Practice Exam

ABC Lending requires mortgage borrowers to prepay 12 months of property taxes and insurance at closing. Where must these funds be held?

Escrow account

What is a township?

A 36-square-mile square formed in the use of the rectangular government survey system

Jimbo doesn't yet have a real estate license. Which activity is he legally allowed to perform without one?

Give advice to a friend who is negotiating the purchase of a house.

Which term refers to the person receiving title, often called the "party of the second part," in a deed?

Grantee

Which of the following loan transactions would be exempt from TILA disclosure requirements?

Grocery store, with personal funds used as collateral Loans for commercial purposes don't require TILA disclosure. Loans for personal purposes do, even when the collateral used is a business.

A buyer is purchasing a home for $400,000 and is financing $300,000. What is the loan-to-value ratio?

75%

A listing brokerage received a $25,000 check from a property sale, which represented the brokerage's 2.5% split. The total commission was 5%. How much did the property sell for?

$1 million

A seller received $800,000 for a 5.5 acre rectangular parcel alongside a road frontage. The property is 400' deep. What was the price per front foot of the property?

$1,335.67

Julie has received notice that the house she is renting was sold in foreclosure. She has a month-to-month lease, so how long does she have until her lease may be terminated?

90 days

A three-unit income-producing property has a sales price of $600,000. Monthly gross rent is estimated at $6,000. What's the gross rent multiplier?

100x

What is the transfer tax rate in California?

55 cents per $500

Subdivision financing usually comes from _____________________.

A combination of sources

What's contained in a UCC security agreement?

A complete description of the personal property used as collateral While the Uniform Commercial Code doesn't generally apply to real estate transactions, it does apply when personal property is used as collateral. A UCC security agreement must include a complete description of that personal property.

Select the statement that accurately reflects the type of deed used for the transfer.

A deed of trust conveys real estate to a trustee for the beneficiary named in the deed.

The first step in the subdivision development process is the market study. This step includes ______.

A feasibility study

Identify the action that is illegal under California's FEHA.

A local city council decides to re-zone a neighborhood from residential to commercial to prevent a housing development aimed at families who receive housing assistance.

If an appraisal is lower than the agreed-upon sales price, what steps can the seller take?

A second appraisal can be ordered, although there should be good reason to question the first appraisal.

Your client, William, wants to run a tax office out of his home. He lives in an area that is not zoned for that purpose. What must William obtain to operate his tax office legally?

A special use permit

Which of the following properties is considered a manufactured home?

A structure transported in two units and built in 2005 on a permanent chassis

With which type of mortgage does the interest rate vary according to a specified index?

Adjustable rate

Which term is defined as the act of transferring away ownership of a property?

Alienation Alienation is the term used to describe the act of transferring away ownership of a property, whether voluntarily or involuntarily.

Which term describes the newly formed land mass built up by the deposits of sediments on a property that belongs to the owner?

Alluvion

Which of the following actions likely requires a variance?

An addition which alters the setback

When you're putting together a listing presentation, which of these is a key point to address?

Buyers won't pay more for a home than the market dictates.

How can a homeowner identify asbestos?

By hiring a certified asbestos consultant

When a complaint is filed against a real estate licensee in California, who is responsible for investigating the complaint?

California DRE

The ______ has held that protections under the Unruh Act are applicable to anyone exhibiting characteristics of the protected groups named in the act.

California Supreme Court

A community apartment project is an example of what type of subdivision?

Common interest subdivision

Which of the following provides an opinion of list price range by looking at recently sold properties, comparing current competing properties and properties that didn't sell, and estimating buyer appeal regarding the style, location, and size?

Comparative market analysis

To make valid computations of adjustments for the sales comparison approach to value, elements of comparison must be applied in a specific order. Which one of these elements listed has the highest priority?

Conditions of sale specific order: financing terms and cash equivalency, conditions of sale, market conditions at the time of contract and closing, location, and physical characteristics.

