousing" is used in connection with real property financing, the term would normally describe: A: A jumbo loan on a self-storage facility; B: The underwriting of stock issues with loans against industrial property; C: Loans regulated by Division 7 of the California Real Estate Law; D: A mortgage banker collecting loans prior to sale.

Correct Answer is : D "Warehousing" is the term used to describe the activity of collecting loans prior to re-sale of those loans to a large institutional investor.

Question: One holding a valid California real estate license is legally entitled to act as agent in the purchase or sale of: A: Any mobile home B: A new mobile home C: Any mobile home that is at least 8 feet wide and 40 feet long D: A registered mobile home

Correct Answer is : D A California licensee can act as agent in the sale of a used (registered) mobile home.

Question: The amount of a VA-guaranteed loan is limited to: A: The assessed value of the property; B: $36,000; C: 35% of the property appraisal; D: Amounts shown on the certificate of reasonable value.

Correct Answer is : D A VA loan is limited to the amount of the government appraisal, the CRV.

Question: The lessee of a single-family residence has promised the lessor to perform certain maintenance tasks on the property, but has delayed performing the tasks. The lessor has written up an agreement incorporating the specific tasks and a deadline for their completion. The lessor threatens to evict the tenant unless the tenant signs the agreement. If the tenant does so, the contract would properly be classified as: A: A valid contract B: An enforceableá contract C: A voidable contract D: Voidable.

Correct Answer is : D A contract formed under threat lacks mutual consent; hence, no valid contract was formed.

Question: The buyer's earnest money deposit may be: A: A promissory note; B: A post-dated check; C: Anything that the seller considers valuable; D: Any of the above.

Correct Answer is : D A deposit on real property may be anything of value.

Question: Which of the following represents the minimum time period for an exclusive right to sell listing on real property: A: 30 days; B: 90 days; C: 6 months; D: Whatever time period is agreed to by seller and broker.

Correct Answer is : D A listing may be for any period of time that is agreed upon by the seller and the broker.

Question: When a proposed development project has received a negative declaration on its proposed development, it means: A: The development project cannot be built as proposed B: Additional clearance must be secured from the local building department C: The EPA will require re-submission of the proposal along with a petition of at least 65% of the affected landowners D: The proposed project is anticipated to have no adverse effect on the environment.

Correct Answer is : D A negative declaration is a finding that the proposed project will have no adverse effect on the environment.

Question: Landlords often require a net lease on commercial property to: A: Designate a percentage of the net income from the business for the lessor; B: Provide for payment of taxes and insurance by the lessor; C: Set funds aside to offset depreciation; D: Provide a net income to the lessor.

Correct Answer is : D A net lease is one in which the lessee (tenant) assumes responsibility for the taxes and insurance, thus providing a net income for the lessor (landlord).

Question: If an attorney-in fact has general powers, he can do all of the following, except: A: Encumber the property with a trust deed making another person the beneficiary B: Perform specific actions, even though the power of attorney is a general one C: Sign the principal's name to documents affecting the real property D: Deal in the principal's real property without recording the power of attorney

Correct Answer is : D A power of attorney that authorizes another person to act for the owner is effective only when that power of attorney is recorded.

Question: Andrews sold a single-family residence to Barnes, using a real property conditional installment contract of sale instead of the usual note and deed of trust. After recording the land contract and paying on it for 15 months, Barnes became unemployed and moved out of state, with no plans to return to California. If Andrews desires to clear the title to the property, the most logical way to achieve that would be to file which of the following actions at law: A: A partition action; B: For declaratory relief; C: For habeas corpus; D: To quiet title.

Correct Answer is : D A quiet title action would be used to remove the cloud created by default on a recorded land contract.

Question: A change in a zoning ordinance could be initiated by: A: A subdivider/developer; B: A local government agency; C: The owner of a property; D: All of the above.

Correct Answer is : D A subdivider/developer or an owner of a property could request a change in zoning, and certainly a local government agency could.

Question: An offer to fully perform a purchase contract is known as: A: A condition; B: A demand; C: A covenant; D: A tender.

Correct Answer is : D A tender is an offer to perform under a contract.

Question: An appraiser would use which of the following when determining the economic life of a building? A: The condition and age of the building; B: The use to which the building will be put; C: The repair policy of the owner; D: All of the above.

Correct Answer is : D All of these would be important when determining the economic life of a building which is the period of time that it earns sufficient income to justify its continued existence.

Question: Any of the following might be a party to the execution of a will except: A: A devisee; B: An executrix; C: A legatee; D: An administrator.

