California Real Estate Principles
eminent domain
The right of the government to acquire title to property for public use by condemnation; the property owner receives compensation which is generally fair market value.
Interior walls can be finished with plasterboard, also called (a)wallpaper (b)drywall (c)building paper (d)filler
(b)drywall
A mortgage broker arranges a 3-year, $15,000 second loan secured by a deed of trust. The maximum commission that may be charged is (a)15%. (b)10%. (c)5%. (d)no limit
15%
How many sections are in a township? (a)6 (b)18 (c)24 (d)36
36
Unruh Civil Rights Act
Forbids discrimination as to sex, race, color, religion, ancestry or national origin in accommodations and business establishments. Under this law there can be no arbitrary eviction, rent increase or withholding of services by any landlord, including the owner of a non-owner-occupied single-family dwelling that is sold or leased for income or gain.
bilateral and unilateral escrow
Escrow instructions are called bilateral when they are given by both parties jointly. The escrow instructions are unilateral when they are given separately by each of the parties.
The federal agency that insures savings accounts is the (a)FDIC (b)FHLMC (c)FHA (d)FNMA
FDIC
What is a commercial acre? (a)An acre minus space for streets and parking. (b)An acre minus space for warehouse structures. (c)An acre minus space for all housing accommodations. (d)An acre minus space for schools and emergency services.
(A) is correct. A commercial acre is that portion of an acre of newly subdivided land remaining after dedication for streets, sidewalks, parks and so on.
A city ordinance contains a provision that states when a unit becomes vacant there is no restriction on the rent set for a new tenant. This is called (a)vacancy decontrol. (b)rent deregulation. (c)no-cap rent. (d)rent insurance.
(A) is correct. If an ordinance contains a vacancy decontrol provision, when a unit become vacant there is no restriction on the rent set for a new tenant.
When executing a grant deed, the grantor makes certain assertions about the property that the grantee must assume to be true, or the deed would be meaningless. These assertions are called (a)covenants (b)implied warranties. (c)nonverbal assertions. (d)CC&Rs.
(b)implied warranties.
In order to be valid, a grant deed does NOT require (a)a granting clause (b)recording (c)the signature of the grantor (d)a proper writing
(b)recording
The right of the future holder of what is currently a life estate is a: (a)fee simple defensible (b)remainder (c)fee simple conditional (d)fee simple subject to a power of termination
(b)remainder
An exact replica of a structure being appraised determines (a)replacement cost. (b)reproduction cost (c)objective review (d)subjective review
(b)reproduction cost
Mark gives a life estate to Charlie. Mark's interest is (a)personal property (b)reversionary. (c)leasehold. (d)remainder.
(b)reversionary
When a real estate licensee accepts trust funds from his/her client in connection with the purchase of real property, the licensee must place these funds into the proper place (a)by the next working day following receipt. (b)within three business days following receipt. (c)by midnight of the current business day. (d)by midnight of the third business day following receipt.
(b)within three business days following receipt.
An owner occupied residence qualifies for a homeowner's exemption of (a)$1,000. (b)$4,000. (c)$7,000. (d)none of these.
(c) $7,000
Unless an extension is given, a federal income tax return must be filed for the preceding tax year by (a)April 15 (b)May 15 (c)August 15 (d)October 15
A
buyer's agency
A buyer-broker does not represent the seller or listing broker and therefore is not liable for their statements or actions.
An option listing
An Option Listing is a listing in which the broker also retains an option to purchase the property for the broker's own account.
observed condition method
Breakdown method; depreciation computed by estimating the loss in value caused by every item of depreciation, whether curable or incurable.
Title search
Following a request by the escrow officer, the title company named by the parties searches the title records and provides a preliminary report. The preliminary report should identify the property and current owner of record, as well as any recorded liens or other encumbrances. The escrow holder reads the report to verify the legal description and to determine if there are any child support liens, taxes, or judgments for which a release will be required before the close of escrow. The buyer and the buyer's agent should review the preliminary report.
A real estate broker's license may be obtained by any of the following except a
LLC
Accretion
Land area can be increased by forces of nature. Accretion is the process by which land adjacent to a flowing body of water accumulates new soil. The buildup of new soil, called alluvion or alluvium, may be so gradual that it is not noticed. Buildup also can be quite dramatic and obvious, as when land is flooded.
What acronym is used to determine a fixture
MARIA
ratification
Method of creating an agency relationship in which the principal accepts the conduct of someone who acted without prior authorization as the principal's agent.
deed restrictions
Provisions placed in deeds to control future uses of the property.
ad valorem
Real estate taxes are assessed according to the value of the property taxed
statute of frauds
State law that requires certain contracts to be in writing and signed by the party to be charged (or held) to the agreement in order to be legally enforceable.
a straight note
The payment may be made by installments of interest only with the principal due in a lump sum
hypothecation
To pledge real or personal property as security for a loan or other obligation without surrendering possession of the property. The borrower retains the rights of control and possession, and the lender secures an underlying equitable right in the pledged property. (basically means the real property will be forfeited to the holder of the security instrument if the underlying debt is not paid.)
Ginnie Mae
Unlike Fannie Mae, Ginnie Mae does not buy securities. Instead, Ginnie Mae guarantees securities issued by FHA-approved home mortgage lenders. Ginnie Mae guarantees that the purchaser of privately issued securities backed by a pool of residential mortgages will receive timely payment of interest and principal, less servicing and Ginnie Mae fees. In the event of late payment by the borrower, the securities issuer advances the payment to the securities holder. Ginnie Mae securities are backed by FHA-insured and VA-guaranteed mortgages, as well as those guaranteed by Farmer Mac (the Farmers Home Administration).
Which of the following generally does NOT require a down payment?a. CalVet 97 loan b. VA-guarenteed loan c. FHA-insured loan d. Loan rom a conventional lender
VA-guaranteed loan
A tenant in common may want to dissolve the shared ownership. This can be accomplished by agreement of all cotenants or, if there is a dispute, by a lawsuit known as
a partition action
Zoning variance:
an exception to the zoning law.
To qualify as a negotiable instrument, a promissory note must be:
an unconditional promise made by one person to another, in writing, an agreement to pay a specified amount of money on demand or at a fixed or determinable future time, payable on the order of a designated person or the bearer of the note, and signed by its maker.
Something that is used with the land for its benefit, such as a roadway or a waterway, is known as (a)an appurtenance (b)personal property (c)a fixture (d)an encumbrance
appurtenance
Covenants, conditions and restrictions (CC&Rs)
are limitations on land use, which are imposed by deeds, usually when land is subdivided. CC&Rs are a means of regulating building construction, density and use. May be referred to simply as restrictions.
Institutional lenders
are those lenders who lend their own money. Savings and loan associations, banks, life insurance companies and mutual savings banks
Land is torn away by the action of water in the process called
avulsion
RESPA requirements do NOT apply to a. federally-related loans b. VA-guaranteed loans c. commercial loans d. FHA-insured loans
commercial loans
The TILA-RESPA Integrated Disclosure (TRID)
consolidates four existing disclosures required under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) for closed-end credit transactions secured by real property into two forms: a Loan Estimate that must be delivered or placed in the mail no later than the third business day after receiving the consumer's application, and a Closing Disclosure that must be provided to the consumer at least three business days before consummation.
the right of a government agency to take private property for a public use is called
eminent domain
Under the Real Estate Law, a real estate salesperson works for a broker as an
employee
The cost of using money BEST describes (a)credit (b)interest (c)a free market (d)an open market
interest
An express contract
is a contract of words established by an oral or a written agreement in which the parties declare their intention to make a contract.
A corporation:
is a separate, legally recognized entity, apart from owners (shareholders); must be chartered by a state; acts through its board of directors and officers; may own, lease, and convey real property; and limits liability of officers, directors, and shareholders.
The priority of claims
is the order in which creditors are paid. The priority of claims against a declared homestead has been established by law. The proceeds of a forced sale go to: holders of liens and encumbrances on the homestead (with any tax lien paid off first); then the homeowner in the amount of the homestead exemption only; then the levying officer for reimbursement of costs for which an advance has not been made; then judgment creditors; and finally, if anything remains, the homeowner.
The security instrument
is used to identify the real estate that serves as assurance that the loan will be repaid.
RESPA regulates loans for which of the following? (a)Land subdivisions (b)Commercial property (c)One-to-four-unit family dwellings (d)Multiple family dwellings
one to four unit dwellings
An agency created by estoppel is also called an:
ostensible or implied agency.
Concurrent ownership is
ownership by more than one person at the same time
Zoning ordinances typically cover:
permitted uses, minimum parcel size, building height limitations, lot coverage limitations, required setbacks, and maximum density.
The Real Estate Transfer Disclosure Statement (TDS) provides information regarding the
physical condition of the property.
The Real Estate Law allows a business opportunity to be sold by a
real estate licensee
The transfer of existing mortgages between investors is the a. primary mortgage market b. growing equity program c. secondary mortgage market d. extended credit program
secondary mortgage market
The self-contained report, also called a narrative report, is
the most comprehensive report the appraiser can make. It includes a complete statement of the appraiser's credentials. It provides a thorough description of the property being appraised, the purpose of the appraisal, and a summary of the background data supporting each opinion of value. It will include a full description of all data considered and all techniques used in the appraisal process. The self-contained report provides an overview of the subject property's region, city, and neighborhood. It may total 30 pages or more, even for a single-family residence. It is used most often in a legal proceeding, such as the probate of an estate, a divorce settlement, litigation, or a condemnation action where extensive detail is necessary.
right of survivorship
this means that when a cotenant dies, the survivors receive the deceased's share.
9: The rectangular survey system is also known as the (a)metes and bounds system (b)Torrens system (c)lot, block, and tract system (d)U.S. government survey system.
us govt survey system
A summary report
will provide the most important details of the appraiser's analysis, including a brief version of pertinent data and a shortened discussion of the appraisal techniques used. A summary report is commonly used by government agencies and the lenders with which they do business, typically by means of a standardized form. The type of property and the purpose of the appraisal dictate the exact form used.
Private land can be conveyed for public use or ownership by all of these methods EXCEPT: (a)deed (b)statutory dedication (c)common law dedication (d)adverse possession
(d)adverse possession
An "S" corporation (a)is taxed as a partnership. (b)avoids corporate taxation. (c)passes tax liability through to shareholders. (d)all of the above.
