CRE Exam Prep

advance fee

10 days before use. Before a broker may solicit, advertise for and agree to receive an advance fee, the paperwork material is to be submitted to the Commissioner of the California Bureau of Real Estate (CalBRE) for approval at least 10 calendar days prior to use.

The Fair Employment and Housing Act (CA)

1959

Civil Right Act (Fed)

1968

Real Estate Settlement Procedures Act (RESPA)

1974

The Transfer Disclosure Statement (TDS)

1987

agency disclosure law

1988

in-house sale

An in-house sale refers to one in which the broker or their salespersons are working with the seller and the buyer. For an in-house sale, the listing broker cannot represent only the buyer.

CalVET loan

CalVet is not a mortgage program, it's land sale contract. Low interest, low downpayment, unemployment payment

CPM

Certified Property Manager

Collateralized loan

Collateralized loan is one secured by another loan, rather than a property

Federal Housing Administration (FHA)-insured loan.

U.S. Department of Veterans Affairs (VA) and Federal Housing Administration (FHA) are insured and guaranteed loans arranged through mortgage brokers and banks

To make a formal declaration that a statement is true without giving an oath is a(n): a. acknowledgment. b. affirmation. c. affidavit. d. deception.

b. affirmation. (Both answer selection A and C are formal declarations that require an oath. Only an affirmation stops short of the oath.)

A residential duplex was purchased for $400,000. The buyer assumed an existing note and trust deed against the property for $300,000. The documentary transfer tax for this county is $.55 per $500 of consideration. The transfer tax is: a. 110 b. 440 c. 55 d. 220

a. 110 (You are correct. The transfer tax is based on the cash and new debt created in the transfer. In this question, the amount is $100,000 ($400,000 purchase price - $300,000 assumed note and trust deed). Determine how many times $500 factors into $100,000: $100,000/$500 = $200. Multiply this amount by the tax rate: $200 x .55 = $110.)

What is not essential to the creation of an agency relationship? a. Agreement to pay consideration. b. Competency of the principal. c. Consent of the principal. d. A fiduciary relationship.

a. Agreement to pay consideration. (This is a NOT question. Agency is not necessarily a matter of compensation. The agency relationship between a client and agent exists whether or not the transaction closes and the agent receives a fee.)

Which of the following may also be called an estate of inheritance? a. Fee simple. b. Remainder interest. c. Condition subsequent. d. Future life estate.

a. Fee simple. (An estate of inheritance is ownership. Fee simple refers to current ownership. A fee estate grants an indefinite, exclusive and absolute ownership interest in a parcel of real estate and is the largest bundle of rights to be held in real estate.)

Peter sold his home to Matt. Matt didn't record the grant deed, but moved into the house. Peter then sold the same property to Isabella, who reviewed the county recorder's records but did not look at the house. Peter gave Isabella a deed, which she recorded. Which of the following is true concerning title to the property? a. Matt maintains title. b. Isabella now owns the property since she recorded her deed and Matt did not. c. Isabella has recourse against Matt for his failure to record. d. Matt and Isabella are co-owners of the property.

a. Matt maintains title. (Since Isabella failed to look at the property and determine whether it was occupied, Matt retains title. Constructive notice requires that the buyer (Isabella) look at the property as well as the county records.)

Which of the following parties is in the weakest position against loss of property due to a claim of title by a third party? a. The person possessing an unrecorded quitclaim deed who does not occupy the property. b. The person possessing an unrecorded grant deed who occupies the property. c. The person possessing a certificate of title issued by a title company. d. The person possessing a recorded deed who rents the property to a tenant.

a. The person possessing an unrecorded quitclaim deed who does not occupy the property. (You are correct. The question speaks to constructive notice. Answer selection A refers to a quitclaim deed that is not recorded nor does the person occupy the property. Recording documents as well as physical possession of a property are both cause for someone to recognize and question an interest in property.)