Correct Answer is : D An administrator is one appointed by the court and would therefore not be named in the will.

Question: An appraiser who does not use generally accepted appraisal methods in order to influence an FSLIC or FDIC insured lender may be guilty of: A: Acting unethically; B: Breaking the Rules and Regulations of the California Bureau of Real Estate; C: A misdemeanor; D: A felony.

Correct Answer is : D An appraiser doing so is committing fraud against the United States and is guilty of fraud. This is a felony punishable by a fine of up to $5,000.

Question: When a California real estate broker advertises for loan business, the ad must include which of the following: A: Licensed mortgage broker by the California Bureau of Real Estate; B: Mortgage loan correspondent; C: Approved under the California Real Estate Residential Mortgage Act; D: Real Estate Broker, California Bureau of Real Estate.

Correct Answer is : D Answer "D" contains the required wording.

Question: A large river suddenly changed course, tearing away a long strip of land from the riverbank. Such an event is called: A: Reliction; B: Alluvion; C: Accretion; D: Avulsion.

Correct Answer is : D By definition, avulsion is the sudden and violent tearing away of land from the bank of a river.

Question: A builder is seeking an agreement from a lender for a loan at an agreed-upon price for funds to be used for development of a parcel many months in the future. Such an agreement would best be termed: A: An obligatory advance; B: A back-up commitment; C: An interim commitment; D: A standby commitment.

Correct Answer is : D By definition.

Question: When Carson conveys to Gimball a portion of his fee estate for a term less than his own, Carson's interest would best be identified as: A: Leasehold; B: Fee defeasible; C: Vested severance; D: Reversion.

Correct Answer is : D Carson has granted a leasehold interest to Gimball, but reserves a reversionary interest, in that the possession will revert to Carson upon termination of the lease.

Question: When a real estate broker speaks of a "tax shelter", the broker is primarily referring to A: Real property taxes B: Mortgage relief C: Interest income D: Income taxes

Correct Answer is : D Certain real estate transactions provide a "shelter" from income taxes.

Question: The consideration for a contract could be which of the following: A: A promise to perform a future act; B: A service which is to be performed in the future; C: Money which is to be paid; D: All of the above.

Correct Answer is : D Consideration for a contract may be anything considered to be valuable by the parties.

Question: In order to operate a competitive, yet profitable business, a real estate broker needs to be concerned with "desk cost." Which of the following most nearly represents the correct way to calculate desk cost: A: Add the total of all the furniture for each salesperson; B: Calculate the gross annual profit for the firm, less the expenses, divided by the number of salespersons; C: Divide the total cost of rent, utilities, and advertising by the number of salespersons; D: Divide the total operating expenses of the firm, including salaries, rent, insurance, etc., by the number of salespersons.

Correct Answer is : D Desk cost is the total of the operating expenses of the firm, divided by the number of salespersons employed by that firm. It is the "break-even" amount each person must produce in gross commissions for the firm in order for the firm to stay in business.

Question: When used in real estate, which of the following terms are usually used with such adjectives as "good," "sufficient," "adequate" and "valuable": A: Unilateral contract; B: Performance; C: Commission; D: Consideration.

Correct Answer is : D Each of the adjectives makes an appropriate phrase when used with the word "consideration."

Question: When preparing a feasibility report for a proposed residential development, and desiring to write the report in view of the national economic factors, all of the following should be included except: A: Analysis of target market; B: Analysis of economic bases; C: Data specific to the proposed project; D: Local zoning ordinances.

Correct Answer is : D Each of the other choices would be essential to a well-written feasibility report; local zoning ordinances would not be.

Question: Tom and Trudy Thompson are both 83 years old and have an annual income of $18,000. They own their home free and clear and want to defer paying property taxes on the property. To receive claim forms and additional information about this program, they should contact: A: The California Bureau of Real Estate; B: The Department of Housing; C: The county assessor; D: The state controller's office.

Correct Answer is : D Elderly people who want to defer their property taxes would contact the State Controller's office.

Question: Which of the following defines the term "equity": A: The owner's interest in real property, over and above all liens against it; B: The difference between the loan amount and the value or price of the property; C: The initial down payment on the property; D: Any of the above.

Correct Answer is : D Equity can be used to describe any of the answers.

Question: A real estate broker would naturally look to the: A: Real Estate commissioner for settlement of commission disputes; B: Federal Bureau of Land Management for settlement of an agricultural lease problem; C: State Personnel Board for resolution of disputes with his office personnel; D: State Department Business Oversight for matters involving illegal escrow procedures.