(d)all of the above.
Exclusive Agency Listing
-No other broker authorized -Owner may sell without owing commission
statute of limitations
5-4-3-2-10. A lawsuit to recover title to real property must be brought within five years. An action based on a written instrument (such as a real estate sales contract) must be brought within four years. An action based on fraud must be brought within three years of the discovery of the fraud. An action based on an oral agreement (such as a lease for only a few months) must be brought within two years. An action based on a judgment must be brought within 10 years of the awarding of the judgment.
lock-in clause
A condition in a promissory note that prohibits prepayment of the note.
Transfer on death deed
A new form of nonprobate transfer of real property was created in 2015 by statute, though the statute will be in effect only until January 1, 2021. A revocable transfer on death (TOD) deed transfers real property on the death of its owner without a probate proceeding, provided it is lawfully created. The grantor must have the capacity to contract to make or revoke the deed, the deed must be in the required form, and it must be signed, dated, acknowledged, and recorded. During the owner's life, the deed does not affect ownership rights and is part of the owner's estate for the purpose of Medi-Cal eligibility and reimbursement. The TOD deed is only available for use on a residence of one to four units, a condominium, or a parcel of agricultural land of 40 acres or less that contains a residence. If, at the time of the owner's death, the property is titled in joint tenancy or as community property with right of survivorship, the deed is void. The law establishes priorities for creditor claims against the property owner and the beneficiary of the deed in connection with the property, as well as limits on the liability of the beneficiary. There is also a procedure for contesting the transfer of real property by a revocable TOD deed. The California Law Revision commission will study the success of the TOD deed and make recommendations regarding its findings to the legislature by January 1, 2020.
acceleration clause
A provision in a mortgage, trust deed, promissory note or contract for deed (agreement of sale) that, upon the occurrence of a specified event, gives the lender (payee, obligee or mortgagee) the right to call all sums due and payable in advance of the fixed payment date. (See alienation clause)
Performance of a contract may be excused if a party can prove which of the following? (a)Impracticability of performance (b)A better deal elsewhere (c)Novation (d)Lack of negotiating skill
A. impractibility (im pretty sure at least)
Accession
Accession refers to an increase in the property owned. Man-made or natural additions to property may extend the owner's title to include those additions. These can occur by the construction of improvements or by the process of accretion or reliction.
an as-is clause
An 'as-is' clause, by itself, does not relieve a residential property seller or broker from liability for latent defects which they knew of or latent defects which the seller or broker had a duty to inspect for and discover. This is because an "as-is" clause, by itself, never bars claims of fraudulent misrepresentation and does not even bar claims of negligent misrepresentation, concealment, or nondisclosure.
discount points
An added loan fee charged by a lender to make the yield on a lower-than-market-interest VA or FHA loan competitive with higher-interest conventional loans. The price of one discount point is equal to 1 percent of the loan amount, or 100 basis points.
income capitalization approach
Appraisal method in which the actual or likely net operating income of property is divided by its expected rate of return (capitalization rate) to arrive at an estimate of market value.
standard subdivision
Area of land divided into parcels intended for separate ownership, with no common (shared) ownership by all of the owners of any of the land.
A personal residence and business equipment are considered (a)personal property (b)capital assets (c)real property (d)intangible property
B
The first property tax installment of the tax year is due on (a)July 1 (b)November 1 (c)February 1 (d)April 1
B
The owner of a house located next to the landing strip of a small public airport successfully sued the local governing body, which was required to purchase the property. This type of action is known as (a)equitable severance. (b)inverse condemnation. (c)condemnation. (d)eminent domain.
B. Inverse condemnation is an action brought by a person whose property has been effectively taken, substantially interfered with, or taken without just compensation.
In northern California, escrows are typically held by (a)escrow companies (b)title insurance companies (c)real estate brokers (d)banks
B. Title Insurance Companies
What is the maximum amount of security deposit a landlord can collect in advance for an unfurnished residential unit? (a)One month's rent (b)Two months's rent (c)Three month's rent (d)Any amount the owner justifies
B. two months rent
A rent control ordinance that allows market rent to be charged a new tenant has (a)vacancy control. (b)vacancy decontrol. (c)voluntary rent control. (d)base rent stabilization.
B. vacancy decontrol
Principle of Regression
Between dissimilar properties, the worth of the better property is adversely affected by the presence of the lesser-quality property.
Personal property is usually transferred by a (a)will (b)deed (c)bill of sale (d)purchase contract
Bill of sale
With an exclusive listing, a broker may be subject to disciplinary action for (a)failing to give accurate tax advice. (b)failing to give a copy to the seller. (c)failing to include a definite termination date.
Both B and C. An exclusive listing must include a definite termination date. The broker must also provide a copy of the listing to the owner.
California's Real Estate Law is found in the
Business and Professions Code
A principal residence must be occupied for how long to take advantage of the maximum exclusion of profit from taxable income? (a)One year (b)18 months (c)Two years (d)Five years
C
Real property taxes become a lien on (a)November 1 (b)February 1 (c)January 1 (d)July 1
C
When a residential tenant vacates, the landlord must mail the tenant either the entire security deposit or an itmeized list of deductions, plus a check for any remaining balance within (a)7 days. (b)14 days (c)21 days. (d)31 days.
C. 21 days
The federal Fair Housing Act provides for age-restricted housing when all residents of an adult community are at LEAST age (a)50 (b)55 (c)62 (d)65
C. 62
In California, the inheritance and gift taxes have been (a)increased (b)reduced (c)combined (d)abolished
D
Which of the following could NOT be an escrow holder? (a)Selling broker (b)Listing broker (c)Escrow corporation (d)Escrow partnership
D. Escrow partnership
Elements of market value
DUST: Demand Utility Scarcity Transferability
Servient tenement
Land on which an easement exists in favor of an adjacent property (called a dominant tenement); also called a servient estate. The servient owner may not use the property in such a way as to interfere with the reasonable use of the dominant owner. (remember, an easement usually is the right of the owner of one parcel of land to travel over an adjoining parcel. The land over which the easement runs is called the servient tenement and the land benefited by the easement is the dominant tenement)
a good rule of thumb to remember is a word that ends in "or" stands for the property OwnerR.
Landlord is guarantor or grantor or lessor
comparative market analysis (CMA)
Many real estate agents who are not appraisers will supply the information necessary for a comparative market analysis (CMA), also called a broker's price opinion (BPO). The agent's purpose is to assist the seller or buyer in determining the property's fair market value. A CMA ordinarily is more limited in scope than an appraisal and does not include an opinion of value by the agent.
Stock cooperative project
Most stock cooperatives are apartment buildings. Each owner in a stock cooperative project is a shareholder in a corporation that holds title to the property, and the individual shareholders receive a right of exclusive occupancy of a portion of the property.
An easy way to remember the requirements for adverse possession is by using the acronym ONCHA. The possessor's occupancy must be:
Open, Notorious, Continuous, Hostile, and Adverse to the interests of the real owner for five years.
Real Property Loan Law
Part of the California Real Estate Law that covers loans solicited or negotiated by a real estate broker. It allows a real estate broker to: solicit borrowers or lenders or negotiate loans for real property.
sales comparison approach
The process of estimating the value of a property by examining and comparing actual sales of comparable properties.
Public dedication
Private land can be transferred for public use or ownership by common-law dedication, statutory dedication, or deed. A common-law dedication occurs when a landowner devotes land to a public use, as when a roadway is opened to public use or described as such in the deeds to adjoining parcels. Under the requirements of the Subdivision Map Act (described in Unit 15), certain areas will be set aside for public use, such as parks, school grounds, and streets. This statutory dedication generally transfers an easement for the intended public use, although transfer of fee simple ownership by deed is becoming the preferred method of public acquisition. Fee simple title preserves the public character of the land despite the failure of the subdivision itself.
assumption
The act of acquiring title to property that has an existing loan and security document (mortgage or deed of trust) and agreeing to be personally liable for the terms and conditions of the promissory note, including payments.
the trust deed
The trust deed, also called deed of trust, is used when property serves as security for a debt. The debt typically is the loan used to purchase the property, but it can be any loan using the property as collateral to guarantee payment of the amount borrowed. The requirements for creation of a security interest in real estate are explained in Unit 8. When the purchaser of property borrows money to finance the purchase, the borrower (new owner) is the trustor (the grantor) of the trust deed. The trustee (the grantee) is the party who holds title until the debt is paid. The beneficiary, the party on whose behalf the title is held, is the lender. If the underlying debt is not paid, the trustee has the power to sell the property at a foreclosure sale and pay the beneficiary the amount of the remaining indebtedness from the proceeds. Any money left over would go to the trustor. The purchaser would receive a trustee's deed from the trustee.
A land contract
is a form of seller financing in which the buyer takes possession of property and makes payments on its purchase but does not receive legal title to the property for at least one year from the date of possession. The sales contract specifies the amount of the purchase price that must be paid before legal title is conveyed. A land contract is one alternative for a buyer who does not qualify for a regular mortgage loan.
A restraint on alienation
is any condition that prohibits a property owner from transferring title to the property
A balloon payment
is defined by the Real Estate Law as an installment that is at least twice the amount of the smallest installment.
Today, more than 50 percent of California is owned by the (a)private sector (b)federal government (c)municipalities (d)state government
private sector. the federal govt owns 40%
The Civil Rights Act of 1866
prohibits racial discrimination in the sale and rental of housing.
Bilateral contract
promise for a promise
Proposition 90
provides that homeowners older than age 55 may transfer assessed value to a new residence in another county, if allowed by the new county.
Proposition 60
provides that homeowners older than age 55 who buy or build another residence within the same county can transfer the assessed value of the previous residence to the new residence.
The credit extend by seller to buyer is a a. mechanic's lien b. secondary market loan c. purchase money mortgage d. conventional loan
purchase money mortgage
pledge
with a pledge, the possession of the pledged property is turned over to the lender until the debt is paid. (Think of the jewelry on display in a pawn shop window.) -This is the exact opposite of hypothecated real estate because for that it is the borrower not the lender
A broker negotiated a loan for a buyer. He will need to prepare a (a)Mortgage Loan Disclosure Statement. (b)Real Estate Transfer Disclosure Statement. (c)Good Faith Estimate. (d)Natural Hazard Disclosure Statement.
