2023 RE Exam Flashcards " Hot Questions"
Someone that sells his findings, but is not accountable to another for the methods used is called an: (a) independent contractor (c) special agent (b) general agent (d) attorney-in-fact
Answer: (A) 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.
Dual agency happens mostly with: (a) cooperating brokers. (c) in-house sales. (b) mobile homes. (d) subdivision sales.
Answer: (C) An "in-house" sale is a form of dual agency where a buyer is represented by the same brokerage firm that has the listing.
If a landlord is going to increase the rent, how does he/she need to notify the current tenant? (a) Deliver written notice in person or by regular mail (b) Verbally (c) Deliver the letter by Certified Mail (d) No notification is required.
Answer (A) A landlord's notice of rent increase must be in writing. The landlord may deliver a copy of the notice personally or by regular US mail, with proper postage and addressed to the tenant at the rental unit.
Corn crops are harvested once-a-year. Which theory applies? (a) doctrine of relation back (c) doctrine of harvest and sale (b) doctrine of constructive severance (d) doctrine of fruitful labor
Answer (B) The "doctrine of constructive severance" states that when growing crops (emblements) are sold or mortgaged, they are considered separated from the land (severed), even though they have not been severed from the land. If constructively severed, they would not transfer with the sale of the land.
After reconciliation of the trust account, a broker finds funds in the account for which he cannot determine ownership. The broker should: (a) Use these funds to offset account shortages (b) Have a separate ledger for the unaccounted money and leave it in the trust account (c) Remove it to avoid commingling with other client's funds (d) Send it to the Department of Real Estate
Answer (B): Unexplained trust account overages are trust funds and unless the broker can establish the ownership of such funds, the funds must be maintained in the broker's trust fund account or in a separate trust fund account established to hold such funds.
What is an imputed interest rate? (a) An estimated interest rate used instead of the established interest rate associated with a debt. (b) The rate at which banks loan money. (c) The interest rate before taking inflation into account. (d) The annual rate charged for borrowing or earned through an investment.
Answer: (A) An imputed interest rate is an estimated interest rate used instead of the established interest rate associated with a debt. An imputed rate is used because the established rate does not accurately reflect the market rate of interest, or there is no established rate at all. From a real estate/finance standpoint, imputed Interest refers to interest that is considered by the IRS to have been paid for tax purposes, even if no interest payment was made.
Property taxes are assessed: (a) annually (c) every 2 years (b) twice-annually (d) once upon purchase
Answer: (A) Property taxes are "assessed" annually with a property tax bill mailed to the homeowner in early October of each year. The bill is payable in two installments.
In order for a licensed salesperson of a broker to legally manage the office, initial contracts, and constitute proper supervision, which of the following is required: (a) 2 years full-time experience during the (immediate) preceding 5 years. (b) 2 years full-time experience during the (immediate) preceding 5 years plus 16 college units. (c) 2 years full-time experience during the (immediate) preceding 10 years. (d) Experience is not required as long as they are licensed.
Answer: (A) 2 years full-time experience during the (immediate) preceding 5 years.
A Notary Public can do all of the following EXCEPT: (a) Demand and accept promissory notes (b) Notarize signatures (c) Administer oaths in depositions (d) Witness and authenticate the execution of documents
Answer: (A) A Notary's duty is to screen the signers of important documents — such as property deeds, wills and powers of attorney — for their true identity, their willingness to sign without duress or intimidation, and their awareness of the contents of the document or transaction. Some notarizations also require the Notary to put the signer under an oath, declaring under penalty of perjury that the information contained in a document is true and correct. A Notary Public cannot demand or accept promissory notes - this is typically done in escrow.
A hidden defect in the premises unknown to the landlord caused an injury to the tenant. Which of the following is CORRECT? (a) Landlords are liable for injury caused by concealed and dangerous conditions that the landlord knows, or should know about. (b) Landlords are NOT responsible for unknown defects and thus cannot be held liable for injury or loss caused by such a defect. (c) Landlords are liable for defects they "should know" about but cannot be held liable for loss or damages. (d) As long as the tenant has renter's insurance, the landlord is not liable for injury or loss due to unknown property defects.
Answer: (A) A landlord leasing dwellings and residential premises to tenants is strictly liable for injuries resulting from latent defects in the premises that exist at the time a lease is executed. Latent defects are concealed and dangerous conditions that a landlord knows, or should know, about. The Landlord is also liable for loss or damage suffered from a defect/disrepair if the Landlord knew or should have known about the defect/disrepair.
What kind of deed clears minor imperfections on the title of real property? (a) quitclaim deed (c) gift deed (b) warranty deed (d) grant deed
Answer: (A) A quitclaim deed is often used to cure an imperfection or defect (a "cloud on the title") in the recorded history of a real estate title. Title defects include items such as issues with wording (for example, a document does not comply with state standards), a missing signature (such as that of a spouse) or failure to properly record real estate documents. For example, if the name of a grantee is misspelled on a warranty deed placed in the public record, a quitclaim deed with the correct spelling can be executed to the grantee to perfect the title.
A home loan in which the lender offers a below-market interest rate in exchange for a share of the profit when the house is sold describes a(n): (a) shared appreciation mortgage (c) adjustable rate mortgage (b) reverse equity mortgage (d) open-ended mortgage
Answer: (A) A shared appreciation mortgage, or SAM, is a home loan in which the lender offers a below-market interest rate in exchange for a share of the profit when the house is sold. A SAM usually has a deadline for paying off the principal, for example, 10 years.
Commingling is one of the greatest single causes for loss of license. Which of the following would NOT be considered commingling? (a) Holding an uncashed deposit check made out to the broker after acceptance of an offer when directed to do so by the seller. (b) Cashing a deposit check and placing the money in the broker's safe, properly identified as being the deposit received from the buyer. (c) Depositing either cash or a check received as a deposit in the broker's personal account to be held until called for by the escrow officer. (d) Depositing money received by his/her client in the broker's personal account to pay miscellaneous expenses.