In a buyer's closing statement, the selling price is listed as: a. a debit to the buyer. b. a credit to the buyer. c. a debit to the seller. d. a debit to the lender.

a. a debit to the buyer. (The seller is credited for the sales price in the buyer's closing statement; the buyer is debited. The credit to the buyer comes from how the sales price is paid, typically a cash down payment and purchase-assist financing.) Note: debit not debt

A soil pipe is a(n): a. drainage pipe. b. sewer pipe. c. electrical conduit.

b. A soil pipe is a sewer pipe. Of the alternative answer choices, only C. electrical conduit is easy to eliminate since the question refers to a pipe, while electrical wires use a conduit. Answer selection A. drainage pipe may be eliminated on the basis that drainage isn't usually dispersed in the soil, but rather sent to a waterway. Answer choice D may be the most difficult to eliminate if the answer is unknown since clay or adobe may sound similar to soil; however, this is not material used in modern piping.

Changes in mortgage financing terms will affect the: a. price and value of the property. b. price only. c. value only. d. use of the property.

b. Changes in mortgage financing terms affect real estate prices. Value is a matter of worth and perception, and is therefore not affected by financing costs. The use of a property is also unaffected.

What must an appraiser do when they are hired to appraise a property owned by a corporation in which the appraiser owns a share? a. Refuse the assignment. b. Disclose their ownership interest in the property and accept the assignment. c. Disclose their ownership interest in the property and seek approval of the client before accepting the assignment. d. Ignore the issue unless they hold a majority interest in the property.

b. Disclose their ownership interest in the property and accept the assignment. (Disclosure is the necessary action as it provides the client the opportunity to select a different appraiser if they feel the appraiser's interest in the property is too significant. The presumption to this question is that the ownership is minimal. Were the ownership interest greater, the requirement may be to obtain the client's approval (answer selection C).)

express contract

is structured in words, delivered in writing or orally

executor/executrix

manager of a will

The primary concern of an appraiser when analyzing property is

marketability and acceptability

testate/intestate succession

property transferred with/without a will

Most real estate sales lawsuits are heard in

state Superior court

Laches

A lost right caused by an unreasonable delay in the pursuit of a claim is called Laches. Laches is an unreasonable delay in making an assertion or claim, such as asserting a right, claiming a privilege or making an application for redress, which may result in refusal.)

resident manager or caretaker

A resident manager or caretaker is required for apartment complexes of 16 units or more.

Right of First Refusal

A right of first refusal obligates the property owner to offer the property to the holder upon the same terms as the owner proposes to sell to a third party. A right of first refusal gives the owner more control over the transaction than an option because the holder cannot force the sale at will. Rather, the holder must wait until the owner decides to sell the property. A right of first refusal becomes an option once the owner decides to sell the property, because the holder is still not obligated to exercise the right. If the holder rejects the right, the owner is free to sell to the third party upon the terms offered to the holder. Otherwise, the owner must sell to the holder on those terms.

subdivision

A subdivision consists of five or more units, with the exception of timeshares which are twelve or more.

Option to Purchase

An option is a privilege or right that the owner of property (the "optionor") gives to another person (the "optionee") to buy certain property at a fixed price within a certain period. The option is a mere offer that binds the optionor to sell, but does not obligate the optionee to do anything. Because the optionee is not bound until the option is exercised, the granting of an option constitutes neither a sale of the property nor an agreement to sell. However, during the option term the optionor usually cannot revoke or withdraw the option without the optionee's consent.

ostensible agency

An ostensible agency occurs when both principals believe the agent represents them, but the relationship has not been formally disclosed.

assemblage/plottage

Assemblage is the act of combining parcels of land to derive an increase in value, called plottage.

boot

Boot refers to any consideration in a §1031 exchange of an unlike kind. e.g. cash, mortgage relief, unlike property

hypothecation agreement

Hypothecation is legal term that refers to the granting of a hypothec to a lender by a borrower. In practice, the borrower pledges an asset as collateral for a loan, while retaining ownership of the assets and enjoying the benefits therefrom.

Agency confirmation provision

It states the existence or nonexistence of each broker's fiduciary agency with the various parties to the transaction. The agency confirmation provision discloses the agency of each broker in the transaction and is contained in all purchase agreements and counteroffers.