(A) is correct. A person who acts as a Mortgage Loan Broker and negotiates a loan for which a license is required, and for compensation, which is secured directly or collaterally by a lien on real property, regardless of the size of the loan, must deliver a written disclosure statement to the borrower. The statement must be delivered within three business days of receipt of the borrower's written loan application, or before the borrower becomes obligated to the loan, whichever is earlier. This is true whether the loan is being processed manually or electronically.
Mutual Mortgage Insurance is paid for by (a)the buyer under an FHA loan. (b)the buyer under a VA loan. (c)the buyer under a Cal-Vet loan. (d)All of the above
(A) is correct. MMI is paid for by the purchaser (buyer) under an FHA loan.
A builder was going to build a home on a 75' x 125' lot and wanted it to fit in relation to its surroundings. This placement would be known as (a)orientation. (b)elevations. (c)plottage. (d)topography.
(A) is correct. Orientation is the placing or positioning of a structure on a lot with regard to exposure to the sun, prevailing winds, privacy, and protection from noise.
Tax consequences with respect to real estate should be known (a)prior to acquisition. (b)at time of sale. (c)at close of escrow. (d)three months after taking possession.
(A) is correct. Virtually all important decisions affecting tax liability must be made before a transaction in negotiated. At any other time, it may be too late.
The second property tax installment is due and delinquent on (a)February 1st; April 10th. (b)November 1st; December 10th. (c)December 31st; June 30th. (d)March 1st; July 1st.
(A) is correct. You must know the fiscal tax year for the state exam. Memorization Aid = NDFA (No, Darn, Foolin, Around) November 1: First installment due December 10, 5 PM: Delinquent date for 1st installment February 1: Second installment due April 10, 5 PM: Delinquent date for 2nd installment
Which of the following statements concerning deed restrictions is correct? (a)A covenant includes conditions and equitable servitudes. (b)A violation of a condition can result in forfeiture of title to real property. (c)Private restrictions must be for public health, safety, and general welfare. (d)Covenants are more restrictive and costly for the owner than conditions.
(B) is correct. A condition is any fact or event which, if it occurs or fails to occur, automatically creates or extinguishes a legal obligation. If a condition is violated, the owner may be forced to forfeit the title. A covenant is only a promise. If a person fails to adhere to a covenant, it will result in a cause of action for damages, but will not automatically extinguish the owner's title.
A manufactured (mobile) home can be either personal property or real property. As personal property, a manufactured home is subject to (a)local property taxation. (b)vehicle license fee status. (c)special tax assessment status. (d)supplemental tax status.
(B) is correct. Manufactured (mobile) homes can be either personal property or real property. As personal property, a manufactured home is subject to vehicle license fee status. Vehicle license fee status means that title to the manufactured home is registered with the Department of Housing and Community Development (HCD). If treated as real property, a manufactured home is subject to local real property taxation.
The licensing of real estate appraisers in California is handled by the (a)California Department of Real Estate. (b)Bureau of Real Estate Appraisers. (c)California Association of REALTORS®. (d)Appraisal Institute.
(B) is correct. The Bureau of Real Estate Appraisers (BREA) is responsible for licensing of real estate appraisers in California.
All of the following are characteristics of FHA loans EXCEPT (a)For housing only (b)Guarantees loans (c)Insures loans (d)High loan-to-value ratio
(B) is correct. The FHA does not guarantee loans, rather it insures loans on real property.
The VA guarantees payment of specified loans up to a maximum amount. If the borrower defaults, the VA will (a)foreclose on the borrower under the "power of sale" clause in the trust deed. (b)pay the lender's net loss up to the amount of the guarantee. (c)foreclose on the lender which in turn forecloses on the borrower. (d)recover the lender's loss through a specific military foreclosure process.
(B) is correct. The VA does not usually lend money directly but rather guarantees payment of the remaining mortgage indebtedness, up to a maximum amount. If the borrower defaults, the VA will pay the lender's net loss up to the amount of the guarantee, which is decreased proportionately as the loan amount is repaid.
The most common style of manufactured home is the (a)colonial. (b)ranch. (c)contemporary. (d)victorian.
(B) is correct. The most common style of manufactured home is the ranch.
A document used to transfer legal title from the trustee back to the borrower (trustor) after the debt has been repaid is called a (a)quitclaim deed. (b)deed of reconveyance. (c)payoff deed. (d)deed of confirmation.
(B): A deed of reconveyance is used to transfer legal title from the trustee back to the borrower (trustor) after a debt secured by a deed of trust has been paid to the lender (beneficiary).
Which of the following is NOT one of the three major appraisal techniques? (a)Sales comparison approach (b)Allocation approach (c)Cost approach (d)Income capitalization approach
(B): You can remember them by the three Cs - comparison, cost, and capitalization: 1. The sales comparison approach requires descriptions of comparable properties that have sold recently. 2. The cost approach requires building cost data. 3. The income capitalization approach requires income and expense data on the subject and/or comparable properties.
The S 1/2 of the NW 1/4 of the SE 1/4 contains (a)40 acres. (b)20 acres. (c)10 acres. (d)5 acres.
(B):Go backwards:First: Find the SE 1/4.Second: Find the NW 1/4 of the first area.Third: Find the S 1/2 of the second area.This area contains 20 acres.
Which of the following circumstances would indicate that a transaction is not a good comparable? (a)The property was not on the same street. (b)The second bathroom was an add-on. (c)It was a forced sale. (d)The buyer obtained a loan from a credit union.
(C) is correct. A forced sale usually places the seller at a disadvantage and the transaction would not be considered an arm's length transaction.
A covenant in Johnson's deed states that he may not operate a dog kennel on the property. Johnson proceeds to build a commercial dog kennel. Adjoining land owners would have recourse by (a)taking Johnson's property. (b)suing Johnson for damages. (c)seeking an injunction. (d)filing criminal charges.
(C) is correct. An injunction would compel Mr. Johnson to close the kennel.
An investor can take advantage of all of the following EXCEPT (a)depreciation. (b)deductions for expenses of operation. (c)homeowner's exemption from federal income tax. (d)deduction of rental property losses.
(C) is correct. An investor cannot take advantage of the homeowner's exemption from federal income taxation but receives other benefits of property ownership.
Which of the following generally DOES NOT require a down payment? (a)Conventional lender (b)FHA (c)VA (d)HUD
(C) is correct. As long as the Notice of Value (NOV) does not exceed the amount of the VA loan guarantee, the VA does not require a down payment, although the lender may.
A buyer does not have to withhold a portion of the sales price from a seller when (a)the property is residential. (b)the seller refuses to pay the withholding. (c)the sales price does not exceed $100,000. (d)None of the above
(C) is correct. California Withholding on the Sale of Real Property: Effective January 1, 2003, buyers must withhold and transmit a portion of the sales price to the Franchise Tax Board (FTB) regardless of whether the seller is a California resident, unless an exemption applies. Buyers must withhold 3 1/3 percent of the gross sales price on sales of California real property interests when:1) the seller is an individual (a "natural person") (Rev. & Tax Code SS 18662(e)(1)); or2) the seller is not an individual and the funds will be transferred to a seller with a last known street address outside of California or to the seller's financial intermediary. (Rev. & Tax Code SS 18662(f)(1)). The exemptions for individuals selling real property include the sale of property for less than $100,000, the sale of a principal residence, an IRC SS 1031 exchange, an involuntary conversion under IRC SS 1033, and the sale of property at a loss for California income tax purposes.
California's Covered Loan Law applies to loans that do not exceed the maximum conforming limit established by Fannie Mae for (a)one-to-four-unit rental properties. (b)single-family properties only. (c)owner-occupied one-to four-unit properties. (d)one-to-four-unit investment properties.
(C) is correct. California's Covered Loan Law, found in Financial Code sections 4970-4979.8, applies to loans that do not exceed the maximum conforming limit established by Fannie Mae for owner-occupied one- to four-unit properties.
Tax delinquent residential real property not redeemed by the owner during the five year statutory redemption period is deeded to the (a)city. (b)county. (c)state. (d)school district.
(C) is correct. If the property is not redeemed by the owner during this statutory redemption period, the property is deeded to the state.
Which of the following is exempt from usury laws in California? (a)Any loan made or arranged by a real estate broker and secured by real property. (b)Loans made by banks and savings and loan associations. (c)Both (a) and (b) are exempt. (d)Neither (a) nor (b) are exempt.
(C) is correct. In 1979, California voters passed Proposition 2, which exempted from usury laws any loan made or arranged by a real estate broker and secured by real property. California law also exempts loans made by banks and savings and loan associations.
In computing transfer tax, the consideration paid for the property excludes (a)the down payment. (b)the deposit. (c)any preexisting liens or encumbrances. (d)any property taxes due.
(C) is correct. In computing transfer tax, the consideration paid for the property excludes any preexisting liens or encumbrances that were not removed by the sale (such as an assumed loan).
Out of the total number of single-family homes purchased in the United States, manufactured homes account for (a)three-quarters. (b)half. (c)one-third. (d)one-quarter.
(C) is correct. Manufactured homes now account for one-third of all new single-family home purchases in the United States.
Seller A let buyer B assume that Broker C was his agent. This type of agency relationship is an example of: (a)ratification. (b)estoppel. (c)ostensible authority. (d)None of the above.
(C) is correct. Ostensible authority is that authority which a third person reasonably believes an agent possesses because of the acts or omissions of the principal. Ratification is the adoption or approval of an act performed on behalf of a person without previous authorization, such as the approval by a principal of an agent, after the acts have been performed. Estoppel is a legal doctrine which prevents a person from alleging something to be true or a fact which is contrary to a previous affirmation or allegation made by that same person.
Real property taxes become a lien on (a)November 1st. (b)February 1st. (c)January 1st. (d)July 1st.
(C) is correct. The next tax year's real property taxes become a lien on January 1st.
All of the following are similarities between VA-guaranteed and FHA-insured loans EXCEPT (a)both loans are available for first mortgages of owner-occupied property. (b)both VA and FHA allow lenders and borrowers to negotiate the interest rate offered. (c)both VA and FHA always require a down payment. (d)both FHA and VA loans can be refinanced to avoid imminent default.
(C) is correct. VA generally does not require a down payment. FHA requires a down payment of at least 1.25 to 2.85 percent of the sales price or appraised value, whichever is less.