Answer: (A) An agent who negotiates the purchase or lease of real estate typically receives a check as a good faith deposit. The agent may hold the check undeposited until an agreed-to event occurs, such as when the offer is accepted or escrow is opened, if:
What font is used in real estate contracts? (a) 10 point bold (c) 12 point bold (b) 10 point underlined (d) 12 point underlined
Answer: (A) Standard form real estate contracts use 10 point bold font.
What does "escalation" mean in real estate? (a) Allows a buyer to increase their purchase offer in order to avoid getting outbid. (b) When a creditor moves to first priority among lienholders recorded against your home, which dictates who gets paid in a foreclosure. (c) The substitution of one person or group by another in respect of a debt or insurance claim. (d) Requires the borrower to pay the full mortgage balance.
Answer: (A) As the name suggests, an escalation clause is a clause that can be included in a purchase offer when there are multiple offers on the home. This clause allows you to increase your suggested purchase price in order to avoid getting outbid. For example, "I will pay X price for this home, but if the seller receives another offer that's higher than mine, I'm willing to increase my offer to Y price."
All of the following are TRUE about a Certified Property Manager (CPM) EXCEPT: (a) The CPM designation can be given to an individual or a company. (b) Must be affiliated with the NATIONAL ASSOCIATION OF REALTORS®. (c) Have 3 years of qualifying real estate management experience as defined by IREM. (d) Pass the CPM Certification exam.
Answer: (A) Be careful, this is a double-negative question. A Certified Property Manager (CPM) is a real estate professional designation awarded by the Institute of Real Estate Management (IREM) and recognized by the National Association of Realtors (NAR). The CPM designation cannot be given to a company.
A Comparative Market Analysis is most often used to: (a) ensure that the seller has a realistic listing price. (b) help the buyer's lender determine the value of the collateral property. (c) assist a builder in determining construction cost. (d) determine property value for insurance purposes.
Answer: (A) Before putting a home on the market or listing with a real estate agent, savvy home sellers obtain a Comparative Market Analysis, also referred to in the industry as a CMA.
A licensee put a "blind ad" in the local newspaper. This ad does NOT: (a) identify the advertiser as a real estate licensee. (b) include the address of the property for sale. (c) include the licensee (d) disclose the selling price.
Answer: (A) Blind advertising is advertising in which a licensee does not make clear that a real estate firm is acting for the owner. Applies to solicitation materials intended to be the "first point of contact" such as business cards, stationery, websites, advertising fliers, brochures, and email. Including advertisements on television, in print, or electronic media. The licensee can use "Broker," "Agent" or "Bro." or "Agt." or REALTOR®, but only by those who are actually REALTORS®.
A landlord CANNOT use a security deposit towards which of the following: (a) Remodeling the property (b) Repair damages caused by the tenant, other than normal wear and tear (c) Unpaid rent (d) Replacing lost keys and garage door openers
Answer: (A) California law specifically allows the landlord to use a tenant's security deposit for four purposes:For unpaid rent; 2) For cleaning the rental unit when the tenant moves out, but only to make the unit as clean as it was when the tenant first moved in; 3) For repair of damages, other than normal wear and tear, caused by the tenant or the tenant's guests; and 4) If the lease or rental agreement allows it, for the cost of restoring or replacing furniture, furnishings, or other items of personal property (including keys), other than because of normal wear and tear.
What is a chattel and how does it relate to annexation? (a) Chattels are items of personal property that may be annexed to real property. (b) Chattels are wild livestock that roam from one property to another. (c) Chattels are immovable but can be removed though the process of annexation. (d) Chattels are smaller pieces of land that may be annexed to a larger one.
Answer: (A) Chattels are generally considered to be moveable or transferable personal property (as opposed to real property). Examples of chattel may include kitchen appliances, furniture, blinds and drapes, etc. Annexation is the addition to property by the act of attaching a smaller item to the larger property, as in attaching chattels (personal property) to real property, thereby creating a fixture.
A deed has a provision regarding racial and religious discrimination. The deed may be changed: (a) If the restrictions are discriminatory or offensive (b) If the restrictions are pre-1978 (c) If a title company agrees the wording is discriminatory or offensive (d) By court action
Answer: (A) Effective January, 2000, a county recorder, title insurance company, escrow company, or real estate licensee who provides a declaration, governing documents or deed to any person must provide a statement about the illegality of discriminatory restrictions and the right of the homeowners to have such language removed. The statement must be contained in either a cover page placed over the document or a stamp on the first page.
Based on the white paper on smart community planning in California, which of the following is superseded by Form-Based Planning? (a) Traditional planning (c) Subdivision planning (b) Urban planning (d) Specific planning.
Answer: (A) Form-based planning (or code) is a land development regulation that fosters predictable built results and a high-quality public realm by using physical form (rather than separation of uses) as the organizing principle for the code. A form-based code is a regulation, not a mere guideline, adopted into city, town, or county law. A form-based code offers a powerful alternative to traditional planning using zoning regulations.
A Buyer is interested in a property. Buyer calls Broker to see if she has a listing on the property. Broker says no, but that the owner is a client. Broker calls the owner to secure a listing and to let the owner know that she has a buyer. The owner says the property is not for sale. Two weeks later, the owner sells the property to the buyer. (a) Broker is not entitled to a commission for her efforts (b) Broker is entitled to 50% of the commission for her efforts (c) Broker is entitled to all of the commission for her efforts (d) Broker must share commission with the buyer, who found the property on their own
Answer: (A) In this case the buyer found the property on their own and wasn't a buyer of the broker. Without an existing buyer-agency relationship with the Broker, the Broker is NOT entitled to a commission as the broker did not establish procuring cause to the sale.