Referral fees between brokers

Referral fees between brokers are legitimate and acceptable provided the broker receiving the fee is not also collecting other monies for services rendered in the same transaction. Hidden fees, secret profits and duplicate fees are never proper.

U.S. Department of Veterans Affairs (VA)-guaranteed loan

Similar to FHA loan.

California Housing Financing Agency (CalHFA)

The California Housing Financing Agency (CalHFA) program offers first-time home buyers special consideration

max commission a broker can charge for hard money loan

The commission for hard money lenders is set by law within the Business and Professions Code. The size of the loan, the length of the loan term and whether it is a first trust deed or a junior mortgage affect the commission that may be charged. A commission on first trust deeds with a term of LESS than 3 years is limited to 5%. The commission is limited to 10% for those with a term of 3 years or longer. For junior trust deeds, the commission limits are 5% for a term of less than 2 years, 10% for a term of LESS than 2 years, and 15% for three years or longer. Note: years are inclusive with longer time

pledge agreement

This is a standard form of pledge agreement to be used in connection with a syndicated loan agreement. It is intended to create a security interest over equity interests and promissory notes owned by the grantors. The grantors are usually the borrower, its parent and its subsidiaries. The grantors typically enter into the pledge agreement with a collateral agent, which is acting on behalf of lenders under a syndicated loan agreement. This form can also be used for one lender. This Standard Document has integrated notes with important explanations and drafting and negotiating tips.

Wainscoting

Wainscoting is a traditional style of wall covering in which a chair rail divides the lower portion of the wall from the upper portion which is generally of a different material.

An unearned incremental increase in the value of real property does not result from: a. added amenities to the property. b. change of zoning. c. increased density of population. d. advantageous methods for measuring depreciation.

a. added amenities to the property. (This is a NOT question. An unearned incremental increase does not come from any direct action by the owner, such as adding an amenity to the property. An unearned incremental increase is an increase in value that results from factors off the property and out of the owner's control.)

To be valid, restrictions in a grant deed need to: a. be contained in a deed or a written agreement. b. be less restrictive than existing zoning requirements. c. run with the land. d. be posted on a sign in a conspicuous spot on the property.

a. be contained in a deed or a written agreement. (You are correct. Restrictions, such as conditions, covenants and restrictions (CC&Rs) for a subdivision need to be recorded as a statement on the deed or as a reference to another recorded document such as the subdivision restrictions.)

As the first step in developing a risk reduction program for their office, a broker: a. identifies all the activities agents perform which could result in a claim of liability against the broker. b. monitors ongoing agent compliance with established risk management protocol. c. requires all their agents to take a driving test through an obstacle course. d. requires licensees to provide proof of health insurance.

a. identifies all the activities agents perform which could result in a claim of liability against the broker. (The first step in a risk reduction program is to identify the activities that create potential liability. Answer selection B is the only other answer that is close to correct, though it is not the best answer available as it involves monitoring agent activities after the activities that create potential liability have been identified. Thus, it is not the first step in developing a risk reduction program.)

In order to form a binding agreement, an offer or counteroffer: a. needs to be accepted in its entirety and without conditions. b. needs to be accepted with minor changes in conditions. c. may be accepted with minor changes if both parties agree to address the conditionswithin 15 business days. d. must contain a provision that specifies which state law controls the transaction.

a. needs to be accepted in its entirety and without conditions. (Any changes to a contract voids the original contract. Thus, in order to be binding, both principals need to agree to and sign the contract without changes.)

As opposed to condominium ownership, cooperative ownership has the disadvantage that: a. owners could lose their equity if the other cooperative owners fail to make their tax and loan payments. c. owners' costs are greater than in a condominium. d. owners have less control over the exterior of their property.

a. owners could lose their equity if the other cooperative owners fail to make their tax and loan payments. (Cooperative ownership (co-op) is a corporate ownership of the property. Thus, individual owners have a lease on the apartment unit and a share of stock in the corporation that owns the property. If the other shareholders do not meet their mortgage and property tax obligations, the corporation may default on the mortgage and the lender may foreclose, causing all the owners to lose their equity.) b. owners cannot deduct tax payments made to the cooperative.