An easement differs from a license in that a license (a)must be created by written instrument. (b)is of indefinite duration. (c)may be assigned. (d)may be revoked.
(D) is correct. A license is the personal, revocable, nonassignable permission to do some act on the land of another. An easement cannot be revoked.
A listing agreement is (a)a promise for a promise. (b)a bilateral contract. (c)an employment contract. (d)All of the above
(D) is correct. A listing agreement is an employment agreement between an owner of property and the real estate broker authorizing the broker to find a buyer for the property. They are also bilateral contracts in that the seller promises to pay the broker a commission when the property sells and the broker promises to make reasonable efforts to obtain a purchaser.
Which of the following statements is TRUE about CalVet loans? (a)A loan application must be made before purchase. (b)The loan term is typically 30 years. (c)CalVet loans may be prepaid at any time. (d)All of the above
(D) is correct. Loan application must be made before purchase under a CalVet loan. The veteran must meet ordinary standards of creditworthiness. CalVet loan terms are typically 30 years. CalVet loans may be prepaid at any time.
Which of the following is true regarding current federal estate tax law? (a)The American Taxpayer Relief Act of 2012 established a federal estate tax exemption of $5 million per person, indexed for inflation. (b)The exemption was $5.25 million for 2013 and is $5.34 million for 2014. (c)The exemption is reduced by any large gifts (those subject to gift tax) made during the decedent's lifetime. (d)All of the above
(D) is correct. The American Taxpayer Relief Act of 2012 established a federal estate tax exemption of $5 million per person, indexed for inflation. The estate is taxed at a 40% rate on any estate value over that amount. The exemption was $5.25 million for 2013 and is $5.34 million for 2014. The exemption is reduced by any large gifts (those subject to gift tax) made during the decedent's lifetime.
An agent who tries to sell a property that is currently listed for sale by the original (listing) agent is called a (a)buyer's agent. (b)general agent. (c)delegated agent. (d)subagent.
(D) is correct. The original agent can delegate authority to a "subagent" where such delegation is either expressly authorized or customary in the trade. For example, it is customary for listing brokers to delegate the responsibility of showing and selling the property
There is no legal requirement that a deed (a)be witnessed. (b)that the grantor's signature be verified by any third person. (c)be supported by consideration. (d)All of the above
(D): A deed, unlike a contract, does not need to be supported by consideration. There is no legal requirement that a deed be witnessed or that the grantor's signature be verified by any third person.
A court order directing the county sheriff or another officer to satisfy a judgment out of the debtor's property is called a (a)sheriff's sale. (b)community sale. (c)foreclosure. (d)writ of execution.
(D): A writ of execution is a court order directing the county sheriff or another officer to satisfy a judgment out of the debtor's property.
The type of loan where the interest charged is adjusted by increases in monthly payment, outstanding principal balance, loan term, or a combination of the three, is called a(n) (a)FLIM. (b)FLAM. (c)SAM (d)ARM.
(D): An adjustable-rate mortgage (ARM) is a broad term for a loan (mortgage or deed of trust) with rates and terms that can change. FHA allows use of an ARM for owner-occupied residences of not more that four units.
A man appointed by the court to settle the estate of a person who has died intestate is called a(n) (a)devisee. (b)testator. (c)executor. (d)administrator.
(D): An administrator (male, administratrix-female) is appointed by the court when the deceased died without leaving a will (intestate). A devisee is one who receives a gift or real property by will. A testator (male, testatrix-female) is one who makes a will. An executor (male, executrix-female) is the one appointed by the deceased to execute (carry out the terms of) a will.
A Graduated Payment Mortgage
(GPM) is a mortgage in which the monthly payment for principal and interest graduates by a certain percentage each year for a specific number of years and then levels off for the remaining term of the mortgage.
An architectural style that features a distinctive gambrel roof and dormers, and has 1 1/2 or 2 1/2 stories is (a)Dutch colonial (b)Spanish (c)French Colonial (d)Victorian
(a)Dutch colonial
Housing discrimination on the basis of race is prohibited throughout the United States on the basis of the (a)First Amendment of the Constitution. (b)National Association of Fair Housing. (c)13th Amendment to the Constitution. (d)Rumford Fair Housing Act.
(a)First Amendment of the Constitution.
Which of the following is considered a "less than freehold estate"? (a)Lease (b)Life estate (c)Fee simple estate (d)Fee simple subject to power of termination
(a)Lease
By which principle will the value of a nonconforming building be enhanced if surrounding buildings are of a higher value? (a)Progression. (b)Contribution (c)REgression (d)Competition
(a)Progression.
A prohibition in a deed against a property use is known as (a)a restriction (b)an easement (c)a condition (d)an encroachment
(a)a restriction
When a landowner has the right to travel over the property of an adjoining landowner, the property that benefits from the easement right is called the (a)dominant tenement (b)servient tenement (c)life tenant (d)tenant at will
(a)dominant tenement
The MOST commonly used form of listing agreement is the (a)exclusive right to sell (b)the exclusive agency (c)open agreement (d)net agreement
(a)exclusive right to sell
An important step at the beginning of the appraisal process is to (a)identify the scope of work. (b)estimate land value (c)determine highest and best use (d)gather the data.
(a)identify the scope of work.
The placement of a house on a site is called its (a)orientation (b)design (c)foundation (d)footing
(a)orientation
A real estate broker works for the (a)principal (b)third party (c)Bureau of Real Estate (d)real estate board
(a)principal
A real estate appraiser's opinion of property value is usually valid only for (a)the date given (b)a lender (c)six months. (d)the tax assessor
(a)the date given
A long-range plan for local development is commonly known as (a)the general plan (b)zoning (c)CC&Rs (d)the design plan
(a)the general plan
The effectiveness of various kinds of insulation is measured by (a)their R-value (b)environmental controls (c)heat control (d)the thickness of the drywall
(a)their R-value
Most of the laws dealing with the formation of an agency relationship are found in the (a)Business & Professions Code. (b)California Civil Code. (c)Commissioner's Regulations. (d)Real Estate Law.
(b)California Civil Code.
What usually happens to a person's property who died intestate? (a)It escheats to the state (b)It is distributed to his/her heirs (c)It is distributed according to his/her will (d)None of the above
(b)It is distributed to his/her heirs
The procedure for filing a subdivision plan when property is divided into two or more parcels is found in the (a)Subdivided Lands Law (b)Subdivision Map Act (c)zoning regulations (d)building codes
(b)Subdivision Map Act
The recording of an instrument gives (a)actual notice. (b)constructive notice. (c)positive notice. (d)passive notice.
(b)constructive notice.
The right of possession is restricted under a: (a)fee simple qualified (b)fee simple subject to a power of termination. (c)freehold estate (d)life estate with a right of reversion.
(b)fee simple subject to a power of termination.
When you divide the capacity of an air conditioner in BTUs by the number of watts of electricity required to run it, you get its (a)120 v. 220 watt ratio (b)heat ratio (c)EER (d)conservation ratio
(c)EER
Which type of deed would be used when the purchaser pays off a loan secured by the real estate? (a)Trust deed (b)Quitclaim deed (c)Reconveyance deed (d)Grant deed
(c)Reconveyance deed
Community Property is: (a)all property acquired during marriage. (b)all property acquired by the husband during marriage. (c)all property acquired during marriage that is not separate. (d)the only form of ownership during marriage.
(c)all property acquired during marriage that is not separate.
For earthquake safety, California building codes require that the foundation be connected to the sill using (a)posts and beams (b)joists (c)anchor bolts (d)girders
(c)anchor bolts
The liability of a limited partner for business debts is limited to (a)the same as the general partners. (b)any amount agreed to in the partnership agreement. (c)his/her contribution to the firm. (d)the amount of the debts equally divided among all the partners.
(c)his/her contribution to the firm.
The MOST luxurious floor plan gives each bedroom (a)an outsider door (b)ceramic tile flooring (c)its own adjoining bathroom (d)direct access to the kitchen
(c)its own adjoining bathroom
Freehold estate includes: (a)estates for years. (b)leasehold estates. (c)life estates (d)All of the above
(c)life estates
The unit-in-place method is used (a)by lenders only. (b)as an appraisal method (c)to calculate reproduction cost (d)to find highest and best use
(c)to calculate reproduction cost
The Subdivided Lands Law can be found in the (a)Penal Code (b)Civil Code (c)Health and Safety Code (d)Business and Professions Code
(d)Business and Professions Code
The Real Estate Law treats a salesperson as (a)a dual agent (b)a general agent c)an independent contractor (d)an employee of the broker
(d)an employee of the broker
Parallel wooden members that support floors and ceiling are (a)baseboards (b)ridge boards (c)studs (d)joists
(d)joists
An attorney-in-fact can best be described as a(n): (a)duly authorized person who has been granted both actual and implied powers to act as a principal for another. (b)properly authorized party who is acting as a dual agent. (c)attorney appointed by the court to administer an estate of a deceased person. (d)legally competent person who has been given the power of attorney by another competent person.
(d)legally competent person who has been given the power of attorney by another competent person.
Land use controls that benefit the public health, safety, and general welfare are possible because of the government's (a)restrictions. (b)regulations. (c)health and safety laws. (d)police power.
(d)police power.
The highest point of construction of a wood frame building is the (a)ceiling joist (b)frieze board (c)bridging (d)ridge board
(d)ridge board
A person holding title to property in severalty would most likely have (a)a life estate. (b)an estate for years. (c)ownership in common with others. (d)sole ownership.
(d)sole ownership
The basis of MOST residential real estate appraisals is the principle of (a)conformity. (b)change. (c)contribution. (d)substitution
(d)substitution
Option Listing
-No other broker authorized -Broker has right to purchase the property -Requires full disclosure to seller of broker's profit if option exercised
Exclusive Authorization and Right-to-Sell Listing
-No other broker authorized -Cooperating broker may be brought in -Commission owed no matter who sells the property
Net Listing
-No other broker authorized -Seller receives predetermined amount and broker receives excess
Open Listing
-Nonexclusive -Commission earned only if listing broker is procuring cause of sale
Quasi-community property is:
-any California real estate acquired by an out-of-state married person that would have been considered community property if it had been acquired by a resident of California and -any California real estate acquired in exchange for real or personal property located anywhere, when the California real estate would have been considered community property if it had been acquired by a California resident.
deficiency judgment
1. A personal judgment levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full. 2. A deficiency judgment is a judgment against a borrower for the balance of a debt owed when the security for a loan is insufficient to satisfy the debt.