Correct Answer is : D Escrow companies are regulated by the Department Business Oversight.

Question: Excess land, in site analysis: A: May be identified as a positive or negative characteristic; B: Is that portion of a parcel of land not utilized by the improvement; C: Is that area by which a parcel of land is greater than the typical marketable lot; D: All of the above.

Correct Answer is : D Excess land in a site analysis, is considered to be that portion of a parcel of land not utilized by the improvements, that area by which a parcel of land is greater than the typical lot size, or may be identified as a positive or negative characteristic.

Question: According to a certain contract, the buyer will be taking the property subject to the existing loan. Subject to most nearly means: A: Both buyer and seller will be liable on the loan; B: The seller has no liability for the loan; C: Only the buyer will be liable for the loan; D: The buyer will not be personally liable for the loan.

Correct Answer is : D If a buyer takes a property subject to an existing loan, the buyer is not personally liable for the payment of that loan. This means that if it went into default and the property was sold for less than the balance, the lender could not get a deficiency judgment against the buyer of the property.

Question: If a lender accepts a deed in lieu of foreclosure from a trustor, the lender: A: Must also receive a power of sale from the trustor; B: Will own the property free and clear of any other loans; C: Must go to court and get a deficiency judgment; D: Will assume any junior liens.

Correct Answer is : D If a lender accepts a deed from the borrower in lieu of foreclosure and other liens on the property would stay on the property and therefore the lender must assume them. If the property is sold at a trustee's sale, and junior liens are cut off.

Question: Lacking any information to the contrary, the holder of a life estate, based on the holder's life, may do any of the following, EXCEPT: A: Lease the property to another; B: Encumber the property; C: Sell the property to another; D: Devise the property.

Correct Answer is : D If the life estate is based on the life of the holder, it will end when that person dies. Therefore, the person could not will (devise) it.

Question: In which of the following ways could an agency relationship not be created? A: Implied contract; B: Oral contract; C: Written contract D: Voluntary offer by the agent.

Correct Answer is : D In order for an agency to be created their must be an agreement between both parties, not just an offer by one.

Question: If the frequency of the business cycle increases, with an accompanying rapid change in business and money conditions, the environment for long-term investments is: A: Unaffected; B: Highly favorable; C: Expanded; D: Unattractive.

Correct Answer is : D In such an environment, flexibility to meet changing conditions is wise. Long-term investments restrict such flexibility.

Question: When the value of a property is estimated by analyzing the income from the property, the appraiser would be careful to give proper attention to: A: The quantity of the income; B: The quality of the income; C: The durability of the income; D: All of the above.

Correct Answer is : D In the income approach, the appraiser must be concerned with how much income (quantity); how certain is the income (quality); and how long will the income continue (durability). All three are important considerations.

Question: In addition to the duties of diligence, care, and skill, a real estate agent owes the principal a full disclosure of all facts material to the subject of the agency. Any intentional concealment of such facts by the agent would probably be regarded as: A: Conversion; B: Co-mingling; C: Misrepresentation; D: Fraud.

Correct Answer is : D Intentional failure to disclose all material facts is fraud.

Question: A broker is seeking investors to participate in a real estate investment. She may assure potential investors of limited liability for the debts to be incurred by forming any of the following except a: A: Foreign corporation; B: Limited partnership; C: Real estate investment trust; D: General partnership.

Correct Answer is : D Investors in a general partnership incur unlimited personal liability for the debts of the partnership.

Question: When a listing agreement includes a provision to extend the agreement "by any period of time in which the property was in escrow or taken off the market," the agent needs also to include: A: A statement that the owner will waive the right to a specific termination date; B: The initials of all parties signing the contract accepting this indefinite term; C: A disclaimer that the clause is not intended to violate any provision of the real estate law; D: An additional provision that establishes an alternate termination date which is certain.

Correct Answer is : D It is a violation of the real estate law for a licensee to claim or receive a commission on an exclusive listing that does not contain a specific termination date. The proposed clause would need to be supplemented by some method of establishing a date certain when the listing would end.

Question: Real property in California is assessed at: A: 1% of the taxable values; B: 10% of the taxable values; C: 25% of the taxable values; D: 100% of the taxable values.

Correct Answer is : D It is assessed 100% of the taxable value. It is taxed at 1% of market value.

Question: Which of the following is responsible for the availability of paved streets, public utilities, curbs and gutters in new subdivisions: A: The bonding company servicing the developer; B: Improvement districts formed by lot purchasers; C: The city or county planning office; D: The subdivider/developer.