What can the lender advertise in the newspaper for a loan offering that includes negative amortization? (a) "We can help you finance the purchase of your home" (b) "We can approve you over the phone" (c) "No cost loan" (d) "Super low interest rate"
Answer: (A) Negative amortization occurs when a monthly loan payment is too small to cover even the interest, which gets added to the unpaid balance. It can result in a borrower owing substantially more than the original amount borrowed. Certain "buzz words" in an ad trigger additional mandatory disclosures. For example, an ad that says, "Low Fixed Rate," or "No Cost Loan," must also prominently mention all associated fees. It is illegal to make loan approvals over the phone.
Which entity issues a permit for a subdivision in a coastal community? (a) California Coastal Commission (c) California Department of Conservation (b) California Department of Real Estate (d) California Department of Parks and Recreation
Answer: (A) The California Coastal Commission has permit authority over construction of buildings, subdivisions, and activities that change the intensity of use of land or public access to coastal waters. The California Coastal Commission's mission is "To protect, conserve, restore, and enhance the environment of the California coastline"
How long must land be maintained under a Williamson Act contract? (a) 10 years (c) 20 years (b) 15 years (d) 25 years
Answer: (A) The California Land Conservation Act, better known as the Williamson Act, has been the state's premier agricultural land protection program since its enactment in 1965. The minimum term for a Williamson Act contract is 10 years.
Which of the following is correct regarding current rules and requirements of reverse mortgage loans? (a) The borrower must complete credit counseling before a reverse mortgage. (b) The borrower must meet with at least three reverse mortgage providers. (c) The borrower is required to take out an equity line of credit as a condition of the reverse mortgage loan. (d) The borrower has three months after loan closing to change their mind and cancel the reverse mortgage loan.
Answer: (A) The FHA has set some additional safeguards to protect borrowers and encourage responsible reverse mortgage loan use. Before loan approval, part of the process is to complete a counseling session with an FHA- approved counselor. This counselor will make sure the borrower knows all of his/her options and has all the reverse mortgage information they need to be able to decide if this loan is best for their situation. Note: Reverse Mortgage may also be referred to as a Reverse Equity Mortgage loan on the state exam.
The Williamson Act provides help to owners of farmland and open-space land in the form of: (a) tax relief. (c) water relief (b) regulatory relief (d) building permit relief
Answer: (A) The Williamson Act of the US state of California (officially, the California Land Conservation Act of 1965) is a California law that provides relief of property tax to owners of farmland and open-space land in exchange for a ten- year agreement that the land will not be developed or otherwise converted to another use. The motivation for the Williamson Act is to promote voluntary land conservation, particularly farmland conservation.
Brokerage A and Brokerage B agreed to charge all their clients the same percentage commission on all listings. This is a violation of the: (a) Sherman Act (c) Robinson-Portman Act (b) Clayton Act (d) Federal Trade Commission Act
Answer: (A) The foundation for federal Anti-Trust laws is the Sherman Act. The three types of anti-trust violations which are most important in the real estate industry are; 1) conspiracy to fix commissions; 2) imbalanced commission splits; and 3) conspiracy to boycott.
What may the tenant do with fixtures in an industrial property? (a) remove before moving out (c) remove or leave at the choice of the lessor (b) leave when moving out (d) it depends on the lessor and lessee's agreement
Answer: (A) Trade fixtures are pieces of property that a tenant affixes to a leased building or land for the purpose of conducting business. Trade fixtures differ from other fixtures in that they may be removed from the real estate (even if attached) at the end of the tenancy of the business, while ordinary fixtures attached to the real estate become part of the real estate. The business tenant must compensate the owner for any damages due to
What does "et ux" mean in the preliminary title report? (a) "and others" (c) "and what follows" (b) "and wife" (d) "and relatives"
Answer: (B) "Et ux" is a Latin abbreviation for "et uxor", meaning "and wife."
What is an "executed contract?" (a) A contract that has been signed, notarized, and recorded. (b) A contract fully performed by all parties as stipulated in the contract document. (c) A contract that was signed by a person when alive but died before the terms of the contract were complete. (d) A contract that has been ended by destroying its force, validity, or effectiveness.
Answer: (B) A contract is said to have been executed when both parties have completed their obligations. In the case of a real estate contract, that milestone comes at closing. Until payment and title change hands, the contract is merely "executory" -- capable of being executed.
What kind of deed transfers the title to real property without receipt of consideration? (a) grant deed (c) quitclaim deed (b) gift deed (d) deed in lieu
Answer: (B) A gift deed is a formal written legal document which gives legal ownership in property from one person (commonly referred to as the "donor") to another person. Since the transfer of ownership is based upon a gift, there is no money, or consideration (something of value) exchanged for the transaction.
A beam placed across openings for doors, windows to support the load from the structure above is called a: (a) sill plate. (c) joist. (b) lintel. (d) frame.
Answer: (B) A lintel is a horizontal support of timber, stone, concrete, or steel across the top of a door or window to support the load from the structure above.
Which of the following is NOT automatically included in a sale unless stated? (a) mineral rights (b) manufactured home not on a permanent foundation (d) an industrial building (d) a watercourse appurtenant to the land
Answer: (B) A manufactured home not attached to the land is personal property, not real. It would have to be mentioned separately in the deed.
Who must the broker disclose the amount of profit the broker will make on a Net Listing? (a) buyer (c) lender (b) seller (d) escrow
Answer: (B) A net listing is a listing agreement in which the seller sets a net amount he/she is willing to accept for the property. If the sales price is more than that set amount, the broker is entitled to keep the excess. Prior to or at the time of acceptance of an offer on a net listing, the broker must disclose to the seller the amount of commission to be received {Business & Professions Code Section 10176(g)}.