A seller entered into an oral listing agreement to sell real estate with a broker without a followup written verification. The payment of a commission to the broker under these circumstances is: a. unenforceable. b. enforceable. c. a violation of the regulations of the Real Estate Commissioner. d. regarded as contrary to public policy.

a. unenforceable. (The only issue regarding an oral listing is that it fails the conditions of Statute of Frauds which requires the listing to be in writing to be enforceable. As such, the broker's fee is unenforceable in a court action.) b. enforceable.

If evidence of active infestation is found, a structural pest control report is required to be provided: a. when the home being purchased is financed by a Federal Housing Administration (FHA)-insured loan or U.S. Department of Veterans Affairs (VA)-guaranteed loan. b. whenever requested by the buyer, whether or not the seller agreed to do so in the contract. c. in every sale involving a wood-frame residence. d. in every sale of a foreclosed property that has been unoccupied for greater than one year.

a. when the home being purchased is financed by a Federal Housing Administration (FHA)-insured loan or U.S. Department of Veterans Affairs (VA)-guaranteed loan. (Pest control reports are only required of U.S. Department of Veterans Affairs (VA) and some Federal Housing Administration (FHA) transactions, such as where active infestation is observed.) b. whenever requested by th

Open roof sheathing is a component of a(n): a. wood shake roof. b. gravel and tar paper roof. c. composite shingle roof. d. fiberglass tile roof.

a. wood shake roof. (Wood shake roofs feature open roof sheathing to allow air to circulate. None of the other answer selections share this design.

A preprinted disclaimer contained in the statutory Transfer Disclosure Statement (TDS) states the disclosures made by the seller on the form: a. may be relied on by a buyer as a warranty of the actual condition of the property. b. are not part of the terms of the purchase agreement. c. Both a. and b. d. Neither a. nor b.

b. are not part of the terms of the purchase agreement (The Transfer Disclosure Statement (TDS) and other disclosures are not part of the terms of the purchase agreement. The statutory language written into the boilerplate of the disclosure states that the disclosure is not a warranty of the property's actual condition, as it represents only what the seller knows and observes about the property's condition.)

The proper order of events in a court proceeding is: a. judgment, attachment, execution. b. attachment, judgment, execution. c. judgment, execution, attachment. d. execution, judgment, attachment.

b. attachment, judgment, execution. (You are correct. The order of events in a court proceeding are as follows: the attachment of the property comes first to ensure its availability if a judgment is awarded. Then, after judgment has been made, it is executed.)

A fictitious business name statement expires: a. five years from December 31st of the year recorded. b. five years from recordation. c. five years from abandonment. d. Never. A fictitious business name never expires.

b. five years from recordation. (The DBA ("doing business as"), also known as a fictitious business name, needs to be renewed every five years.)

A broker under an exclusive listing also holds an option to purchase the property. If the broker intends to exercise the option, the broker: a. has a conflict of interest which needs to be disclosed. b. needs to obtain the seller's approval of the broker's exercise of the purchase option in writing. c. needs to obtain the approval of the California Bureau of Real Estate (CalBRE). d. needs to avoid receiving other offers before exercising the option.

b. needs to obtain the seller's approval of the broker's exercise of the purchase option in writing. (An exclusive listing with an option to purchase may cause potential conflict of interest issues. Answer choices C and D can be easily eliminated as the CalBRE is not directly involved and the broker would breach their fiduciary duty if they avoid receiving offers. The difference between choices A and B is a matter of recognizing that choice A is possible, but not necessarily true. Alternatively, choice B is always the best course of action.)

An option granted to a buyer: a. functions as an offer to enter into a contract with the seller. b. prevents the seller from selling the property to another buyer for the term of the option period. c. creates a voluntary lien on the seller's real estate. d. creates a relationship identical to that of a vendee/vendor under a land contract.

b. prevents the seller from selling the property to another buyer for the term of the option period. An option is a right given for a consideration to another by a property owner to purchase or lease a property as agreed within a specified time without obligating the person who receives the right to exercise it. Thus, an option prevents the seller from selling the property to another during the term of the option. Further, it obligates the seller to perform if the option is exercised.

