BROKER EXAM 6
Which of the following would not be included in the Federal Truth-in-Lending Disclosure: (A) Loan Fees; (B) Appraisal fee and Credit report fee; (C) Assumption fees; (D) FHA and VA discount points
(B) Appraisal fees and credit report fees are not considered part of the cost of credit.
Which of the following statements is false: (A) Fixtures which are purchased and installed by an owner, after the execution of a mortgage, are subject to the lien of the mortgage; (B) When an owner of land tears down a fence with the intent that it will be permanently rembved, and then piles the material on the land, such material is real property; (C) Generally, trade fixtures that are installed by a tenant can legally be rem.oved by the tenant; (D) Water heaters which are installed in an apartment building are fixtures
(B) Once the lumber becomes moveable - stacked or piled up - it is personal property.
The Federal Real Estate Settlement Procedures Act of 1974 (RESPA) requires lenders to do, or cause to be done, all of the following except; (A) Provide loan applicants with a good faith estimate of closing costs on a HUD-prescribed form; (B) Where the lender is also the closing agent, to furnish a uniform settlement statement to the borrower and seller; (C) Furnish all applicants for loans with a copy of a specific information pamphlet no later than three business days following the time of loan application; (D) Charge no more than $10.00 per document for preparation and delivery of the good faith estimate and the uniform settlement statement
(D) RESPA forbids the lender to charge for disclosures.
In the field of real estate, a "prepayment penalty" is sometimes: (A) Required from a truster who makes advance payments on his home loan; (B) Collected from a borrower who is late in his payment on his home loan; (C) Charged a buyer when he applies for a home loan; (D) Written into the trust deed for the protection of the truster
A) A "prepayment penalty" is charged by lenders to borrowers who pay off their loan before the end of the loan term.
Of the following lenders dealing with real estate finance, which would be most interested in establishing a good line of credit at a commercial bank: (A) A mortgage broker; (B) A retail credit association; (C) A prospective home buyer; (D) A life insurance company
A) A mortgage banker needs a line of credit with a commercial bank to finance loans prior to selling them on the secondary market.
A broker has a fiduciary obligation to his principal (usually the seller). This obligation can be compared to that which exists between: (A) Trustee and beneficiary; (B) Trustor and beneficiary; (C) Trustor and trustee; (D) Mortgagor and mortgagee
A) A trustee has a fiduciary responsibility to the beneficiary. He is working for the best interests of the beneficiary
The purchase agreement between a buyer and seller resulted in a disagreement between them about the refund of the deposit. The broker had placed the deposit in his trust account. Since the broker was unable to resolve the dispute between the buyer and seller, he brought the deposit to court. He relinquished any claim to the deposit, thereby forcing the parties to settle the matter without involving the broker. This act is called: (A) lnterpleader action; (B) Negation Action; (C) Quiet title action; (D) Substitution of authority action
A) An interpleader action is a court action to settle a dispute over money between the buyer and seller. This action is usually initiated by escrow, but could certainly be used in the circumstances described in this question.
Broker Michael lists a particular property. Later, that property was sold by Broker Robert. Broker Robert would be: (A) An agent of the seller; (B) An agent of the buyer; (C) An agent of Broker Michael; (D) None of the above
A) Broker Michael has a fiduciary relationship to the seller.
Generally, in the practice of real estate, a seller, when dealing with the listing broker, is known as: (A) client; (B) A customer; (C) An agent; (D) A lessee
A) Client is another name for a principal.
Under the Real Estate Settlement Procedures Act, the fee that the lender can charge the borrower for the preparation of the Disclosure/Settlement Statement is: (A) Nothing; (B) 1/2 of 1% of the loan; (C) $25.00; (D) .25%
A) Lenders may not charge for disclosures required under the Real Estate Settlement Procedures Act.
When a title insurance company issues an ALTA policy, it generally extends the risks which are insured against by a standard policy to include all of the following except: (A) The effects of a zoning change; (B) Unrecorded mechanic liens; (C) Parties in possession; (D) Unrecorded easements
A) No policy of title insurance will protect against police power. Zoning changes would be an example of police power
Joe Brown is the duly appointed attorney-in-fact of Bob Anderson. When executing a deed conveying an interest in real property owned by Anderson, Brown would: (A) First write his principal's name followed by his signature; (B) Sign his name only; (C) Sign the principal's name only; (D) None of the above
A) This is the proper procedure when an attorney-in-fact signs for his principal.
An easement woul.d be terminated by merger when the: (A) Holder of the easement becomes the owner of the land subject to the easement; (B) Owner of the easement gives all rights to the holder of the land subject to the easement; (C) Purpose for which the easement was granted ceases to exist; (D) Easement is abandoned
A) When the holder of the easement also owns the land subject to the easement, the easement ceases to exist. One does not need an easement over his own property.
"The acquisition or resale to the public, not as an investment, of eight or more real property sales contracts or promissory notes secured directly or collaterally by liens on real property during a calendar year or..." The previous statement is an excerpt from the Real Estate Law. Of the following, which best illustrates the meaning of being secured collaterally by a lien on real property: (A) The lien is a junior lien; (B) A loan is being made on the security of another loan; (C) The real property is encumbered by a blanket encumbrance; (D) The real property is the subject of several liens of equal precedence
B) Statement of fact.