An unrepresented ______ who's a party to a transaction is known as a principal.

Customer

In addition to its potential health hazards, what is a common consequence of a brownfield's presence in a community?

Decreased property values

Which of the following terms describes the actions required to transfer a title by deed?

Delivery and acceptance

What does a D&R stand for when issued by the state real estate commissioner?

Desist and Refrain

Which of the following individuals is exempt from contractor licensing requirements?

Diedre, who is remodeling her kitchen because extended family is coming to live with her

Your buyer client, Ben Dalton, tells you two weeks before closing that he's lost his job. He doesn't have any other income at the moment, and may not be able to follow through on his purchase of the house you're helping him buy. However, he doesn't want to miss out on his dream home and is optimistic that he'll find something soon, so he asks you to keep it confidential. What should you do?

Disclose this fact to all parties to the transaction if Ben refuses to do so. A buyer losing his job - and ability to fulfill his duty under the contract by paying for the house - is a material fact that is very relevant to the transaction. Therefore, it must be disclosed.

Informing parties of material facts related to a transaction describes the duty of ______.

Disclosure

What's another term for a valuation that's an unbiased opinion of value?

Formal appraisal

Bob is quite proud of the 600-square-foot garage he's included in his new home. According to national standards, how can he include the garage square footage in his total?

He can only include it as unfinished square footage.

What's the purpose of a typical subordination agreement?

It allows a junior mortgage to move into first lien position. In a typical subordination agreement, the senior lien holder agrees to subordinate or lower its lien position in favor of the junior lien. This agreement must be signed by both lien holders and recorded

Which of the following is generally true of flood insurance?

It is usually purchased separately or bundled with a homeowners policy, but it's not standard.

Which of these statements is NOT true about an extended title insurance policy?

It's typically used when the property is paid for in cash.

Which of the following is a mortgagor's responsibility?

Keep the property in good repair.

Determining who the buyers of subdivision homes are, the market niche to target, and whether to have different price points for various phases of development are all considerations in the ___________.

Marketing strategy

The best way to start comparative market analysis data collection is to use properties that sold within which timeframe?

No later than three to six months ago

Parker entered into a contract with seller Derrick to buy Derrick's home. Before finalizing the sale, Parker had a change of heart and decided to renounce all worldly possessions. He no longer wanted to buy Derrick's home. With Derrick's approval, Parker is released and Parker's brother, Tom, takes Parker's place as the buyer in the purchase contract. Of what is this an example?

Novation

To make valid computations of adjustments for the sales comparison approach to value, elements of comparison must be applied in a specific order. Which one of these elements listed is applied last?

Physical characteristics The elements considered in the sales comparison approach are applied in a specific order: financing terms and cash equivalency, conditions of sale, market conditions at the time of contract and closing, location, and physical characteristics.

The smallest property on the block is priced lower than any others, but the higher-priced properties that surround it help to drive the property's market value up. What economic principle is at work here?

Progression Progression is the bump in value that a lower-value property gets by being near a higher-value property.

Siblings Shasta and Ruby inherited their mother's home when she died. Ruby had been taking care of their mom, so she was already living in the home and continued to do so. Shasta lived in another state and remained there. After some years, Ruby decided to sell the house. Shasta agreed to the sale, and even offered to give up any of his ownership so Ruby could enjoy all the profits of the sale. What's the best deed to use in this situation?

Quitclaim deed

Which of these types of tenants most often uses a percentage lease?

Retail

Which of these situations could be most appropriately addressed through reformation of the contract?

Sally the Seller and Bobby the Buyer request a new contract after Sally notices the property address is mistyped.

Which type of site provides better natural drainage?

Sloped site

What is a sketch that shows the location, size, and shape of any improvements on a property being surveyed?

Spot survey A spot survey includes the location, size, and shape of any improvements on a property.

At which level does the Department of Housing and Community Development operate?