Correct Answer is : D It is the responsibility of the developer/subdivider to assure the availability of such items as paved streets, public utilities, curbs, gutters, sidewalks, etc., in new subdivisions.

Question: Most lenders who make construction loans will release the final payment to the general contractor when: A: The owner or his representative has recorded a notice of completion; B: The owner has occupied the completed buildings; C: The note and trust deed have been executed; D: The mechanics lien period has expired.

Correct Answer is : D Lenders will normally release the final funds only after the mechanics lien period has expired, signifying that no further claims against the construction project can be made.

Question: Which of the following types of misrepresentations occur least often in the practice of real estate: A: Innocent misrepresentations; B: Fraudulent misrepresentations; C: Negligent misrepresentations; D: Malicious misrepresentations.

Correct Answer is : D Licensees seldom are malicious in their misrepresentations; they are often innocent or negligent, and sometimes fraudulent.

Question: Properties located in an area with poor local sewer service would probably suffer a loss in value from: A: Incurable physical deterioration; B: Curable functional obsolescence; C: Incurable functional obsolescence; D: External obsolescence.

Correct Answer is : D Loss in value due to factors beyond the property lines would constitute external obsolescence.

Question: 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 an investment and was rented or leased out as such.

Correct Answer is : D Loss on the sale of a personal residence is not deductible; loss on the sale of rental property might be deductible.

Question: Which of the following is the best term to substitute for the term "Market value": A: Cost; B: Price; C: Value in use; D: Value in exchange or most probable selling price.

Correct Answer is : D Market value is also known as value in exchange. It is the most probable price at which the property would sell on the open market, given a ready, willing, and able seller and a ready, willing, and able buyer and a reasonable time to bring them together.

Question: The general state of the economy would be of least interest to an appraiser when appraising: A: Manufacturing plants; B: Shopping centers; C: Commercial properties; D: Medical or dental office buildings.

Correct Answer is : D Medical facilities would be less impacted by the general economy because people get sick or need dental work regardless of the state of the economy.

Question: An owner purchased his residence several years ago, using a conventional loan, and now desires to refinance using the VA guaranteed loan program. The lender who will make the loan will require the veteran to pay loan discount points. In such a case, the VA: A: Will refuse to guarantee the refinancing of a conventional loan; B: Will not guarantee a loan from a lender who charges the veteran discount points; C: Will guarantee the loan only if the lender does not charge more than one point origination fee; D: Will guarantee the loan and the veteran may pay reasonable discount points.

Correct Answer is : D On a refinance loan the VA allows the veteran to pay reasonable discount points.

Question: Which of the following actions by a real estate salesperson is not within the "Beneficial Conduct" guidelines of the Real Estate Commissioner's Code of Ethics and Professional Conduct: A: Disputes between brokers being settled by arbitration rather than court hearings; B: Treating all parties to the transaction fairly; C: Complete records of all real estate transactions being maintained by a salesperson; D: Approval by a broker of pocket listings taken by salespersons in his employ.

Correct Answer is : D Pocket listings, as a matter of custom, are specifically mentioned as not approved in the Code of Ethics.

Question: Of the following liens, the one that would be given priority would be a: A: Trust deed signed and recorded April 28,1990; B: Trust deed signed on April 27, 1990 and recorded on April 29, 1990; C: Mechanics lien applicable to work that was started on April 25, 1990; D: Street improvement assessment lien created May 10, 1990.

Correct Answer is : D Property tax and assessment liens have priority.

Question: An owner of a single-family residence sold his home with the aid of an unlicensed person If the owner pays that person for the assistance, the one who would prosecute the unlicensed person for violating the Real Estate Law would be A: The Attorney General of California B: The Real Estate Commissioner C: A Hearing Officer appointed under the provisions of the Administrative Procedures Act D: The District Attorney of the respective county

Correct Answer is : D Section 10130 of the Real Estate Law stipulates that the District Attorney is the one who prosecutes any person who acts like a real estate licensee without first obtaining a real estate license

Question: In contrasting conventional and FHA loans, historically FHA loans: A: Are processed faster; B: Provide for more flexible terms; C: Require a larger down payment; D: Require smaller monthly principal payments.

Correct Answer is : D Since FHA loans are for a longer period of time, the monthly principal payments would be smaller.

Question: Samuels holds an easement in Taylor's land but owns no real property in the area. This would be an example of a(n): A: Prescriptive easement; B: License; C: Appurtenant easement; D: Easement in gross.

Correct Answer is : D Since there is no dominant tenement, the easement must be an easement in gross.