According to the Real Estate Law, real estate brokers may service a promissory note secured directly or collaterally by a lien on real property. In order to perform this service, the broker must have: (A) A power of attorney executed by the borrower or lender; (B) Written authorization from the borrower or lender; (C) Been appointed an executor by the lender; (D) A copy of the promissory note
B) Statement of fact.
Unless instructed otherwise, a broker who is involved in the creation of a promissory note secured by a trust deed on real property shall see that the trust deed is recorded or deliver a written recommendation to record within: (A) 5 days; (B) 10 days; (C) 14 days; (D) 30 days
B) Statement of fact.
A real estate transfer disclosure statement would be required when property was transferred by which of the following methods: (A) Bankruptcy proceedings; (B) A sale transaction involving one to four units; (C) The foreclosure of one to four units; (D) All of the above
B) The Real Estate Transfer Disclosure Statement is required on the sale of one-to-four residential units.
The cornmission paid to a real estate licensee for the sale of a horne can be deducted on the seller's federal income tax as: (A) A Standard deduction; (B) An expense of sale; (C) A long term capital gain; (D) A casualty loss
B) The commission is an expense of sale and may be deducted as such.
The presence of a corporate seal on a deed: (A) Means that consideration was paid; (B) Implies that the proper or authorized person signed the deed; (C) Would indicate that title is being conveyed to a corporation; (D) Is needed for recording this instrument
B) The corporate seal indicates the corporation has authorized these individuals to sign for the corporation. It is not the same as acknowledgment.
Under which of the following loan transactions would the lender have the best opportunity to secure a deficiency judgment in the event of a default and foreclosure: (A) A first trust deed and note executed in favor of a conventional lender, the proceeds of which is being used to purchase a single-family residence; (B) A first trust deed and note executed in favor of a private lender to secure a loan, the proceeds of which were used to purchase an 18-unit apartment building; (C) A second trust deed given to the seller; (D) None of the above would allow a deficiency judgment as they are not permitted under California law
B) The loan described is a hard money loan or a cash loan. Deficiency judgments may only be obtained in California on a hard money loan and only when there is a court foreclosure.
Concerning option contracts, which of the following statements is most incorrect: (A) If the optionee does not exercise the option right, the optionee loses the option money that was given the optionor for the right to purchase during the option period; (B) If the optionee decides to buy the property, it will be necessary to enter into a separate sales contract before the expiration of the option in order for the two parties to be legally bound; (C) The optionee must give the optionor some amount of valuable consideration; (D) Separate from the purchase of real property owned by a business, an option may be used to buy the business separate from the property
B) The option agreement states the terms and conditions of a potential sale. If the optionee decides to exercise the option, the option contract would bind the buyer and seller.
A contract which authorizes a real estate agent to sell a property during a specified time and allows that person to collect a commission if the sale is made by anyone, including the owner, is: (A) An Exclusive Agency Listing; (B) An Exclusive Right to Sell Listing; (C) An Open Listing; (D) A Net Listing
B) This is a good definition of the Exclusive Authorization and Right to Sell Listing.
Wong acted as an agent for Jackson without having the authority (or the appearance of authority) to do so. Jackson later chose to accept Wong's unauthorized acts. This is an example of: (A) Implied contract; (B) Ratification; (C) Estoppel; (D) Misrepresentation
B) This is a good example of ratification. Ratification occurs when a principal accepts an agent's authorized act.
Sellers are understandably reluctant to cancel an existing fire insurance policy at the time of a cash sale of real property because: (A) Of fear the buyer may not properly cover the property; (B) Of the higher short-term cancellation rate; (C) It may result in cancellation of other policies; (D) Of the elimination of a cash return in the prorations
B) When insurance is canceled early, the refund is not a direct proration. There is a penalty charged by the insurer for the early cancellation
Usually the relationship of an escrow holder to the parties in a real estate transaction is which of the following: (A) Advocate; (B) Agent; (C) Independent Contractor; (D) Employee
B). Escrow is an agent for both buyer and seller during the escrow period. Escrow owes a fiduciary relationship to both.
Which of the following statements is true about an attachment lien and a judgment lien: (A) A judgment lien is recorded after a court decision; (B) An attachment lien is recorded after a court decision; (C) An attachment lien is against all the property of the debtor; (D) A judgment lien is against a single property of the debtor
A) A judgment lien is recorded after a court decision. An attachment lien is recorded before court action and only affects the property which is the subject of the law suit.