Broker A enters into a 90-day exclusive listing with a seller. 30 days into the listing term the property burns down. What happens to the listing? (a) The listing is not affected and continues for its full term. (b) Destruction of the property terminates the agency agreement and thus the listing. (c) The listing continues and the seller is responsible to rebuild the property. (d) The listing continues and seller must provide a property of equal or greater value.
Answer: (B) If the property burns down before the listing "expires," the agency (and thus the listing) will end because the object of the agency is rendered impossible.
What is the form a lender must give the buyer-borrower when the loan terms have changed prior to the close of escrow? (a) Transfer Disclosure Statement (c) Good Faith Estimate (b) Closing Disclosure (d) Truth in Lending Disclosure
Answer: (B) According to the new TILA-RESPA Integrated Disclosure (TRID) law (TILA and RESPA Integrated Disclosures), if there are changes in the loan terms prior to consummation, but after issuance of the Closing Disclosure, the lender must provide the buyer-borrower with updated information in a revised Closing Disclosure no later than consummation. "Consummation" occurs when the buyer-borrower becomes contractually obligated to the creditor (lender) on the loan. In California, the buyer-borrower becomes contractually obligated to the lender upon recordation of the loan documents. The TILA-RESPA Integrated Disclosure (TRID) rule went into effect on Oct. 3, 2015.
A title officer of a title insurance company is familiar with an "Abstract of Title" and would know that it is: (a) where the legal description of the property is found in the title policy. (b) a written summary of the various recorded documents relating to the title of the subject property. (c) a standard form of title insurance that is used by most title companies. (d) an opinion of the title officer as to the condition of the title.
Answer: (B) An Abstract of Title is a written summary of the recorded documents relating to a particular property. It is no longer used today in favor of a policy of title insurance.
Which of the following describes a "perfect escrow?" (a) All documents submitted to escrow have been proofed for errors. (b) All documents, funds, and instructions needed to close the transaction are in the hands of the escrow agent. (c) The title search has taken place and the policy of title insurance has been issued. (d) All financial settlements have taken place and the documents are recorded.
Answer: (B) An escrow is said to be "perfect" (or perfected) when all documents, funds, and instructions needed to close the transaction are in the hands of the escrow agent.
An unlicensed secretary in a real estate office can: (a) quote prices over the phone. (b) type listings and sales contracts for salespeople. (c) prepare and mail postcards for salespeople. (d) all of the above.
Answer: (B) An unlicensed secretary can take messages and type listings and sales contracts for salespeople subject to review and approval by the broker. The other choices would be considered activity that would require a real estate license.
The installation of curbs, gutters, streets, and utilities in a new subdivision is the responsibility of: (a) the homeowner's association. (b) the developer. (c) buyers as a group. (d) the city.
Answer: (B) As a condition of approval, developers must provide plans for installation and/or improvement of curbs, gutters, streets, and utilities.
When a licensee is employed as an independent contractor, the employing broker may still have to cover the licensee for: (a) Unemployment insurance (c) Errors and omissions insurance (b) Workers' compensation (d) All of the above
Answer: (B) By law, all employers are required to maintain workers' compensation insurance for their employees for injuries occurring within the course and scope of the employment. While independent contractors are excluded from coverage, the California Labor and Workforce Development Agency has taken the position that a real estate salesperson is nearly always an employee for workers' compensation insurance purposes. Thus, it is highly recommended that coverage be obtained for salespersons as a matter of sound business practice.
The maximum security deposit allowed by law for an unfurnished rental is: (a) 1 times the rent (c) 3 times the rent (b) twice the rent amount (d) 1 1⁄2 times the rent
Answer: (B) California state law defines maximum security deposit based on furnished vs. unfurnished. Unfurnished rentals have a set limit that cannot exceed two months' worth of rent. Furnished rentals have a set limit that cannot exceed three months' worth of rent.
What is the Latin word for "buyer beware?" (a) ad victoriam (c) nolo contendere (b) caveat emptor (d) ad honorem
Answer: (B) Caveat emptor is a Latin term that means "let the buyer beware."
How long can a broker's commission remain in a trust account? (a) 15 days (c) 30 days (b) 25 days (d) 35 days
Answer: (B) Commissions, fees, and other income earned by a broker and collectible from trust funds may remain in the trust account for a period not to exceed 25 days. Regulation 2835 recognizes that it may not always be practical to disburse the earned income immediately upon receipt. So as long as the broker disburses the commission from the trust account within 25 days after it is earned there is no commingling violation.
Which would be considered economic obsolescence? (a) poor architectural design (c) termite damage (b) blighted neighborhood (d) deferred maintenance
Answer: (B) Economic obsolescence concerns influences outside the property limits and would include a blighted neighborhood. Functional obsolescence is a loss in the value of a property resulting from a deficiency in the floor plan of a house. A one-car garage would be inadequate for the four bedroom house.
A Broker must have a written broker-salesperson agreement with each of his/her: (a) office employees. (c) janitors. (b) licensees. (d) affiliates.
Answer: (B) Every broker must have a written agreement with each of his/her licensees, whether licensed as a salesperson or as a broker under a broker-salesperson arrangement. The agreement shall be dated and signed by the parties and shall cover material aspects of the relationship between the parties, including supervision of licensed activities, duties and compensation.
Which of the following is considered a fixture? (a) grape arbor (c) chicken coops stabilized by barn (b) new ceiling fans (d) a greenhouse window
Answer: (B) Fixtures are items of personal property which have become attached to real property, thus becoming real property. Of these choices the only one which is permanently fixed to the land (incorporated into the land) are the ceiling fans.