All of the following terminate an easement, except: a. merger of the tenements. b. release by the owner of the servient tenement. c. abandonment. d. destruction of the servient tenement.

b. release by the owner of the servient tenement. (This is an EXCEPT question. The termination of an easement may occur for any of the reasons cited in the answer selections, except the release by the servient tenement. The servient tenement is the party burdened by the easement and they cannot unilaterally terminate the easement.)

When a broker's unlicensed assistant prepares marketing material, the Business and Professions Code requires: a. the broker to be the original source of all content for the advertisements. b. the broker to read and approve all material before it is used. d. the broker to ensure the assistant is provided with accurate information.

b. the broker to read and approve all material before it is used. (The real estate law requires the broker to read and approve all marketing material prepared by an unlicensed assistant before it is used.)

Unless fraud is involved, an action against a licensee by the Real Estate Commissioner needs to be initiated within ________ of the occurrence of the alleged violation. a. two years b. three years c. four years d. five years

b. three years (The Statute of Limitations allows a three-year period after the alleged violation for the Real Estate Commissioner to initiate an action against a licensee, except in the case of fraud where the limit is three years from the occurrence or one year of the discovery.)

The lowest closing costs other than the down payment are realized using a: a. Federal Housing Administration (FHA)-insured loan. b. U.S. Department of Veterans Affairs (VA)-guaranteed loan. c. CalVET Home Loan. d. conventional loan.

c. CalVET Home Loan. (You are correct. Closing costs are charges related to the transaction that are paid through escrow. The CalVet Home Loan is a land sales contract and is therefore different from each of the other answer choices. There are no loan charges in this arrangement and thus the escrow charges are lower.)

What appraisal license is required to appraise a ten unit apartment building valued at $1 million? a. Residential license. b. Certified residential license. c. Certified general license. d. Apartment specialist license.

c. Certified general license. (There are four levels of appraisal licenses. Anything other than a one-to-four unit residential property requires a certified general appraiser license.)

If homes in an area represent the highest and best use of the land and are similar in architectural design, which of the following principles of appraisal apply? a. Anticipation. b. Contribution. c. Conformity. d. Substitution.

c. Conformity. (There are several principles to real estate value. The principle of conformity holds that the maximum value is realized when a reasonable degree of homogeneity of improvements is present. Use conformity is desirable, creating and maintaining higher values.)

Which of the following will not terminate an agency relationship? a. Mutual consent. b. Death of the agent or seller. c. Estoppel. d. Destruction of the property.

c. Estoppel. (This is a NOT question. Estoppel - the principle that prevents a person from asserting something contrary to what is implied by previous actions or statements - will not terminate the relationship. Each of the alternative answer selections will terminate an agency relationship.)

What is the name of sheet metal that protects a building from water seepage? a. Sill. b. Weep hole. c. Flashing. d. Shingles.

c. Flashing. The sheet metal on the edge of the roof and surrounding various exhaust pipes extending above the roof is called flashing.

Nathan agreed to list his property for sale with Broker Chan. In the listing agreement, Nathan specified Broker Chan is not authorized to accept a deposit towards the purchase price from the buyer. What happens if Broker Chan produces a buyer? a. He must refuse to accept any deposit. b. He cannot present the offer as written. c. If he accepts a deposit, he holds it as an agent of the buyer until the offer is accepted by the seller. d. If he accepts a deposit and the buyer rescinds the offer prior to acceptance by the seller, Chan is entitled to one-half of the deposit.

c. If he accepts a deposit, he holds it as an agent of the buyer until the offer is accepted by the seller. (Due to the lack of seller authorization, Broker Chan holds the deposit towards the purchase price as an agent of the buyer until the offer is accepted by the seller.)

Which of the following zoning designations is suitable for land used as the site of multi- family residential developments? a. I-3. b. R-1. c. R-4. d. MU-4.

c. R-4. Residential use zoning is labeled with an R. Multiple units will have a number following the R other than 1, the precise number determined by each city or county.