There are many ways to terminate an easement. They include the following eight actions:
1. Express agreement of the parties 2. Lawsuit 3. Abandonment of a prescriptive easement 4. Estoppel 5. Merger of the dominant and servient tenements 6. Destruction of the servient tenement 7. Adverse possession 8. Excessive use You can remember the ways to terminate an easement by the following acronym ADAM E LEE Abandonment Destruction Adverse possession Merger Express agreement Lawsuit Estoppel Excessive use
Real estate loan interest payments can be computed in two steps:
1. Principal x Rate = Annual interest -The principal is the unpaid balance of the loan. The rate is the percentage rate of interest paid. 2. Interest on a loan ordinarily is calculated monthly. To find interest per month, divide the annual interest by 12.
lien
A charge or claim that one person (lienor) has on the property of another (lienee) as security for a debt or obligation.
executory contract
A contract is said to be an executory contract when some future contract obligation is yet to be performed
writ of execution
A court order authorizing and directing an officer of the court (sheriff, police officer) to levy and sell property of a defendant to satisfy a judgment.
trustee's deed
A deed executed by a trustee when property is sold at a trustee's sale. The trustee's deed is a bargain and sale deed, which contains only implied warranties and no express warranties. Generally, a trustee's deed is not an insurable deed without separate documentation.
Subdivided Land Law
A disclosure law enacted to protect buyers of subdivided parcels. A public report is required for subdivisions of five or more parcels.
deed of reconveyance
A document used to transfer naked title from the trustee back to the borrower (trustor) after a debt secured by a deed of trust has been paid to the lender (beneficiary).
condition subsequent
A fee simple estate, may be qualified by a condition subsequent. This means that the new owner must not perform some action or activity. The former owner retains a right of reentry so that if the condition is broken, the former owner can retake possession of the property through legal action.
gross income multiplier
A figure used as a multiplier of the gross annual income of a property to produce an estimate of the property's value.
An offer to perform a contractual obligation is called a TENDER
A formal offer of money or service in payment of an obligation. A written offer to contract goods or services at a specified cost or rate; a bid. Something, especially money, offered in payment.
abstract of judgment
A full summary by the court of a judgment. It becomes a general lien on all of a debtor's property in the county where it is recorded. (note that a judgment is a judicial decision whereby a court action creates or affirms an obligation, such as a debt. The judgment is also the writ in witness of such an act.)
abstract of title
A full summary of all consecutive grants, conveyances, wills, records and judicial proceedings affecting title to a specific parcel of real estate, together with a statement of all recorded liens and encumbrances affecting the property and their present status.
interpleader
A judicial proceeding where an innocent third party, such as an escrow agent or broker, can deposit with the court property or money that he or she holds and that is subject to adverse claims. The court can then distribute it to the rightful claimant.
functional obsolescence
A loss of value to an improvement to real estate arising from functional problems, often caused by age or poor design.
straight-line method
A method of depreciation, also called the age-life method, that is computed by dividing the adjusted basis of a property by the number of years of estimated remaining useful life.
emancipated minor
A minor becomes emancipated by marrying, joining the armed forces, or petitioning the court, which may approve the petition.
open-ended mortgage
A mortgage loan that is expandable by increments up to a maximum dollar amount, the full loan being secured by the same original mortgage.
A reconveyance deed
A reconveyance deed executed by the trustee is the means by which the trustee returns title to the trustor when the debt is paid off. The beneficiary notifies the trustee that the debt has been cleared by sending the trustee a document called a request for reconveyance.
equal dignities rule
A rule of agency law that stipulates that when a contract is required by law to be in writing, the authority of an agent to enter into such a contract on behalf of the principal must also be in writing.
A sheriff's deed
A sheriff's deed is given to the purchaser at a court-ordered sale to satisfy a judgment. A sheriff's deed carries no warranties.
negative amortization
A situation that, even when the borrower pays their mortgage minimum payment, interest is not being paid resulting in the amount owed increasing. The unpaid interest gets added to the amount borrowed, and the amount owed increases.
homestead
A statutory exemption of real property used as a shield from the claims of certain creditors and judgments up to a specified amount; requires a declaration of homestead be completed and filed with the county recorder's office.
A tax deed
A tax deed is issued by the county tax collector if property is sold because of nonpayment of taxes. Tax collection procedures are discussed in Unit 11.
extended coverage policy
A title insurance policy that covers risks normally excluded by most standard coverage policies. Extended coverage indemnifies the insured against such things as liens, encumbrances, easements, and encroachments, which may not be disclosed by the public records.
title plant
A title plant is the storage facility of a title insurance company in which it has accumulated complete title records of properties in its area. Many of the larger title insurance companies maintain their own title plants containing copies of all recorded instruments.
external obsolescence
A type of incurable depreciation caused by negative factors not on the subject property, such as environmental, social or economic forces. The loss in value can not be reversed by spending money on the property.
warranty deed
A warranty deed expressly warrants that the grantor has good title. The grantor's warranty makes the grantor liable for a flaw in the title affecting the buyer's interest that may be discovered later, even if the grantor had no previous knowledge of it. This form of guarantee, while attractive to a property buyer, could be devastating to a property seller. It is one reason why title insurance is required (particularly by lenders) in most transactions in California. By shifting the liability to the insurer, the seller can be assured that there will be no future liability caused by an undiscovered defect in the seller's title. In turn, the buyer can rely on the resources of the title insurer if any problem covered by the title insurance should arise.
standby takeout commitment
An agreement by an interim lender to advance funds to take out a construction lender. (See interim financing)
undivided interest
An area of land divided into parcels where each owner is a tenant in common with all other owners; for example, a campground with shared facilities, or condominium common areas.
easement by prescription
An easement acquired by continuous, open and hostile use of property for the period of time prescribed by state law.
easement by condemnation
An easement created by the government or government agency that has exercised its right under eminent domain.
appurtenant easement
An easement that is annexed to the ownership of one parcel and allows the owner the use of the neighbor's land.
easement in gross
An easement that is not created for the benefit of any land owned by the owner of the easement but that attaches personally to the easement owner. For example, a right granted by Eleanor Franks to Joe Fish to use a portion of her property for the rest of his life would be an easement in gross.
express agreement/contract
An oral or written contract in which the parties state the contract's terms and express their intentions in words.
encroachment
An unauthorized invasion or intrusion of an improvement or other real property onto another's property, thus reducing the size and value of the invaded property. For example, a roof of a building that extends over a neighbor's property.
encumbrance
Any claim, lien, charge or liability attached to and binding on real property that may lessen its value or burden, obstruct or impair the use of a property but not necessarily prevent transfer of title. IN OTHER WORDS is anything that has an effect on an owners: fee simple title to real estate or use of the property
discharged contract
Performance - impossibility of performance Rescission - both parties rescind agreement Release - A party to whom an obligation is owed may sign a written release, possibly for further consideration. The contract is then discharged, and the other party no longer has an obligation to perform. Novation - By a novation the parties may substitute a new agreement for the original one, discharging the original agreement. If the new agreement falls within the statute of frauds, it must be written. Reformation - At some point during the life of the contract, one of the parties may determine that a mistake has been made in the contract terms or that certain information should be made a part of the contract Assignment - transfer Breach - A breach occurs when one of the parties fails to perform all or part of the obligations required by the contract. The nonbreaching party who is injured by the breach is entitled to legal relief.
These four unities of a joint tenancy, which can be remembered by the acronym TTIP, are as follows:
T-unity of time (each takes title at the same time) T-unity of title (each receives title through the same deed) I-unity of interest (each owns an equal share) P-unity of possession (each has the right to use all of the property)
A tenancy in common is created when it is specified by name. It also is created when more than one person takes title, they are not married to each other, and no other method of taking title is specified.
Tenancy in common is the default form of ownership for two or more unmarried people.
alienation
The act of transferring ownership, title, interest, or estate in real property from one person to another. Property is usually sold or conveyed by voluntary alienation, as with a deed or assignment of lease. Involuntary alienation takes place when property is sold against the owner's will, as in a foreclosure sale or a tax sale.
unit-in-place method
The appraisal method of estimating building costs by calculating the costs of all of the physical components in the structure with the cost of each item including its proper installation, connection, etc. Also called the segregated cost method
index method
The appraisal method of estimating building costs by multiplying the original cost of the property by a percentage factor to adjust for current construction costs.
The maximum nontaxable amount that can be given as a gift to one donee, in one year, is currently (a)$14,000. (b)$10,000. (c)$5,000. (d)$1,000.
The correct answer is: (A): A gift is a voluntary transfer by an individual of any type of property for less than full consideration. The giver is the donor; the recipient of the gift is the donee. No gift tax return need be made on a gift to one donee, in one year, of a present interest valued, as of 2013, at $14,000 or less. (A married couple could give $14,000 each, for a total of $28,000 to one donee in one year.) For every year after that, the maximum gift allowed before a gift tax return must be made will be $14,000 per donee plus an adjustment for inflation, although the exclusion will remain at $14,000 for 2014. If the gift is a future interest, a return always must be made.
When acting as agent for seller Jones, real estate broker Smith (a)is obligated to render faithful service to Jones. (b)can modify the terms of any contract that Jones enters into. (c)can give Jones legal advice. (d)can eliminate any offers on Jones's property that Smith believes is not good enough.
The correct answer is: (A): As a fiduciary the broker (and salesperson) have a duty to be faithful to the principal. Other obligations that a fiduciary owes to his or her principal are the duties of loyalty, obedience and full disclosure; to be fair and honest; the duty to use skill, care and diligence; and the duty to account for all monies.
Who usually creates deed restrictions? (a)Developer (b)Cities and counties (c)State government (d)Federal government
The correct answer is: (A): CC&Rs are commonly found in the Declaration of Restrictions filed by the developer in a subdivision plan.
Funds for CalVet loans come from (a)state bonds. (b)property taxes. (c)surplus funds. (d)federal grants.
The correct answer is: (A): Funds for CalVet loans come from voter-approved State General Obligation Bonds and Revenue Bonds issued by the legislature.
a counter-offer by a seller: (a)creates a brand new offer that replaces the buyer's original offer. (b)amends the original offer from the buyer, essentially adding to it. (c)accepts the original offer and starts a back-up offer. (d)rejects the original offer and bars that buyer from submitting future offers.