In which of the following ways is fraud different from misrepresentation? (a) A misrepresentation is a deliberate attempt to deceive while fraud is not. (b) Fraud is a deliberate attempt to deceive while a misrepresentation is not. (c) There is no difference between fraud and misrepresentation. (d) A misrepresentation cannot result in discipline, and fraud will always involve discipline.
Answer: (B) Fraud involves a deliberate attempt to deceive, misrepresentation does not. A licensee may be disciplined for either fraud or misrepresentation.
What happens if you fail to renew your license on-time? (a) You must reapply and retake the state examination. (b) You have two years to submit your renewal application and late fees. (c) You fall into a two year grace period but may continue doing business. (d) You must complete a 3-hour course in Ethics but may continue doing business.
Answer: (B) If you fail to renew your license on-time (prior to your license expiration date), you may renew your license during the two-year late renewal grace period immediately following your license expiration date. However, you cannot perform activities requiring a real estate license until your license has been renewed.
When examining someone's ability to purchase a home, what would you use? (a) underwriting guidelines (c) buyer's desires (b) income analysis (d) seller participation in financing
Answer: (B) Income analysis involves determine the potential buyer's ability to make the payments on a loan. Usually the buyer's debt to income ratio will determine the ability to pay.
One party sells property to another, and within the contract, the legal description is incorrect because of a simple typographical error. This can be corrected through a legal action called: (a) remediation. (c) arbitration. (b) reformation. (d) foreclosure.
Answer: (B) Reformation is legal action necessary to correct or modify a contract or deed that has not accurately reflected the intentions of the parties, due to some mechanical error, such as a typographical error in the legal description or a misstated property value.
Broker Jones uses ABC Escrow for every transaction because of an arrangement with ABC Escrow that the company gives Broker Jones $100 for every transaction. This arrangement violates: (a) FIRPTA (c) TILA (b) RESPA (d) Regulation Z
Answer: (B) Section 8 of RESPA prohibits any settlement service provider from giving or receiving any fee, kickback, or anything of value for the referral of business. By reimbursing the real estate agent for the referral of business, the title agency has given the broker a thing of value in consideration for the referral of business. Both the escrow company and the broker could be held responsible for the RESPA violation.
How often should a trust fund account be reconciled? (a) once-a-week (c) semi-annually (b) once-a-month (d) once-a-year
Answer: (B) Similar to balancing your checkbook, reconciliation is the process of comparing two or more sets of records to determine whether their balances agree. This should reveal if the records are completed accurately. To assure the accuracy, the records must be reconciled at least once-a-month.
Where does information governing the use of electronic signatures NOT exist? (a) Uniform Commercial Code ("UCC") (b) California Department of Real Estate ("DRE") (c) Federal Electronic Signatures in Global and National Commerce Act ("ESIGN Act") (d) Uniform Electronic Transactions Act ("UETA")
Answer: (B) The Federal Electronic Signatures in Global and National Commerce Act ("ESIGN Act") generally provides that electronic records and signatures have the same validity and effect as original signatures with regard to transactions in or affecting interstate commerce. Many states, including California, have adopted a parallel law, the Uniform Electronic Transactions Act ("UETA"), which authorizes electronic records and signatures as a matter of state law. Article 8 and 9 of the Uniform Commercial Code ("UCC") both permit the use of electronic records and signatures for most purposes.
All materials used in obtaining advance fee agreements must be submitted to the Real Estate Commissioner at least ____________ before they are used. (a) 5 calendar days (c) 20 calendar days (b) 10 calendar days (d) 30 calendar days
Answer: (B) The Real Estate Commissioner requires that any or all materials used in obtaining advance fee agreements, including but not limited to the contract forms, letters or cards used to solicit prospective sellers, and radio and television advertising be submitted to him or her at least 10 calendar days before they are used.
What does it mean when a lender "calls" a loan? (a) The interest rate and payment goes down early in the loan term. (b) The full payment of the remainder of a loan is due immediately. (c) The home is seized and put up for sale by the bank. (d) The loan resets to a new interest rate based on current market rates.
Answer: (B) The bank can "call" the loan and demand full payment of the remainder of the loan immediately. While this practice is legal if disclosed in the terms of the loan, a bank likely will never call the loan unless you fail to meet the loan's terms.
How much is the borrower paying if a lender charges 1 point on a $250,000 loan with a purchase price is $300,000? (a) $1,500 (c) $3,000 (b) $2,500 (d) $6,000
Answer: (B) The lender sometimes charges points as a form of pre-paid interest. One point equals one percent of the loan amount. By charging a borrower points, a lender effectively increases the yield on the loan above the amount of the stated interest rate. Borrowers can offer to pay a lender "discount points" as a method to reduce the interest rate on the loan, thus obtaining a lower monthly payment in exchange for this up-front payment.
Why should a buyer seek legal counsel before assuming the seller's first mortgage? (a) It is illegal to assume a loan in California. (b) The lender has to approve the assumption. (c) The buyer cannot qualify for a loan independently. (d) The seller will be able to foreclose.
Answer: (B) The most obvious pitfall to a buyer is thinking that the loan is fully assumable, but in fact it is not, and the lender can declare the entire loan due and payable. In order to assume an existing mortgage loan it is generally necessary to obtain consent from the lender prior to the assumption process. Transfer of property with an existing mortgage loan that is made without the lender's consent is sometimes referred to as a sale "subject to" the existing loan. In most cases, this type of transfer does not avoid the lender's right to call the loan due under the due-on-sale provision in the loan.
Who regulates electronic signature requirements? (a) Real Estate Commissioner (c) Governor (b) Secretary of state (d) Attorney General
Answer: (B) The regulations adopted by the Secretary of State define the types of technologies that are acceptable for creating digital signatures for use by public entities in California.