A seller enters into an exclusive right-to-sell listing with an agent but does not receive a copy of the signed agreement. The seller, believing this relieves them of any obligations, personally sells the property while the listing is in effect. What is the outcome? a. The listing is invalid and the broker is liable to be disciplined. b. The broker did nothing wrong. c. The listing is valid and enforceable, but the broker is liable to be disciplined. d. The broker may be disciplined only if they accept the commission.

c. The listing is valid and enforceable, but the broker is liable to be disciplined. (The failure to deliver a copy of any signed document is a violation of agency law that may warrant disciplinary action by the California Bureau of Real Estate (CalBRE). However, the signed listing contract is still valid and enforceable against the seller.)

How soon must a broker deposit a client check that is made out to the broker's trust account? a. One business day. b. Two calendar days. c. Three business days. d. One week.

c. Three business days. (You are correct. Three business days is the time allowed to deposit a client's check into the broker's trust account.)

When a broker solicits and accepts a deposit on the purchase of real property without express written authorization from the owner to sell the property, the broker is: a. guilty of converting a customer's funds for their own benefit. b. guilty of violating their fiduciary duty to the owner. c. acting as an agent for the buyer. d. acting under a restricted listing.

c. acting as an agent for the buyer. (As an agent for the buyer, the broker requires no authorization from the seller to accept a deposit on the purchase of property from the buyer they represent.)

Under the market comparison approach, if a comparable property lacks a feature that is present in the subject property, the value that feature will contribute is: a. ignored since it has no effect on the sales price. b. identified in the appraisal report for comparison purposes. c. added to the sales price of the comparable property. d. subtracted from the sales price of the subject property.

c. added to the sales price of the comparable property. (An appraiser adjusts the value of the comparable property, not the subject property. The value is adjusted in the direction of the subject. Since the subject property has an added feature, the value of the feature in the marketplace will be added to the comparable property to make the two more similar.)

mortgage broker's fee is customarily paid by the: a. lender. b. seller. c. borrower. d. underwriter.

c. borrower. (Mortgage broker fees are customarily, though not exclusively, paid by the borrower.)

An exception in a grant deed: a. is the same as a reservation in a grant deed. b. voids the deed entirely. c. excludes part of the property from the grant. d. makes certain provisions of the deed voidable.

c. excludes part of the property from the grant. (Grant deeds transfer title to property. When an exception is stated, a portion of the property is not transferred with the grant deed. For example, consider an easement being retained by the owner, or a specific space such as highway frontage or beach frontage to be held for other purposes.)

If multiple lenders participate in the same loan but in different portions, the loan is a(n): a. 80/20 mortgage. b. piggyback loan. c. participation loan. d. apportioned loan.

c. participation loan. (When multiple lenders participate in the same loan it is called a participation loan. Note that a form of the word appears in the question and the correct

Without a liquidated damages provision in the purchase agreement, the seller is entitled to recover: a. only 3% of their money losses caused by the buyer's breach. b. only 10% of their money losses caused by the buyer's breach. c. the entire amount of their money losses caused by the buyer's breach. d. none of their money losses caused by the buyer's breach.

c. the entire amount of their money losses caused by the buyer's breach. (A liquidated damages clause in a purchase agreement sets the maximum dollar amount a seller may recover from the buyer on the buyer's breach. It is limited by statute to 3% of the purchase price. Without the clause, the buyer may be liable for the entire amount of financial loss suffered by the seller due to the buyer's breach.)

The calendar date that is of most concern to an appraiser is the date: a. the loan was originated. b. escrow closed. c. the purchase contract was signed. d. escrow was opened.

c. the purchase contract was signed. (The date that is most critical to an appraiser is the date the contract was signed since the fair market value (FMV) for a property is established as the purchase price agreed to by the buyer and seller.)

Which of the following does not describe excess land? a. Land which does not add to the total value of the property. b. Land in excess of that used by comparable properties. c. Land that is not sufficiently utilized by the improvements on it. d. Land that is used to store unused property fixtures.

d. (All of the answer selections correctly describe the condition of excess land except answer selection D, as the land is being used for a practical purpose, i.e., storage.)