Question: Carr purchased an income property. After taking possession of the property, Carr discovered that the seller and the broker had misrepresented the net income from the property. Carr may take which of the following actions: A: Sue for rescission of the purchase; B: Sue for damages; C: Neither of the above, since the information could have been discovered through an audit; D: Either "A" or "B".

Correct Answer is : D Since there was a misrepresentation of the net income, the buyer could either sue for rescission (and damages) or just sue for damages.

Question: All of the following are essentials of each and every contract, except; A: Lawful object B: Mutual consent C: Capable parties D: A proper writing

Correct Answer is : D Some contracts (e.g., a lease for a year or less) do not have to be in writing to be enforceable, according to the Statute of Frauds

Question: Under California law, when the owner of rental property intends to convert apartments into condominium units, the existing tenants must be given advance notice of the intention to convert before terminating their tenancy. How many days notice is required: A: 30 days; B: 90 days; C: 120 days; D: 180 days.

Correct Answer is : D Statute requires 180 days notice of intent to convert; 90 days exclusive right to buy must also be granted existing tenants.

Question: Jones conveyed his ranch to Brown using a land contract. The ranch was serviced by a mutual water company, and Jones was a stockholder in the company. The stock which Jones owned was appurtenant to the land. Does Brown have to enter into a separate contract for the stock of the mutual water company? A: Yes, since stock is always personal property and therefore not included in land contracts; B: No, because land in California cannot be sold without water rights; C: Yes, because real property is not always accompanied by water rights; D: No, because the stock was appurtenant to the land and therefore part of the real property and part of the land contract.

Correct Answer is : D Stock in a mutual water company is an appurtenance to the land, and appurtenances run with the land to the new owner.

Question: Gorham owns a property valued at $80,000, and owes $49,000 to Beneficial Savings and Loan on a first trust deed and note on the property. She has agreed to sell the property to her nephew for $1,000 cash, loaning the nephew $79,000 on a new trust deed, which includes the amount due Beneficial. Gorham has agreed in the loan documents to make the payments on the existing trust deed to Beneficial as they become due. The new trust deed Gorham is to receive is properly termed: A: An all-inclusive trust deed; B: A wrap-around deed of trust; C: An over-riding trust deed; D: Any of the above.

Correct Answer is : D Such a financing instrument can properly be called any of the listed terms.

Question: 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".

Correct Answer is : D Such activity is described as both panic peddling and blockbusting.

Question: Generally, as the employment rate and the GNP (Gross National Product) both rise,: A: The level of personal income rises; B: New residential developments will increase in number; C: Sales of existing homes will remain level or increase; D: All of the above will probably occur.

Correct Answer is : D Such increases in the economic indicators generally signal a healthy economy, and each of the trends listed will occur.

Question: Certain junior trust deeds on newly-subdivided land cannot be re-sold for a specified time.á Such notes can be resold A: Twelve months after creation B: Twenty-four months after creation C: Thirty months after creation D: In the thirty-seventh month after creation

Correct Answer is : D Such notes are freed from the resale restriction after three years.

Question: Real estate investment trusts which are formed as a corporation generally provide their shareholders all of the following advantages except: A: Professional management of the investment; B: Relative ease in the transferability of their shares; C: Freedom from personal liability for the debts of the enterprise; D: Tax-deferred income.

Correct Answer is : D Such trusts offer all of the other advantages, but do not necessarily provide income which is free from tax liability.

Question: All of the following would be considered examples of the use of police power by the government EXCEPT: A: The enactment of building codes; B: The establishment of rent control; C: The creation of subdivision ordinances; D: The establishment of taxation rights.

Correct Answer is : D Taxes come under the government's power of taxation, not police power.

Question: If a real estate licensee is found guilty of a violation of the state Fair Housing laws, the maximum fine that may be imposed as a penalty is: A: $1,000; B: $2,000; C: $5,000; D: $10,000;

Correct Answer is : D The Department of Fair Employment and Housing may impose of civil penalty of up to $10,000 for violation of the Fair Housing laws

Question: In designing an ad offering a 80% loan-to-value mortgage at a specific interest rate fixed for 30 years, which of the following is not required to be included in the ad: A: The correct annual percentage rate; B: A disclosure of whether the loans are offered for first, second, or third trust deed loans; C: A statement disclosing the method of determining the market value of the property; D: An indication that the loan can or will be approved over the telephone.

Correct Answer is : D The ad need not disclose the telephone approval for the loan; the other items must be included in the advertisement.

Question: In estimating the value of a parcel of real property, an appraiser considers the value of which of the following: A: Bundle of rights; B: Utility; C: Physical land and the improvements thereon; D: All of the above.