The correct answer is: (A): If the seller changes any of the contract terms, the seller makes a counteroffer. Any change by the seller rejects the buyer's offer as originally written. The seller can change terms only by, in effect, creating a brand new offer that replaces the buyer's original offer.
A request for notice of default would be of most help to the (a)beneficiary of a second trust deed. (b)trustor. (c)beneficiary of a first trust deed. (d)trustee.
The correct answer is: (A): Since foreclosure wipes out all junior liens, the holder of a junior lien should request the recording of a request for notice of default announcing that a default has occurred.
The Subdivision Map Act is a(n) (a)enabling act. (b)restrictive act. (c)informational act. (d)police power act.
The correct answer is: (A): The Subdivision Map Act is an enabling act. This means that it authorizes cities and counties to establish subdivision requirements by local ordinance.
The Unruh Civil Rights Act prohibits discrimination in (a)accommodations and business establishments of every kind. (b)public establishments only. (c)commercial establishments only. (d)for profit enterprises only.
The correct answer is: (A): The Unruh Civil Rights Act prohibits discrimination in accommodations and business establishments and now includes all of the protected classifications that appear in FEHA. Sections 54-55.1
Studding in a single-family dwelling is usually (a)16" O.C. (b)8" O.C. (c)24" O.C. (d)6" O.C.
The correct answer is: (A): The letters O.C. stand for "On Center." Stud spacing is usually 16" O.C. This means that the distance from the center line of one stud to the center line of the nearest stud is 16" on center.
A document that describes the property and any existing encumbrances is called a (a)preliminary report. (b)abstract of title. (c)title plant. (d)binder.
The correct answer is: (A): The preliminary report describes the property and current owner of record, as well as any recorded liens or other encumbrances. The escrow holder reads the report to verify the legal description and to determine if there are any child support liens, taxes, or judgments for which a release will be required prior to the close of escrow. The buyer is required to review and sign acceptance of the preliminary report.
A standard policy of title insurance covers all of the following EXCEPT (a)easements and liens not shown in the public records. (b)incompetent grantor. (c)incorrectly given marital status. (d)forged deed.
The correct answer is: (A): The standard policy of title insurance specifically excludes easements and liens not shown in the public records. Generally, a standard policy of title insurance will protect the insured against losses arising from such title defects as: -Forged documents such as deeds, releases of dower, mortgages; -Undisclosed heirs; -Mistaken legal interpretation of wills; -Misfiled documents, unauthorized acknowledgments; -Confusion arising from similarity of names; -Incorrectly given marital status.
Why would a lender be interested in making a government-insured or government-guaranteed loan over a traditional conventional loan? (a)Faster repayment (b)Lower risk (c)Easier qualification (d)Faster foreclosure
The correct answer is: (B): A government guarantee or government insurance lowers the risk for the lender.
Under a lease, the leasehold interest lies in the (a)lessor. (b)lessee. (c)landlord. (d)beneficiary.
The correct answer is: (B): A leasehold interest is the right to exclusive possession and use of real property for a fixed period of time held by the lessee (tenant).
When comparing mortgage bankers and mortgage brokers, which of the following is true? (a)Both deal exclusively in the primary mortgage market. (b)Mortgage bankers usually lend their own funds, while mortgage brokers arrange loans. (c)Both are corporations. (d)All of the above
The correct answer is: (B): A mortgage banker is a person, corporation or firm that normally provides its own funds for mortgage financing. A mortgage broker is a person or firm that acts as an intermediary between borrower and lender who negotiates, sells or arranges loans and sometimes continues to service the loans (also called a loan broker).
A listing that is retained and secretly marketed by the listing broker or salesperson, and is not made available to other brokers in the office or to other multiple-listing service members is called a (a)secret listing. (b)pocket listing. (c)double-ended listing. (d)ostensible listing.
The correct answer is: (B): A pocket listing is one which the listing agent markets privately before entering it in the MLS. Under MLS rules, a member must generally report any new listing except for commercial listings, which may be optional, within a short time.
The clause in a mortgage note which permits the lender to declare the unpaid balance due and payable upon default by the borrower is called a(n) (a)defeasance clause. (b)acceleration clause. (c)due on sale clause. (d)none of the above
The correct answer is: (B): An acceleration clause is a provision in a mortgage, trust deed, promissory note or land contract that, upon the occurrence of a specified event, gives the lender the right to call all sums due and payable in advance of the fixed payment term.
In addition to following all applicable housing and/or building codes, the landlord must assure that the property is habitable. Even if there is no express provision in a lease agreement, there is a legally implied (a)one day walk-out clause for tenants. (b)warranty of habitability. (c)covenant of constructive eviction. (d)condition of responsibility.
The correct answer is: (B): As a minimum the landlord must follow all applicable housing or building standards. Even if there is no express provision in a lease agreement, there is a legally implied warranty of habitability.
Capitalization is a process whereby an appraiser (a)finds gross income of equity capital. (b)converts income into capital value. (c)establishes cost of capital investment. (d)All of the above
The correct answer is: (B): Capitalization is a mathematical process used in estimating the value of income producing property by applying a certain capitalization rate to the net operating income.
A contract signed under duress is (a)void. (b)voidable. (c)illegal. (d)enforceable.
The correct answer is: (B): Duress is a threat whereby a person is forced to do some act against his or her will. The person who was forced to perform under a threat has the right to void the agreement or let it stand. A voidable contract is one that appears valid and enforceable on its face but is subject to rescission by one of the parties who acted under a disability.
When the escrow officer requests the appropriate party to deposit the required funds in the escrow account, it is referred to as (a)appropriation. (b)funding. (c)procurement. (d)allocation.
The correct answer is: (B): During the funding phase of the escrow process, the escrow officer requests the appropriate party to deposit the required funds in the escrow account. The lender provides the committed percentage of the purchase price. The buyer (borrower) will provide whatever amount is necessary to cover the remainder of the purchase price, taking into account any deposits already made as well as additional costs of closing, such as fees and prorations.
If a property owner believes that the assessed value on his or her property has been set too high, the owner could file a request to seek a reduction from the (a)County Board of Supervisors. (b)Assessment Appeals Board. (c)Tax Collector. (d)State Board of Equalization.
The correct answer is: (B): Each county has an Assessment Appeals Board to which an individual can question their property's value set by the assessor.
A lease contains a clause in which the parties agree to an adjustment of rent based upon some stated criteria. This lease clause is called a(n) (a)increase clause. (b)escalator clause. (c)index clause. (d)variable rate clause.
The correct answer is: (B): Escalator Clause: An escalator clause in a lease may provide for an increase in payments based on an increase in an index such as the consumer price index (CPI) or the wholesale price index (WPI). This type of lease is called a graduated lease.
A roof which slopes downward to each side of the structure from the ridge line is called a (a)gable roof. (b)mansard roof. (c)hip roof. (d)gambrel roof.
The correct answer is: (C): A hip roof has four planes that slope downward on each side of the structure from a ridge line. See Figure 14.1 in Section 5.
To protect homeowners against unfair practices of insurance companies, the legislature added the (a)Homeowner's Mediation Program. (b)Homeowner's Bill of Rights. (c)Homeowner's Reconciliation Act. (d)Homeowner's Remediation Standards of Practice.
The correct answer is: (B): Following the major Southern California fires of 2003, the legislature added the Homeowner's Bill of Rights of 2004 to the Insurance Code.
In California, an on-site resident property manager is required for building with (a)10 or more dwelling units. (b)16 or more dwelling units. (c)25 or more dwelling units. (d)50 or more dwelling units.
The correct answer is: (B): In California, every building with 16 or more dwelling units must have a resident apartment manager.
Which of the following must comply with the Subdivided Lands Law? (a)Parcels of more than 160 acres (b)Parcels of up to 160 acres (c)Parcels of any size (d)None of the above
The correct answer is: (B): Parcels of up to 160 acres are included in the Subdivided Lands Law.
In their dealings with clients and with each other, real estate agents generally act as (a)employees. (b)independent contractors. (c)subcontractors. (d)attorneys-in-fact.
The correct answer is: (B): Real estate agents generally act as independent contractors in their dealings with clients as well as dealings with each other. An independent contractor is one who is retained to perform a certain act, but who is subject to the control and direction of another only as to the end result and not as to how he or she performs the act.
All of the following will prevent an escrow from closing EXCEPT (a)agreement of the parties. (b)demand of the broker. (c)inability to meet a contingency. (d)None of the above
The correct answer is: (B): Since a broker is not a party to the transaction, he/she cannot order an escrow terminated.
California provides homeowners with a special protection from creditors called the "homestead" law. This law protects the homeowner's equity from (a)all creditors of record. (b)claims of unsecured creditors. (c)tax liens. (d)foreclosure.
The correct answer is: (B): Some or all of the value of the owner's equity in the homestead is exempt from the claims of unsecured creditors.
The California Coastal Act defines coastal zones as (a)the zone between 1,000 yards off-shore to 1,000 yards inland. (b)the length of the state from the sea inland 1,000 yards or more. (c)all beach and cliff zones in contact with the sea. (d)all coastal zones consisting of buildable land.
The correct answer is: (B): The California Coastal Act defines coastal zones, which generally run the length of the state from the sea inland 1,000 or more yards, depending on terrain.
Which of the following protects a tenant's rights with regard to the use of credit reports? (a)The Equal Credit Opportunity Act (ECOA) (b)The Federal Fair Credit Reporting Act (FCRA) (c)The Federal Tenant Rights Act (FTRA) (d)The Credit Bureau Regulatory Act (CBRA)
The correct answer is: (B): The Federal Fair Credit Reporting Act (FCRA) addresses the use of credit reports, as well as the information on tenants provided to credit bureaus by the landlord.
The main purpose of California's Community Redevelopment Agency (CRA) is (a)to rehabilitate dilapidated low income apartments and sell them as condominiums. (b)to rehabilitate existing structures for low and moderate-income housing. (c)to lend money to low income buyers for the purchase of inner-city housing. (d)to demolish older structures in favor of new planned developments.