Martin needs $25,000 to buy a new car. He owns a note secured by a $50,000 trust deed. A friend will lend Martin the money if Martin gives him his note and trust deed as security. Martin would use which document to complete this transaction? a. A chattel mortgage. b. A security agreement. c. A hypothecation agreement. d. A pledge agreement.

d. A pledge agreement. A pledge agreement is the document used to secure a loan using another loan as security where possession is relinquished. This is similar to hypothecation, which also pledges a loan or property as security, yet possession is retained.

In the instance of condominium ownership, which of the following may be held in fee title? a. The outside yard. b. The public hallways. c. The individual units. d. All of the above.

d. All of the above. (In a condominium complex, an individual owner owns their own condo as well as a proportional share of all common areas. They can own both in fee title.)

Title insurance is the means by which the title insurance company __________ a person who acquires an interest in real estate against a monetary loss caused by an encumbrance on title. a. holds harmless b. reimburses c. indemnifies d. All of the above.

d. All of the above. (Title insurance is a form of indemnity insurance by which a title insurance company holds harmless a person who acquires an interest in real estate against a monetary loss caused by an encumbrance on title that is not listed in the policy and the insured was unaware of when the policy was issued. The title insurance company then reimburses the insured for a later claim.)

If an appraiser uses improper valuation methods or is negligent in completing a government loan assignment, they may be guilty of: a. violating appraisal ethics. b. violating real estate law. c. committing a felony. d. Both a. and c.

d. Both a. and c. (Both ethics violations and possibly fraud have occurred. The key word "may" in this question allows for the possibility of intent. Negligence is an ethics violation. Fraud is a felony. Real estate law does not apply since this is an appraisal issue not related to brokerage activity.)

In a general plan, what is the method of enforcement used by the planning commission? a. Escheat. b. Prescriptive easement. c. Eminent domain. d. Zoning.

d. Enforcement of the general plan by the planning commission is accomplished through zoning laws.)

Which of the following is not true regarding a notary acknowledgment contained in a grant deed? a. It does not need to be notarized by the grantee. b. The notary needs to stamp it with their official seal. c. The notary needs to keep a record of the identification of the person acknowledging the deed. d. It does not need to be signed by the grantor.

d. It does not need to be signed by the grantor. (A grant deed is signed by the grantor and the records of the proof of identity are kept by the notary. This is another example of a question that offers potentially useful information that may be helpful when answering other questions on the state exam.)

Which of the following is false regarding the cost method of appraisal? a. It is used in computing real estate values of public buildings. b. It is hard to apply. c. It is used in new residential homes. d. It produces the lowest value results.

d. It produces the lowest value results. (You are correct. This is a FALSE question. Of the three appraisal approaches to determine a property's value, the cost approach will generally produce the highest value and the income approach will generally produce the lowest. The reason for this is that while the cost approach shows the actual expense to replace the property, the income approach demonstrates the value based on the income it generates which is always less. Note that the alternative answer selections may be useful to remember for other questions.)

The Agency Law Disclosure does not need to be made to all parties in which of the following transactions? a. The sale of a commercial building. b. The sale of vacant land. c. The sale of a residence. d. Leases for one year or less.

d. Leases for one year or less. (The Agency Law Disclosure is not required for leases of one year or less.)

An agency relationship in real estate between a licensee and a principal is terminated in several ways. Which of the following does not terminate an agency relationship? a. The death or incapacity of either the seller or broker. b. Revocation at any time by the principal. c. Destruction of the property. d. None of the above.

d. None of the above. (This is a NOT question. All of the answer selections will terminate the agency relationship, though some have negative consequences. For instance, if a principal revokes the agency before the listing has expired, the principal will be liable to the broker for money losses.)

The promissory note and mortgage are signed by: a. the mortgagee. b. the lender. c. the trustee. d. the mortgagor.

d. Real estate mortgages are secured by property. Thus, the property owner (mortgagor) signs the promissory note and mortgage.)

Just as disclosure laws are written to protect the consumer, who benefits the most when a lender requires an impound account of property taxes and insurance for a real estate loan? a. The lender and the trustee. b. The beneficiary and the trustee. c. The seller and the lender. d. The lender and the trustor.

d. The lender and the trustor. Both the lender and the trustor (borrower) benefit from the existence of an impound account since it guarantees the necessary funds will be available for property taxes and insurance when they are due.