In what situation can the listing broker fill in the Natural Hazard Disclosure (NHD) for the seller? (a) When the disclosure was verbally communicated to the listing agent by the seller. (b) Never. (c) When the seller is out of state. (d) When the property is being sold in foreclosure by a representative.
Answer: (B) The seller's agent should NEVER complete any portion of the Natural Hazard Disclosure (NHD) for which the seller is responsible.
Which of the following is considered a "bona fide" purchaser? (a) A person who inherits a parcel of property as a gift. (b) A buyer who innocently purchases a property, without having any prior knowledge that someone else may be able to claim the title to the property. (c) A buyer who purchases a property knowing full well that he/she cannot qualify for the necessary financing. (d) A buyer who induces a sale through fraudulent representations.
Answer: (B) The term "bona fide" means honest; genuine; actual; authentic; acting without the intention of defrauding. For example, a bona fide purchaser is one who purchases property for a valuable consideration that is inducement for entering into a contract and without suspicion of being defrauded or deceived by the seller. He or she has no notice of any defects of the title. A bona fide purchaser pays in good faith, full value for the property and, without any fraud or misrepresentation.
The buyer (offeror) submits an offer to purchase and dies 4 hours later. What happens to the offer? (a) The offer is voidable due to the fact that the deed could never be delivered to the buyer (b) The death of the buyer revokes the offer (c) An administrator of the buyer's estate could continue with the offer and create a contract with the seller (d) The buyer's estate is liable
Answer: (B) There was no contract when the buyer died so the death of the buyer revokes the offer.
How long does the broker keep the buyer's receipt for deposit? (a) 3 years from the date the deposit receipt was received. (b) 3 years from the date the transaction is closed. (c) 3 years of when the agency agreement was established. (d) 3 years from the first introduction to the buyer.
Answer: (B) This question is referring to the buyer's written offer called the "Purchase Agreement and Receipt for Deposit," sometimes referred to as a "deposit receipt." The law requires a broker to maintain copies of "all listings, deposit receipts, canceled checks, trust records, and other documents executed by him or her or obtained by him or her in connection with any transactions for which a real estate broker license is required." (Bus. and Prof. Code § 10148). The retention period runs from the date of the closing of the transaction or if there is no closing from the date of the listing.
Emblements refer to: (a) bushes (c) fixtures (b) crops (d) fences
Answer: (B) Vegetable chattels called "emblements" are the crops of the earth produced annually, not spontaneously, by labor and industry.
What is the definition of an Offset Statement? (a) Notes the unpaid balance remaining on a mortgage loan as of a certain date. (b) Uncovers defects in the note that the property owner might assert against enforcement. (c) Indemnity insurance that protects lenders and homebuyers from financial loss sustained from defects in a title to a property. (d) An official document that proves your work is genuine and authentic.
Answer: (B) When a note and trust deed is offered for sale, a due diligence investigation is conducted that includes obtaining a trustor's offset statement to uncover defects in the note that the property owner might assert against enforcement. The offset statement is prepared by the beneficiary selling the note (or the loan broker or escrow), then delivered to the property owner for review and confirmation of the information contained in the statement. Once reviewed and signed by the property owner, it is delivered to escrow for further approval by the trust deed investor prior to closing and acquiring the trust deed note.
Which of the following is correct regarding the adjustment process for a Comparative Market Analysis (CMA)? (a) adjust the subject properties (b) adjust the comparable properties (c) adjust both the subject property and comparable properties (d) adjust the loan amount
Answer: (B) When completing a Comparative Market Analysis (CMA), adjustments are made to the comparable properties value to remove or add, as much as possible, the differences between your subject property and the comparable properties. Adjustments are made to the comparable properties to show if they are superior or inferior to the subject property.
When the real estate commissioner stops a real estate licensee from performing any act in real estate which requires a license, he would issue a(n): (a) desist and refrain order. (c) bar order. (b) revocation declaration. (d) order of cloture
Answer: (C) A Bar Order issued by the Real Estate Commissioner prohibits (debars) licensed or unlicensed persons from engaging in specified real estate related activities for a maximum period of 36 months.
What does MLS stand for? (a) Management Listing Service (c) Multiple Listing Service (b) Mortgage Licensing System (d) Management Loan Service
Answer: (C) A Multiple Listing Service (MLS) is a service used by a group of real estate brokers. They band together to create an MLS that allows each of them to see one another's listings of properties for sale.
An exact history of conveyances and encumbrances affecting the title of property is called a(n): (a) title search. (c) chain of title. (b) abstraction. (d) abstract of title.
Answer: (C) A chain of title is the recorded history of matters that affect the title to a specific parcel of real property, such as ownership, encumbrances and liens, beginning with the original recorded source of the title. The chain of title shows the successive changes of ownership, each one linked to the next so that a "chain" is formed.
When a government or business gives the right to use its land without any interest in the land it is called a: (a) charter. (c) license. (b) franchise. (d) easement.
Answer: (C) A license is permission or authority to do a particular act on the land or property of another, usually on a nonexclusive basis. A license is a personal, revocable, and nonassignable right, but unlike an easement, it is not considered an interest in the land itself.
In the correct order, list the chain of events necessary to comply with the agency disclosure law: (a) confirm, disclose, elect (c) disclose, elect, confirm (b) investigate, disclose, confirm (d) disclose, confirm, reconfirm
Answer: (C) According to the agency disclosure law, the correct order is Disclose, Elect, Confirm (Memory Aid: DEC).
When can you hire a contractor without a contractor's license? (a) when the job is $600 or more (c) when the job is under $500 (b) when the job is for $1,000 or more (d) when the job is over $5,000
Answer: (C) All businesses or individuals who construct or alter any building, highway, road, parking facility, railroad, excavation, or other structure in California must be licensed by the California Contractors State License Board (CSLB) if the total cost (labor and materials) of one or more contracts on the project is $500 or more.