The correct answer is: (B): The deteriorating condition of some urban neighborhoods has served as the impetus for local redevelopment efforts. California's Community Redevelopment Law (found in the Health and Safety Code) allows the formation of a community redevelopment agency (CRA). CRAs work to rehabilitate existing structures or bring in new development both to provide low- and moderate-income housing and to employ low-income persons.
The final responsibility of the escrow holder in the overall escrow process is to (a)accept the purchase contract and formulate escrow instructions. (b)prepare and deliver settlement statements and transfer funds and documents of title. (c)order a final title search. (d)receive and review preliminary report.
The correct answer is: (B): The final responsibility of the escrow holder is to close the sale by preparing and delivering settlement statements and transferring funds and documents of title.
In applying the principles of the Easton v. Strassburger case, real estate licensees are obligated to give prospective buyers of certain real estate (a)a list of obvious defects and functional obsolescence. (b)a list of known defects and those that should be known. (c)a strong recommendation that the buyer obtain a home inspection. (d)a disclosure forcing the buyer to take the property "as is."
The correct answer is: (B): The landmark case of Easton v. Strassburger gave rise to the Real Estate Transfer Disclosure Statement, which lists known defects and those which can be discovered by a reasonably diligent investigation of the accessible areas of the property.
The purpose of an impound account is to (a)earn interest. (b)accumulate reserves for future recurring costs. (c)provide additional funds in the case of a foreclosure. (d)do none of these.
The correct answer is: (B): The lender may require that an impound account be established for the benefit of the borrower, to accumulate reserves for future recurring costs, such as property taxes and hazard insurance.
In a real estate listing agreement, the commission is earned when (a)the listing expires, regardless of acceptance of an acceptable offer. (b)the broker finds a buyer who is ready, willing, and able to purchase the subject property on the seller's original terms. (c)the down payment is deposited in escrow. (d)an acceptable offer is accepted by the seller.
The correct answer is: (B): The listing broker earns his/her commission when he/she finds a buyer who is ready, willing, and able to purchase the subject property on the seller's original terms. Until the seller's acceptance is communicated to the buyer, there is no contract.
When using the cost approach, the appraiser calculates the cost of construction of property improvements based on "reproduction" cost or "replacement" cost. "Reproduction" cost is (a)The cost to replace the current improvements with another structure. (b)An estimate of the actual cost of the building when originally constructed. (c)The cost to build an exact replica using the actual materials and design of the present building. (d)The cost to remodel the existing structure so it meets current building codes.
The correct answer is: (C): "Reproduction" cost is the cost of reconstructing a replica of the existing structure using the same design and materials.
Which of the following can a property owner expect after sewer lines are installed in front of his/her property? (a)supplemental assessment (b)general assessment (c)special assessment (d)All of the above
The correct answer is: (C): A special assessment is a tax imposed against only those specific parcels of realty that will benefit from a proposed public improvement, as opposed to a general tax on the entire community.
B.T.U.'s would indicate (a)water output. (b)butane gas pressure. (c)heating output. (d)electrical resistance.
The correct answer is: (C): B.T.U. stands for British Thermal Unit. One BTU is the amount of heat required to raise one pound of water one degree Fahrenheit in temperature.
A member of a family unit of two or more persons qualifies a homeowner for a (a)$50,000 homestead exemption. (b)$75,000 homestead exemption. (c)$100,000 homestead exemption. (d)$150,000 homestead exemption.
The correct answer is: (C): Being a member of a family unit of two or more persons qualifies a homeowner for a $100,000 exemption. At least one member of the family unit must own no interest in the property or the interest must be a community property interest with the person claiming the exemption.
A way to spread the cost of acquiring property used in a trade or business over its useful life that is a deduction from adjusted gross income describes (a)reconciliation. (b)recuperation. (c)depreciation. (d)deferred maintenance.
The correct answer is: (C): Depreciation is an expense deduction taken for an investment in depreciable property to allow for the recovery of the cost of the investment. The annual amount of the depreciation deduction results from an arbitrary apportionment of the investment in the building systematically spread over its useful life.
The original mandate of Fannie Mae in the secondary market involved (a)FHA loans only. (b)all types of real estate loans. (c)FHA-insured and VA-guaranteed loans. (d)second mortgages and trust deeds up to $20,000.
The correct answer is: (C): Fannie Mae was originally organized to create a secondary market in mortgage loans. The original mandate of the agency involved FHA-insured and VA-guaranteed loans. Fannie Mae's authority has now been expanded to take in conventional mortgage loans as well.
Once the writ of possession is served on the occupant(s) of the property, how long does the occupant have before being removed by the sheriff or marshal? (a)1 day (b)3 days (c)5 days (d)10 days
The correct answer is: (C): Five days after the service, the sheriff or marshal may remove any occupant still on the premises.
Prior to close of escrow the subject property burns to the ground without fault of the buyer or buyer's agent and neither the legal title nor possession of the property had been transferred to the buyer. In this case, which of the following is the most likely outcome? (a)The buyer must still complete the terms of the contract. (b)The buyer must still complete the terms of the contract but the seller's insurance will cover rebuilding the home. (c)The seller cannot enforce the contract and the buyer is entitled to recover any part of the purchase price paid. (d)The buyer can back out of the deal but will lose his/her down payment.
The correct answer is: (C): If a material part of the real property is destroyed without fault of the buyer (or is taken by eminent domain), and neither the legal title nor possession of the property has been transferred to the buyer, the seller cannot enforce the contract and the buyer is entitled to recover any part of the purchase price that has already been paid.
If a tenant is aware of a property defect that arises after taking possession and fails to notify the landlord, the landlord (a)is still liable for any subsequent injury according to the law. (b)is still liable for any subsequent injury but without monetary damages. (c)will not be liable for any subsequent injury. (d)will be covered under his/her liability insurance.
The correct answer is: (C): If the tenant is aware of a property defect that arises after taking possession and fails to notify the landlord, the landlord will not be liable for any subsequent injury.
The practice of rejecting real estate loan applications because of the location of the property involved is called (a)blockbusting. (b)mainlining. (c)redlining. (d)steering.
The correct answer is: (C): Redlining is the illegal practice by a lending institution of restricting the number of loans or the loan-to-value ratio in certain areas of a community, or refusing to make loans in those areas, based on the demographics of the area's residents.
An ALTA policy of title insurance primarily protects the (a)buyer. (b)seller. (c)lender. (d)all of these.
The correct answer is: (C): The ALTA policy is used to protect lenders and usually requires a survey. It expands the standard policy to include: -Rights of parties in possession; -Unrecorded liens; -Easements; -Claims that a correct survey or inspection would show; -Mining claims and water rights.
The California sales tax is a(n) (a)ad valorem tax. (b)tax paid on real estate. (c)tax paid on tangible personal property. (d)tax paid on all personal property.
The correct answer is: (C): The California State Sales Tax is imposed upon retailers for the privilege of selling tangible personal property at retail.
Ownership interest in the airspace of a particular portion of real property, as well as an interest in common in the land and structure describes a (a)stock cooperative. (b)planned unit development. (c)condominium project. (d)time-share.
The correct answer is: (C): The owner of a condominium has an exclusive ownership interest in the airspace of a particular portion of real property, as well as an interest in common in the land and structure.
Under the provisions of the Residential Lead-Based Paint Hazard Reduction Act of 1992, a buyer of residential property has a ____ day opportunity to have the dwelling tested for lead-based paint hazards. (a)Three (b)Five (c)Ten (d)None at all since the law does not make provisions for a buyer testing for lead after signing a purchase agreement.
The correct answer is: (C): The prospective buyer or renter must: -receive an EPA disclosure pamphlet (or state-approved alternative), -have ten days in which to arrange a property inspection, and -sign a lead warning statement and acknowledgment.
When must the settlement agent provide the seller its copy of the Closing Disclosure? (a)Only on the day of consummation (b)Up to 14 days after the day of consummation (c)No later than the day of consummation (d)None of these
The correct answer is: (C): The settlement agent must provide the seller its copy of the Closing Disclosure no later than the day of consummation.
Recognizing that many older people on fixed incomes have trouble paying property taxes, the Property Tax Postponement Law was passed to allow (a)senior citizens to postpone payment of property taxes. (b)blind or disabled people to postpone payment of property taxes. (c)both (a) and (b) are correct. (d)certain individuals to postpone property taxes on houseboats and floating homes.
The correct answer is: (C): The state recognizes that many older people on fixed incomes are property owners but have little funds to set aside for taxes. The Property Tax Postponement Law allows a senior citizen (person aged 62 or older) to postpone payment of taxes on his or her personal residence. Postponement also may be made by persons who are blind or disabled, as defined in the law. If the applicant is married, only one spouse need qualify. Houseboats and floating homes on which the property taxes are delinquent at the time of application are not eligible for postponement.
A water company's right to run a water line through private property would most likely be (a)riparian rights. (b)correlative rights. (c)an easement in gross. (d)a dominant tenement.
The correct answer is: (C): This is an example of a commercial easement in gross.
The requirement to brace water heaters against falling or horizontal displacement due to earthquake motion applies to (a)replacement water heaters only. (b)new water heaters only. (c)all water heaters, new and replacement. (d)damaged water heaters only.
The correct answer is: (C): To help reduce earthquake caused damage to dwellings, California law requires that all water heaters be braced, anchored, or strapped to resist falling or horizontal displacement.
A broker can, without being licensed as an escrow, handle the escrow on transactions where he or she (a)acts as a principal. (b)represents the buyer. (c)represents the seller. (d)Any of the above
The correct answer is: (D): A broker may act as an escrow on his or her own sales or on sales in which he/she acts as a principal.
If an "exclusive authorization and right to sell listing" does not contain a complete legal description, (a)the listing is void. (b)it is a violation of the Real Estate Law. (c)the listing is unenforceable. (d)None of the above
The correct answer is: (D): A complete legal description is not required for a listing, however, the description must be adequate, clear and not ambiguous.
A deficiency judgment against a mortgagor is possible (a)when the current market value of the property is less than the remaining loan balance. (b)as long as market demand exceeds supply and prices continue to rise. (c)on a purchase-money mortgage. (d)never since anitdeficiency laws protect homeowners in California.
The correct answer is: (D): A deficiency judgment is a judgment against a borrower for the balance of a debt owed when the security for a loan is insufficient to satisfy the debt. A deficiency occurs when the foreclosure sale of a property produces less than the amount due on the loan. In California, a mortgagee cannot recover a deficiency judgment on a purchase-money loan. In those states where mortgages generally carry a "power of sale," creditors must bring a separate action to obtain a deficiency judgment.