Which of the following is the maximum term of an exclusive right to sell listing on real property? a. one year. b. Six months. c. 90 days. d. Whatever time period is agreed to by the seller and broker.

d. Whatever time period is agreed to by the seller and broker. (An exclusive right to sell listing may last for whatever period of time is agreed to by the seller and broker. There is no specified length of time that sets a threshold for an exclusive listing. Different property types, locations or market condition may affect the mutually agreed-to length of time.)

Commission splits between a broker and a salesperson are determined by: a. an implied contract. b. an express contract. c. local custom. d. a written contract.

d. a written contract. (A salesperson has a written contract with their broker that specifies what the commission split will be. The commission split is not set by law but through negotiations between the agent and employing broker. Answer selection B. an express agreement is applicable in some cases, but may be either written or verbal and is thus not the best answer.)

A broker's receipt of any deposit towards marketing costs from a seller is documented: a. in the broker's bank statements. b. and reported to the California Bureau of Real Estate (CalBRE). c. in a subaccount ledger. d. and accounted to the seller.

d. and accounted to the seller. (Monies advanced to the broker for future marketing costs needs to be accounted to the seller.)

Successful marketing materials are generally held to include the following four critical elements: a. disclosures, price, location, size. b. number of bedrooms, baths, size, and location. c. location, amenities, price, and size. d. attention, interest, desire, and action.

d. attention, interest, desire, and action. (For questions regarding marketing, remember this helpful acronym: AIDA. The essential elements of marketing materials are as follows: attention, interest, desire and action.)

A bank loans Lauren $850,000. Part of the loan agreement calls for Lauren to keep $20,000 of the loan funds on deposit with the bank for the life of the loan. This is an example of: a. prepaid charges. b. yield enhancement. c. risk management. d. compensating balance.

d. compensating balance. (This question illustrates the need to select the best answer available. The correct term for what the bank has required is a compensating balance - leaving enough money with the bank to offset potential foreclosure costs. It can also be said to improve the yield and reduce the lender's risk.)

In a §1031 real estate exchange, "boot" does not refers to: a. unlike property received. b. cash received. c. mortgage relief. d. like-kind consideration.

d. like-kind consideration. (Boot refers to any consideration in a §1031 exchange of an unlike kind. Once again, the answer choices offer the reader important information regarding the subject of this and related questions.)

A loan that allows the borrower to make monthly payments less than the interest accruing isreferred to as a(n): a. 80/20 loan. b. straight loan. c. hybrid loan. d. option adjustable rate mortgage (ARM).

d. option adjustable rate mortgage (ARM). (The option adjustable rate mortgage (ARM), which results in negative amortization, is the correct choice.)

The holding of the Easton v. Strassburger court case requires brokers to: a. explain economic conditions to the buyer. b. notify the buyer of their right to property inspections. c. explain the meaning of "as is" in regards to a property. d. reveal all known material facts about a property.

d. reveal all known material facts about a property. (You are correct. The holding of the Easton v. Strassburger court case requires sellers and their agents to disclose all material facts about a property to a buyer as soon as practicable. This is the case which prompted the creation and implementation of the Transfer Disclosure Statement (TDS) form.)

A capitalization rate (cap rate) is least affected by: a. the return on investment. b. the return of investment. c. current interest rates. d. taxes.

d. taxes. (The capitalization rate (cap rate) is least affected by taxes. The cap rate is the annual rate of return produced by the operations of an income property or sought by an investor, and is therefore an investor demand. Comparisons to current interest rates and requirements for a return on or of the investment are all investor considerations.)

A title company performs a title search by viewing the records of all except: a. county clerk's office. b. county recorder. c. secretary of state. d. the federal registry.

d. the federal registry. (A title company performs a title search by viewing the records of the county clerk's office, county recorder and the secretary of state. A search of the public records of all entities is required to determine a property's chain of title and any relevant records for the buyer or seller (e.g. an income tax lien). A federal registry of any sort of least likely to contain information relevant to a property's title.)