What is required of a broker to cover their unlicensed employees who are authorized to withdraw money from the broker's trust fund account? (a) fidelity bond coverage (b) insurance coverage (c) fidelity bond or insurance (d) unlicensed employees can never have access to company trust funds.
Answer: (C) Brokers now have a choice of whether to use a fidelity bond or insurance to cover their unlicensed employees who are authorized to withdraw money from the broker's trust fund accounts. Previously, the broker was limited to bond coverage. (Senate Bill 764 codified as Business & Professions § 10145. Effective January 1, 2018.)
Which of the following allows a landowner to retain private ownership while also achieving other goals, like protecting a farming or ranching operation, preserving open space or conserving habitat for wildlife? (a) Prescriptive easement (c) Conservation easement (b) Easement in gross (d) Voluntary easement
Answer: (C) Conservation easements are based on the idea that when people own land, they own rights that go with the property - such as the right to graze cattle, hunt, build a home, subdivide or extract minerals. By voluntarily limiting some of these activities, a conservation easement allows a landowner to retain private ownership while also achieving other goals, like protecting a farming or ranching operation, preserving open space or conserving habitat for wildlife. Typically, a conservation easement limits subdivision and non-agricultural, commercial uses.
Which of the following best describes a down payment? (a) prepayment (c) deposit (b) front money (d) security
Answer: (C) Down payment (or downpayment, also called a deposit), is an initial up-front partial payment for the purchase of a house. It is usually paid in cash or equivalent at the time of finalizing the transaction. A loan of some sort is then required to finance the remainder of the payment.
Regarding environment standards, Federal law requires the seller of a new home to disclose which of the following to the buyer? (a) Type of windows (b) Thickness of the walls (c) R-rating (d) Type of foundation
Answer: (C) Federal law requires that a "new home" seller (including a subdivider) disclose in every sales contract the type, thickness, and R-value of the insulation which has been or will be installed.
When subdividers evaluate the topography of land, (a) hillside topography is highly considered. (b) hillside topography is least considered. (c) hillside topography property is less desirable than flat mainstream property. (d) topography is not a concern.
Answer: (C) Flat land is cheaper and easier to build on. The subdivider can build more homes on flat land compared to hillside land.
A corporation has their broker's license under one of its corporate officers. A non-licensed corporate-officer can do all of the following EXCEPT: (a) follow the instructions of other corporate officers (b) sell corporate owned properties with no consideration, commission or profit (c) secure listings and negotiate sales on his/her own behalf (d) transfer his/her broker-officer status to another corporation
Answer: (C) In some cases, brokers will elect to do business as a corporation. A corporation may be licensed as a real Estate broker, provided at least one officer of the corporation is a duly qualified real estate broker willing to act as the corporation's responsible designated broker-officer. That person would only be allowed to conduct licensed activities on behalf of the corporation.
How long does a lender like to see a person in the same job or field to qualify for a loan? (a) 6 months (c) 2 years (b) 1 year (d) 3 years
Answer: (C) It is typical for lenders to consider your last two years of employment. But that doesn't mean you need to have been in the exact same job for the past two years. Generally, lenders will accept a 2-year history of consistent work in the same field.
A real estate salesperson shows their own income property to a prospective buyer. The buyer seems interested and salesperson says, "you should submit a full price offer" but never tells the buyer it is his own property. This behavior is: (a) Legal (c) Unlawful (b) Unethical (d) Criminal
Answer: (C) It is unlawful for the licensee-agent to fail to disclose to the buyer of real property, in a transaction in which the licensee is an agent for the buyer, the nature and extent of the licensee's direct or indirect ownership interest in such real property.
The CPI (Consumer Price Index) is often used in leases as a way of adjusting rents. This is most likely to appear in: (a) Residential leases (c) Commercial leases (b) Net leases (d) Percentage leases
Answer: (C) The CPI (Consumer Price Index) is used by some commercial real estate leases in an attempt to fairly increase (or decrease) the rent required to be paid by a tenant to correspond with changes in national or regional inflation.
Who regulates franchises in California? (a) Department of Consumer Affairs (DCA) (c) Department of Business Oversight (DBO) (b) California Department of Real Estate (DRE) (d) Consumer Finance Protection Bureau (CPFB)
Answer: (C) The Department of Business Oversight (DBO) regulates and oversees the enforcement of California's Franchise Investment Law and the registration of Franchise Disclosure Documents (FDDs).
A Broker enters into a 90-day Seller Reserved Listing with the owner. 30 days into the listing the owner sells the home to an old friend whom the Broker never met. In this case the Broker is entitled to: (a) the full commission. (c) no commission. (b) just expenses for advertising. (d) 50 percent of the commission.
Answer: (C) The Exclusive Agency Listing is now being referred to as Seller Reserved Listing on the state exam. The Seller Reserved Listing agreement gives a broker the right to market and sell a property for a specified time period, while the owner "reserves" the right to find a buyer and sell the property without owing the broker a commission.
What does the Homeowner's Guide to Earthquake Safety discuss? (a) Underground gas lines, electrical lines, and water pipes. (b) Existing fault lines and there exact location. (c) The most common weaknesses that can cause earthquake damage to a home. (d) The various earthquake insurance policies.
Answer: (C) The Homeowner's Guide to Earthquake Safety describes the most common weaknesses that can cause damage to homes, in the event of an earthquake and provides the homeowner with basic information about finding and fixing those weaknesses.
The maximum security deposit allowed by law for a furnished rental is: (a) $100 (c) 2 times the rent (b) 1 times the rent (d) 3 times the rent
Answer: (D) Unfurnished rentals have a set limit that cannot exceed two months' worth of rent. Furnished rentals have a set limit that cannot exceed three months' worth of rent.