Correct Answer is : D The appraiser must consider all factors which might affect the value of the subject property. Certainly the utility (the usability) of the property is important, and so is the value of the specific rights that is left in the "bundle" of rights.

Question: A community's master plan's basic purpose is to indicate existing and proposed: A: Public facilities for such things as parks and schools; B: Public streets and highways; C: Industrial, residential and commercial districts; D: All of the above.

Correct Answer is : D The basic purpose of a community's master plan is to indicate existing and proposed streets, highways, districts for industrial, commercial and residential purposes, and to allocate property for public facilities such as schools, parks, etc.

Question: Under ordinary circumstances, a broker with a valid listing contract has earned the commission when: A: The escrow instructions are signed; B: The deed is recorded; C: Escrow closes; D: The land contract is signed by the buyer and the seller.

Correct Answer is : D The broker earns the commission when the buyer and the seller reach an agreement.

Question: Which of the following contracts or forms is not required to be approved by the California Bureau of Real Estate prior to use: A: A real property security disclosure statement; B: A mortgage loan disclosure statement; C: An advance fee rental agreement; D: A broker/salesperson agreement.

Correct Answer is : D The broker/salesperson agreement outlines the responsibilities of each and therefore would be different for each broker. It does not have to be approved by the DRE.

Question: The regulation of the housing and construction industries is accomplished by: A: Local building codes; B: State Contractor's License Law; C: State Housing Act; D: All of the above.

Correct Answer is : D The construction and housing industry is regulated by the State Housing Act, local building codes and State Contractor's License Law.

Question: While appraising a residence in a hillside subdivision, the appraiser observes cracks in the foundation and notices that the doors and windows do not close properly. The appraiser would probably recommend that which of the following be ordered: A: Termite inspection report; B: A home warranty protection policy; C: A special studies zone map; D: A soils engineering report.

Correct Answer is : D The cracking in the foundation and the shifting of the house would probably be caused by a shifting of the soil.

Question: In a conveyance of real property, which of the following would most likely be regarded as the valid delivery of a deed: A: The escrow agent mails the deed to the buyer after the seller's death; B: The seller draws a deed, but gives it to the broker for safekeeping; the broker hands it over to the buyer upon the buyer's request; C: The escrow agent hands the deed to the buyer before the buyer has complied with the escrow instructions; D: The seller hands a deed to the buyer, but the buyer does not record it since there is no acknowledgement.

Correct Answer is : D The delivery should be valid even if the deed has not been acknowledged; in each of the other answers, the intent of the grantor may be lacking.

Question: When an escrow agent encounters an unresolved issue on an open escrow, the agent should: A: Return the documents and funds to the party who had deposited them into escrow B: Cancel an interpleader action before a court of competent jurisdiction C: Arbitrate the dispute between the parties D: Await further instructions from the parties to the escrow

Correct Answer is : D The escrow agent cannot unilaterally cancel or dissolve the escrow, and is not authorized to arbitrate any disputes; hence, the escrow agent must await further instructions

Question: When a buyer signs an exclusive authorization to locate a property there is ususally 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.

Correct Answer is : D The form referred to usually allows the broker to represent other buyers at the same time.

Question: While reconciling the trust account, the broker finds an unexplained overage in the account, and is unable to identify the owner of the funds. In this scenario, the broker should: A: Immediately withdraw the funds by check made payable to the Real Estate Commissioner; B: Transfer the funds to a new interest-bearing general account and maintain them there for at least 3 years or until claimed by the owner; C: Transfer the funds to his office account to avoid commingling; D: Maintain the funds in the existing trust account, but keep a separate record of the overage funds and include them in the monthly reconciliations.

Correct Answer is : D The funds are to be left in the existing account, with a separate notation on each future monthly reconciliation.

Question: The income approach to value uses: A: Gross multipliers; B: Bands of investment; C: Construction costs; D: Capitalization.

Correct Answer is : D The income approach is the same as the capitalization approach.

Question: If the possession of the property does not transfer to the buyer when the title to the property transfers, the real estate agent should make sure there is: A: An assignment of rents; B: A novation; C: A quitclaim deed; D: An interim occupancy agreement.

Correct Answer is : D The interim occupancy agreement is used to detail the seller's right to remain in possession after the close of escrow (after the title passes to the buyer). It can also be used to allow the buyer to occupy the property before escrow closes.

Question: The disclosure statement which is required under the Truth-in-Lending Act would include: A: A list of the items that are included in the finance charge; B: A description of the security interest held by the lender; C: The annual percentage rate; D: All of the above.