State

Evelyn's mortgage payments fluctuate. The amount applied toward principal each payment remains the same, but the interest amount varies. What type of amortization is this?

Straight-line amortization

What's it called when lien holders allow another lien holder's claim to have priority over their own?

Subordination agreement

Which one of the following is a true statement about radon testing?

Test kits are available for purchase.

What does a lot release provision require?

That a portion of the loan be repaid when each lot is sold

Henry wants to submit an offer for Lacy's house. Under the statute of frauds, which of the following is NOT a requirement Henry must meet for his offer to become an enforceable purchase agreement?

The contract must be notarized. In order to turn a verbal offer into an enforceable purchase agreement, the contract must be in writing. In addition, the terms and conditions must be stated, and the seller must sign the contract.

Licensee Kennie Mae's neighbor, Buzz, wants to sell his house but doesn't want to sign an agency agreement. Kennie Mae works with Buzz to list and show the property and negotiate offers. After the property sells, Buzz discovers that Kennie Mae didn't present all offers to him, and he sues Kennie Mae. Kennie Mae claims that because she didn't have an agency agreement with Buzz, she wasn't required to perform all fiduciary duties. What legal principle applies here?

The doctrine of estoppel keeps Kennie Mae from disavowing the agency relationship because she provided agency tasks for Buzz. The doctrine of estoppel prohibits an individual from making an assertion that's in opposition to actions or to a previous statement. Kennie Mae acted as if she was Buzz's agent, so she can't later disavow that behavior.

Which fiduciary duty may continue even after the transaction closes?

The duty of accounting For instance, any money the agent holds after a transaction closes must be accounted for until it's delivered to the appropriate party.

Stan is a home inspector who's evaluating a home for potential buyers. He pointed out that neither of the two bathrooms had vent fans installed. Why is this a potential problem that will be noted on the inspection report?

The lack of air circulation in a moist room can lead to mold growth.

Who or what entity is the beneficiary of a completion bond?

The municipality The municipality is the beneficiary of the completion bond. The completion bond provides the municipality with assurances that the developer will make improvements on which the development is predicated.

How do the primary and secondary mortgage markets work together?

The primary market packages loans to sell to the secondary market.

What recourse does a subdivision developer have to a D&R order?

They can write a request to have a hearing and contest the order

Which of the following is true regarding national standards for measuring square footage?

They're voluntary but recommended. The standards are voluntary and include measuring to the nearest inch, or 10th of a foot and only including living space with a ceiling height of seven feet or more.

A town has just assigned a lower-density use zone to an area that previously allowed higher density. What's one reason the town may have done this?

To limit overgrowth

What is the minimum amount of full-time real estate industry experience that an individual must have to qualify for a broker's license?

Two years

How many parties does a mortgage involve?

Two: borrower and lender A trustee is only used with a deed of trust.

An agent lists a home that receives an offer for full list price within one day in a buyers' market. There is a chance the agent ______ the home.

Underpriced

A lawsuit filed by a landlord against a holdover tenant.

Unlawful detainer lawsuit

Which system pulls stale air out of the kitchen, bathrooms, and other places where smells and pollutant concentrations occur?

Ventilation

Which system uses a central exhaust fan and ducts to move stale air out of the building?

Ventilation

Your aunt bequeathed you her property in her will, but you never received it. Instead, the property went to pay her tax bill. Is this legal?

Yes, due to operation of law Operation of law trumps a will. It says that what's legally required must be satisfied before the terms of the will apply.

Imagine that you're an active real estate licensee as well as an architect, and you'd like to partner with a builder who's just beginning a development. Which of these creates agency coupled with interest?

You agree to design the houses for this builder in return for getting the listings when the properties are finished.

Corrie shows Marvin several properties and prepares CMAs for each. She assists him in making an offer on one. He becomes difficult to work with, and she then says she's not his agent because they don't have a signed agency agreement. What is this an example of?

the doctrine of estoppel?