What is the landlord's responsibility if a tenant notices that some construction in the building may contain asbestos? (a) The landlord is required to notify the owner or property manager in writing. (b) There are no state laws requiring a landlord to provide asbestos disclosures. (c) The landlord is required to notify other tenants of the presence of asbestos. (d) The landlord must provide tenants with alternate living accommodations.
Answer: (C) The Occupational Health and Safety Administration (OSHA) ensures that owners of buildings constructed before 1981 are responsible for locating any existing asbestos. It is the landlord's responsibility to inform tenants of any presence of asbestos, carry out the necessary checks and, if required, remove harmful asbestos.
An employment agreement between broker and licensee must be maintained: (a) by the broker for up to 3 years after termination of the employment. (b) by the licensee for up to 3 years from the date of execution of employment. (c) by both the broker and licensee for up to 3 years from the date of termination of employment. (d) both (a) and (b) are correct.
Answer: (C) Written employment agreements are required for each salesperson or broker working for you as sales agents. Both you and the sales agent should sign, date and retain a copy of this agreement for three years from the date employment is terminated.
During a title search, the word "land patent" came up. This would be a(n): (a) Easement (b) Escheat to the state of land left after the death of a person with no will and no known heirs (c) Invention (d) Transfer of title from the government to the first private individual
Answer: (D) A land patent is an exclusive land grant made by a sovereign entity (the government) with respect to a particular tract of land.
Real estate commissions may be paid the form of: (a) a note. (c) cash only. (b) stock. (d) anything of value.
Answer: (D) Although it is true that most real estate commissions are paid in the form of cash (check), it can be "anything of value" so long as that value is defined and agreed upon by all parties to the transaction.
An installment sale represents a tax advantage because: (a) it reduces tax rates. (c) it is a tax exemption. (b) it eliminates taxes all together. (d) it defers payment of capital gains.
Answer: (D) An installment sale allows the taxpayer to postpone the receipt and reporting of income tax to future years when his/her other income may be lower. Thus, a taxpayer can avoid paying the entire tax on the gain in the year of sale.
If the current highest and best use of a property is expected to change, the current use is referred to as the: (a) temporary use. (c) probable use. (b) transitional use. (d) interim use.
Answer: (D) An interim use is some use the property is put to while waiting for some future action that will make another use the most productive or as we say in the business..."it's highest and best use." Interim use is a form of nonconforming use of property.
Which of the following best describes "Cash-On-Cash" return? (a) Annual dollar income (c) Total amount of distributions (b) Total amount of investment (d) Income earned on investment
Answer: (D) Cash-on-Cash Return is the ratio of income received by the investor based only on the cash invested. It is expressed as a percentage and does not include appreciation. Calculated as Annual Dollar Income ÷ Total Dollar Investment. For example when you purchase a rental property, you might put down only 10% for a cash down payment. Cash-on-cash return would measure the annual return you made on the property in relation to the down payment.
A condition or situation where the landlord doesn't decide to evict the tenant but rather the tenant chooses to leave the property as they deem it to be uninhabitable is called: (a) abandonment. (c) surrender. (b) severance. (d) constructive eviction.
Answer: (D) Constructive eviction is a condition or situation where the landlord has not evicted the tenant but rather the tenant chooses to leave the property as they deem it to be uninhabitable. When the landlord (lessor) engages in constructive eviction the tenant may move without giving the thirty day notice or may correct the situation by paying for the repair and deducting the bill from the rent.
Which of the following is NOT a type of soil or a soil condition? (a) alkaline (b) expansive (c) adobe (d) deciduous
Answer: (D) Deciduous pertains to plants that lose their leaves, not ground. Expansive soil is tightly packed, such as clay or adobe. Alkaline refers to the condition of the soil as to alkali content (salt).
Documentary Transfer Tax is calculated at a rate of ______ of the price paid for the property (or fraction thereof). (a) $100 per $500 (c) $1 per $500 (b) $50 per $500 (d) 55 cents per $500
Answer: (D) Documentary Transfer Tax is calculated at a rate of 55 cents for each $500 of the price paid for the property or fraction thereof. A portion of the total price paid for the property may be exempt because a lien remains on the property.
A listing agent received two offers in the morning and immediately presented the offers to the seller. In the evening the agent received two more offers, both with a lower price. What should the agent do? (a) Don't present the evening offers to the seller because the offers were low. (b) Wait until the seller has made a decision on the morning offers before presenting the evening offers. (c) Wait until the next day to present the lower evening offers. (d) Let the seller know of the two new offers immediately.
Answer: (D) Even though it is a temptation to favor the higher offers, it is the listing agent's fiduciary duty to notify the buyer of the new offers immediately.
Which of the following fees are allowed under RESPA? (a) One person marks up the cost of a third party service and keeps the difference without providing any goods or services to justify the additional charge. (b) Two or more persons split a fee and one person did not perform any services to receive a share of the fee. (c) A payment for the referral of business, rather than for services actually performed. (d) Payments to an attorney for services actually rendered.
Answer: (D) Section 8 of RESPA prohibits a person from giving or accepting any "thing" of value for referrals of settlement service business related to a federally related mortgage loan. It also prohibits a person from giving or accepting any part of a charge for services that are not performed.
Private Mortgage Insurance (PMI) can be canceled when you've paid down your mortgage to: (a) 50% of the loan. (c) 70% of the loan. (b) 60% of the loan. (d) 80% of the loan.
Answer: (D) The federal Homeowners' Protection Act, which applies to people who bought their homes after July 29, 1999, says that you can ask that your PMI be canceled when you've paid down your mortgage to 80% of the original loan, if you have a good record of payment and compliance with the terms of your mortgage.