Correct Answer is : D The law provides for inclusion of statements "A," "B" and "C"; hence, item "D" is correct.

Question: By law, a broker must provide Worker's Compensation insurance coverage for which of the following: A: Only those employees who are between 21 and 65 years old; B: Only those who earn more than the minimum wage; C: Only office employees; D: All employees, regardless of age, position, or amount of compensation.

Correct Answer is : D The law requires that all employees be covered by Workers Compensation.

Question: Lacking specific instructions from the seller to the contrary, a licensee is legally required to submit all offers on a listed property until A: The seller has signed acceptance of an offer B: Escrow has been opened C: The buyer's financing has been confirmed D: The escrow has closed

Correct Answer is : D The licensee is required to submit all offers until the close of escrow.

Question: If the causes of action occurred after January 1, 1980, what is the maximum amount of payment a court may order levied against the real estate recovery account for any one licensee: A: $10,000; B: $20,000; C: $40,000; D: $250,000;

Correct Answer is : D The maximum is limited by law to $250,000.

Question: Appraiser Smith is a qualified expert witness and has been asked to appraise a particular property. Appraiser Smith decides to use the observed condition method of determining depreciation. Appraiser Smith will consider: A: Physical deterioration; B: Functional obsolescence; C: Economic obsolescence; D: All of the above.

Correct Answer is : D The observed condition method of determining depreciation requires the appraiser to consider all three causes of depreciation.

Question: When a purchaser under a land contract is paying the seller impounds for taxes and insurance, those payments may not be disbursed for any other purpose without the consent of the: A: Trustee; B: Holder in due course; C: Seller; D: Payor.

Correct Answer is : D The one paying the impounds (the payor) is the only one who can authorize a different expenditure of those funds.

Question: A reconstructed operating statement would include: A: Payments on a trust deed; B: Depreciation of the property for tax purposes; C: Income taxes paid; D: Costs of management.

Correct Answer is : D The operating statement on an income property should show costs of management.

Question: Carson agreed to buy a parcel of real estate from Barnes for $72,000. There is presently a first trust deed for $50,000, and a second trust deed for $12,000. Carson agrees to assume the first trust deed and pay the balance of the purchase price in cash. Which of the following best identifies the new documents which will be created in connection with this transaction, and the order in which they will be recorded: A: First trust deed and deed of reconveyance; B: Grant deed and a real property conditional installment sale contract; C: Reconveyance deed on the first trust deed and a wrap-around deed of trust for the balance; D: Reconveyance deed for the second trust deed and a grant deed.

Correct Answer is : D The proper procedure would be to pay off the second and record the reconveyance deed for that second trust deed, and then record a new grant deed from Barnes to Carson.

Question: When an appraiser compares the land residual technique and the property residual technique, he knows that: A: They use different methods to arrive at the net income; B: Land never depreciates and therefore depreciation is not considered in the land residual technique; C: When using the property residual technique the "residual" is the gross income of the building; D: The property residual technique uses an overall capitalization rate which is applied to the net income.

Correct Answer is : D The property residual technique is a standard capitalization problem.

Question: The cost approach that tends to set the upper limit of value is known as: A: In-place cost; B: Replacement cost; C: Historic cost; D: Reproduction cost.

Correct Answer is : D The reproduction cost in the cost approach to value tends to set the upper limit of value for the property. In this method, you estimate the cost to reproduce an exact replica.

Question: When an agent has sold a single-family residence and is helping the buyer obtain a first trust deed loan from a bank and a second trust deed loan to be carried back by the seller, the agent will often record a "Request for Notice of Default." Such action is usually taken for the protection of the: A: Trustor on the bank loan; B: Trustee of the bank loan; C: Trustee of the seller's carry-back loan; D: Beneficiary of the second loan.

Correct Answer is : D The request for notice of default would be important to the second lender, for it would allow him to be aware of the potential foreclosure on the senior loan.

Question: When the principal gives the broker a listing, the authority the broker receives is governed by: A: Law; B: The principal; C: The agency relationship; D: The terms of the contract.

Correct Answer is : D The terms of the contract determine the broker's authority.

Question: Which of the following is not a test for a fixture: A: The intention of the parties; B: The method of attachment; C: The agreement of the parties; D: The time of attachment.

Correct Answer is : D The time of attachment is not a test for a fixture; the other items mentioned are all used to determine whether personal property has become real property, and thus a fixture.

Question: If the current highest and best use of a property is expected to change, the current use is referred to as: A: The temporary use; B: The transitional use; C: The probable use; D: The interim use.