A holder in due course is someone who takes a negotiable instrument (a)for value. (b)in good faith. (c)without notice of any defense against its enforcement. (d)All of the above
The correct answer is: (D): A holder in due course is someone who takes a negotiable instrument (check, note) for value, in good faith, and without notice of any defense against its enforcement that might be made by any person.
Which of the following is considered a responsibility of the buyer in escrow? (a)Deposit the cash needed to cover down payment, closing costs, and other expenses (b)Sign escrow instructions (c)Obtain hazard insurance (d)All of the above
The correct answer is: (D): All of the choices above are among the responsibilities of the buyer in escrow.
Which of the following is a tax consideration for the homeowner? (a)mortgage interest deductions (b)tax credits (c)capital gains exclusion (d)All of the above
The correct answer is: (D): All of the choices above would be tax considerations for the homeowner.
An easement created by express grant or express reservation is a (a)license agreement. (b)subdivision filing. (c)quitclaim deed. (d)grant deed.
The correct answer is: (D): An easement may be created by express grant or express reservation in a grant deed.
An installment sale represents a tax advantage because (a)it reduces tax rates. (b)it eliminates taxes all together. (c)it is a tax exemption. (d)it defers payment of capital gains.
The correct answer is: (D): An installment sale allows the taxpayer to postpone the receipt and reporting of income to future years when his or her other income may be lower. Thus, a taxpayer can avoid paying the entire tax on the gain in the year of sale.
In general, the real estate agent's responsibility in escrow is to (a)contribute a portion of his/her commission if necessary to close the escrow. (b)personally lend money to the buyer if conventional financing is not available. (c)keep light pressure on both parties to the transaction so escrow closes on time. (d)keep informed of the progress of the escrow and assist the escrow officer when necessary.
The correct answer is: (D): In general, a real estate agent's responsibilities are to keep informed of the progress of the escrow and assist the escrow officer when necessary.
An agency relationship may be created by (a)agreement. (b)ratification. (c)accepting an offer of subagency. (d)All of the above.
The correct answer is: (D): Most agency relationships are created by written agreement. An agency relationship can also be created by ratification (consenting to acts of the agent) and estoppel (principal stopped from denying an inconsistent position in the representation).
Which of following is a benefit of real estate ownership? (a)Borrowing money against the value of the property. (b)Future appreciation. (c)Forced saving by paying down the amount owed. (d)All of the above
The correct answer is: (D): Often the greatest financial benefit of real estate ownership is that it can be used as security for a loan. By borrowing money against the value of the property, home purchasers benefit from present use, future appreciation (increase in value), and forced saving by paying down the amount owed.
requirements for valid escrow
To create a valid escrow for a real estate sale, two requirements must be met: a binding contract and conditional delivery of the necessary documents and funds.
A payment to FHA at closing is the a. loan interest rate b. mortgage insurance premium c. escrow fee d. recording fee
mortgage insurance premium
Some lending activities are conducted under the rules of the California Residential Mortgage Lending Act. Which of the following are exempt under this Act? (a)A real estate broker licensed in California (b)Commercial banks (c)A court-appointed representative of an estate (d)All of the above
The correct answer is: (D): Real estate brokers licensed in CaliforniaInstitutional and noninstitutional lenders already licensed by the state or federal government, such as banks, savings and loan associations, trust companies, and insurance companies: An individual or company making residential mortgage loans with his, her, or its own money Government and pension plan employees Court-appointed estate or other representatives A trustee under a deed of trust The law also exempts a California finance lender licensed under the California Finance Lenders Law. A finance lender is someone who is in the business of making consumer loans or commercial loans in which personal property may be used as collateral.
When the Federal Reserve Board wants to tighten the money supply, it would (a)raise the amount of reserves required for member banks. (b)raise the discount rate for member banks. (c)sell government bonds or treasury bills on the open market. (d)All of the above
The correct answer is: (D): The Federal Reserve Board ("Fed") would take all of the above actions to curb inflation. For example, in a tight money market where the supply of money is limited and the demand for money is high, interest rates typically go up.
Which of the following types of contracts must be in writing under the Statute of Frauds? (a)listing agreement (b)an agreement that will not be completed within one year (c)a lease of real property for more than one year (d)All of the above
The correct answer is: (D): The statute of frauds lists the types of contracts that are required to be in writing. Among others, they include: an agreement that will not be completed within one year; the lease of real property for more than one year; an agreement that employs an agent, a broker, or any other person to purchase or sell real property (listing agreement).
A landlord wishes to evict a tenant and serves an eviction notice. Under what circumstances could a tenant remain in the property? (a)The tenant has not had hot water for months (b)Unlawful entry by the landlord (c)The lessor failed to repair a weak staircase (d)All of the above
The correct answer is: (D): These are all examples of constructive eviction. When the landlord (lessor) engages in constructive eviction, the tenant may move without giving the 30-day notice or may correct the situation by paying for the repair and deducting the bill from the rent. The lessor may not evict a tenant if the problem is the lessor's fault.
Buyer Frank sued broker Sam for a misrepresentation in the sale of a single family residence. He was awarded a judgment in the amount of $60,000. Broker Sam was bankrupt and unable to pay the judgment. Buyer Frank appealed to the Real Estate Recovery Account. Assuming the Recovery account agrees to pay Frank, he will receive a maximum of (a)$10,000. (b)$20,000. (c)$30,000. (d)$50,000.
The correct answer is: (D): This question is asking for the maximum amount that may be recovered for any one salesperson. $50,000 for a single transaction, but $250,000 maximum for any one licensee. If the broker or salesperson is bankrupt, he/she will not be granted reinstatement until the fund is repaid in full, plus interest at the prevailing legal rate.
holder in due course
The holder of a negotiable instrument (check or note) purchased for value when the instrument appears complete and regular on its face; is taken before its due date and without notice of previous dishonor; and the holder has no notice of any defects in title of the transferor.
discount rate
The interest rate at which Federal Reserve banks lends money to eligible banks.
federal funds rate
The interest rate the Federal Reserve charges its member banks on uncollateralized loans.
attachment
The legal process of seizing the real or personal property of a defendant in a lawsuit by levy or judicial order, and holding it in court custody as security for satisfaction of a judgment.
Notice of Value
The lender on a VA loan will request a determination of reasonable value from a panel of VA-recommended appraisers, who will provide a Notice of Value (NOV), formerly called a certificate of reasonable value., for the subject property. The NOV sets the maximum loan amount the VA will guarantee.
prime rate
The minimum interest rate a commercial bank will charge to its largest clients. Prime rates are determined in part, by the rate banks pay for the money they lend to borrowers. Decisions of the Federal Reserve Bank to increase or decrease the supply of money, can cause the prime rate that banks charge to fluctuate.
the amortized loan
The payment may be made by installments that include both interest and principal
capitalization rate (cap rate)
The rate of return a property will produce on the owner's investment.
estate (tenancy) at sufferance
The tenancy of a lessee who lawfully comes into possession of a landlord's real estate but who continues to occupy the premises improperly after his or her lease rights have expired.
Reliction
Waters of any moving body of water may permanently recede, uncovering new land that was once under the water. This process, called reliction, increases the adjacent owner's property.
quantity-survey method
Way of estimating building reproduction cost by making a thorough itemization of all construction costs, both direct (material and labor) and indirect (permits, overhead, profit), then totaling those costs.
A wraparound mortgage
is a method of financing in which the new mortgage is placed in a secondary or subordinate position; the new mortgage includes both the unpaid principal balance of the first mortgage and whatever additional sums are advanced by the lender. In essence, it is an additional mortgage in which another lender refinances a borrower by lending an amount over the existing first mortgage amount, without cashing out or disturbing the existence of the first mortgage. The entire loan combines two or more debts and is treated as a single obligation, and the wrap, or secondary, mortgagee pays the obligations of the first mortgage from the total payments received.
A sale-leaseback
is a real estate financing technique in which a property owner sells the property and, at the same time leases it back from the buyer. Using this approach, a seller/lessee enjoys many benefits; retaining possession of the property while obtaining the full sales price and, in some cases, keeping the right to repurchase the property at the end of the lease. This frees capital that was frozen in equity.
partition action
is brought by a co-owner of property to force a severance of the co-owners' respective interests. As explained in Unit 3, the co-owner can be a tenant in common or a joint tenant. The property is divided, if possible, or sold. After a sale, the court divides the proceeds according to the owners' respective shares.
action to quiet title
is brought to force others who have claims to the property to prove those claims or have the claims ruled invalid by the court. This is the usual method of establishing title by adverse possession and of clearing tax titles or title acquired on a forfeited contract of sale.
An implied contract
is established by the conduct of the parties, without a specific oral or written agreement.
The purchase-money trust deed or purchase-money mortgage
is given by buyer to seller at the time of purchase to secure all or part of the purchase price. The purchase money may come from either a third party (such as an institutional lender) or in the form of credit from the seller.
The promissory note
is the borrower's promise to pay the amount borrowed. The promissory note is evidence of the debt. It establishes the underlying obligation of the loan transaction.
Usury
is the charging of an exorbitant amount or rate of interest and is the subject of both state and federal law.
An unenforceable contract
is valid on its face, but its enforcement would violate some law. An example is an oral contract on a matter that the law requires to be in writing. An oral contract to purchase real estate is unenforceable, no matter what its terms, because it is oral and not written. The kinds of contracts that require a written agreement will be covered later in this unit.
An installment sales contract is also called a a. temporary contract b. land contract c. voidable contract d. terminable contract
land contract
Which of the following documents is used with a CalVet loan? a. Grant deed b. Land contract c. Trust deed d. Sheriff's deed
land contract
On default of a VA-guaranteed loan, the VA will pay the a. down payment b. property's market value c. remaining mortgage balance d. lender's loss on the amount guaranteed
lender's loss on the amount guaranteed
The Federal Housing Administration insures payment of a. a discount b. loan principal c. loan points for the lender d. a broker's commission
loan principal
The interest rate on CalVet loans a. never changes b. may change annually c. changes monthly d. depends on the CPI
may change annually
Which of the following is NOT an institutional lender (a)savings and loan (b)insurance company (c)mortgage company (d)thrift
mortgage company