Correct Answer is : D This is an example of interim use.

Question: A "standby loan commitment" refers to: A: The fee that a mortgage loan broker collects for committing to a loan for a borrower; B: A lenders decision to make a construction loan; C: The origination charge that a lender will collect for making a construction loan; D: A commitment by the lender to make a permanent takeout loan upon the borrower's demand.

Correct Answer is : D This is the definition of a standby commitment.

Question: An extended coverage policy of title insurance protects the holder of the policy against all of the following risks except: A: Rights of the parties in possession of the property B: Forgery in the title documents C: Defective delivery of a recorded deed D: Regulations of municipalities concerning capacity and use.

Correct Answer is : D Title insurance does not protect against zoning regulations

Question: The total amount due to all of the beneficiaries of a trust account must, by law, at all times be at least equal to the trust fund bank account: A: Fidelity bond coverage; B: Shortage; C: Overage; D: Balance.

Correct Answer is : D What is due to the beneficiaries must be equal to what is in the trust fund bank account.

Question: An appraiser, in correlating the value estimate she obtained under each of the approaches to value, would: A: Assign weight to the individual estimates and then average them; B: Simply average the estimates; C: Do both "A" and "B"; D: Do none of the above.

Correct Answer is : D When an appraiser correlates the values in using the three approaches (i.e., capitalization approach, market data approach, cost approach), the appraiser correlates the information. She uses the information that applies to that type of property the most.

Question: An agency relationship may be terminated by all of the following methods except: A: Destruction of the subject matter with which the agency is concerned; B: Mutual termination by both the agent and the principal; C: Resignation of the agency by the real estate broker; D: Revocation by the principal if the agent has an interest in the subject of the agency.

Correct Answer is : D When the agent has an interest in the subject of the agency, it cannot be revoked by the principal.

Question: The cost of real property would usually equal its value when: A: The improvements on the parcel are new; B: The type of property involved is scarce; C: The improvements on the parcel embody the highest and best use of the land; D: Both "A" and "C" are the case.

Correct Answer is : D When the improvements are new, little physical deterioration has occurred, and thus the cost of the improvements is fairly close to their value. And when the improvements represent the highest and best use of the land, the cost of the land is fairly close to value. Hence, answer (D) is the best.

Question: When a legal description begins with the phrase: "Beginning at a point on the northerly edge of M Street l00 feet easterly of the NE corner of the intersection of M and Seventh Street, and running thence....", which of the following methods of land description is being used: A: U.S. Geographical Survey System; B: Recorded tract map system; C: U.S. Government Rectangular Survey System; D: Metes and bounds.

Correct Answer is : D Whenever a description uses distance and direction, it is a metes and bound description.

Question: Broker Sanchez has obtained a buyer for a single-family residence. 'The buyer will use FHA financing.' As the close of escrow approaches, the buyer asks the broker to loan him $500 to help with the closing costs.á If the broker does so, which of the following could be prosecuted for violation of the FHA regulations: A: The seller B: The broker C: The buyer D: Both the broker and the buyer

Correct Answer is : D undisclosed additional financing would make both the broker and the buyer liable for violation of FHA regulations.

Question: Which of the following would be best defined by the words: "The relationship between a thing desired and a potential purchaser": A: Economic perfection; B: Market cost; C: Utility; D: Value.

Correct Answer is : D Value can be so defined.

Question: Which of the following are necessary for a real property conditional installment sales contract to be valid: A: Consideration, offer and acceptance, mutuality, competent parties, legally sufficient writing; B: Consideration, offer and acceptance, expressed time element, price; C: Lawful object, competent parties, offer and acceptance, legally sufficient writing; D: Consideration, offer and acceptance, lawful object, competent parties, legally sufficient writing.

Correct Answer is : D (CoaLc) The four legal essentials in any contract are: (1)consideration; (2) an offer and acceptance (i.e., a meeting of the minds); (3) a lawful object; and (4) competent parties. In addition, in most real estate transactions, a fifth essential, required by the Statute of Frauds, is that there be a legally sufficient writing.

Mortgage vs Trust Deed

Mortgage has two parties - Lender and borrower Trust Deed has three parties - trustor (borrower), trustee (3rd party), and beneficiary (lender).

Trustor vs Trustee

Trustor is the borrower. Trustee: This is the third party who will hold the legal title. (usually escrow in event of foreclosure) Beneficiary: This is the lender.

How to calculate Gross Rent Multiplier

monthly/annual gross rent divided by the selling price