Broker James has an exclusive agency listing with Brown to sell his home for $65,000. During the listing period Brown sold the property to his friend Greene without the help of Broker James. Brown refused to pay a commission to Broker James. Broker James is legally entitled to: (A) No commission; (B) A full commission since this is an exclusive listing agreement; (C) One half of the commission since the owner found the buyer; (D) All expenses incurred for advertising, plus money expended on the Multiple Listing Service
A) An exclusive agency listing allows the seller to sell the property himself and not pay a commission
The deed restrictions on a subdivision said that the lots must contain a minimum of 15,000 square feet. The zoning restrictions said that the lots must contain a minimum of 10,000 square feet. Which of would prevail: (A) Deed restrictions; (B) Zoning restrictions; (C) The one recorded first; (D) None of the above
A) When there is a conflict between private deed restrictions and zoning, the one which is the most strict prevails. In this case, the private restrictions are more strict than zoning and would prevail.
When comparing an FHA loan and a conventional loan, Mr. Jones discovered that the conventional loan usually offered the borrower: (A) A longer repayment period; (B) A lower loan-to-value ratio; (C) Lower interest rate; (D) Less chance of losing title in the event of a default
B) FHA generally would have a higher loan-to-value ratio than a conventional loan.
Private restrictions on land can be created: (A) Only by deed; (B) By deed or by written agreement; (C) By deed, written agreement, or zoning ordinances; (D) By deed or zoning
B) Private restrictions are created by individuals, either by deed or by written agreement. Zoning is an example of police power. This is governmental power.
A licensed real estate salesperson placed a "blind ad" in a local newspaper. A "blind ad" does not properly: (A) Give the address of the property; (B) Identify the broker; (C) Identify the seller; (D) Give the selling price
B) Statement of fact.
A real estate broker licensed by the state of California is entitled to advertise himself as: (A) A Realtor; (B) A Real Estate Broker; (C) A Real Property Securities Dealer; (D) All of the above
B) Statement of fact.
In which of the following contracts does one of the parties agree not to revoke an offer for a certain period of time? (A) An exchange listing; (B) An option; (C) A ratification; (D) An exclusive right to sell listing
B) This is a description of an option agreement.
The protection which is given by an ALTA policy of title insurance: (A) Covers easements which are created during the term of the policy; (B) Is limited to the stated condition in ownership of title as of the date of the policy; (C) Protects the insured against unknown lessees who occupy the property after the date of the policy; (D) Includes encroachments upon the property that occur after the effective date of the policy
B) Title insurance protects the owner as of the date of the policy - not for future events.
When a deed of trust is foreclosed by court sale, the action: (A) Is the same as a foreclosure by trustee's sale; (B) Would allow the truster a redemption period; (C) Is not legal in California; (D) Prevents a deficiency judgment
B) When a trust deed is foreclosed by court action, the trustor has a one-year redemption period.
A sublease is: (A) An assignment of the lease; (B) A transfer of the entire leasehold; (C) A transfer of less than the entire leasehold; (D) Void after fifteen years
C) A sublease is one where the original lessee maintains an interest in the lease.
When dealing with the public, a broker may not: (A) Delegate any of his duties to other people; (B) Reject a listing on real property in the area in which he is active; (C) Remain silent concerning material facts about a property known only to himself; (D) Do any of the above
C) Statement of fact. All material facts must be disclosed.
Which of the following would be considered real property: (A) Crops before harvest; (B) Fruit that has not been picked, but which has been sold under contract; (C) Stock in a mutual water company; (D) Minerals which have been mined
C) Stock in a mutual water company is appurtenant to the land. It is part of the real property.
It is generally felt that the successful real estate licensee possesses certain characteristics such as honesty, sincerity and a compelling desire to serve people. Which of the following attitudes should the licensee possess in dealing with clients: (A) One where minorities are treated with respect, but referred to other brokers who deal with property suitable for their desires; (B) One where all clients are accepted willingly and without bias, even though the licensee prefers not to deal with them; (C) One where he can react according to his best judgment based on his understanding of the social pressures involved; (D) One that is "color blind" or absolutely free from bias
D Statement of fact.
The consent of the trust deed beneficiary should be obtained for: (A) Consolidation agreements; (B) Boundary line adjustment agreements; (C) Restriction agreements; (D) All of the above
D) A change in any of these would affect the security on which the trust deed is based. The consent of the beneficiary would be required whenever a change occurs which effects the security of the lender.
Mr. Cain homesteaded his residence on which there was a $105,000 first trust deed. Mrs. Cain did not sign the declaration of homestead. The value of the property was $150,000. Robert Burns filed a mechanic's lien after the homestead was recorded. The lien was: (A) Not enforceable because homesteaded property is exempt from mechanic's liens; (B) Not enforceable because there was no equity above the homestead; (C) Enforceable because Mrs. Cain did not sign the homestead; (D) Enforceable because mechanic's liens take priority over homestead exemptions
D) A homestead exemption only protects the owner from judgment liens; not mechanic liens.
Mr. Roberts sold his home under a land contract and, while driving by the house one day, noticed that a contractor was installing a swimming pool. To protect himself, the Mr. Roberts should: (A) Record a notice of completion; (B) Record a notice of non-responsibility; (C) Record a notice of default; (D) Post and record a notice of non-responsibility within ten days
D) A notice of non-responsibility must be posted on the property and filed with the county recorder within 10 days of the owner finding out the work has been done. This will protect the owner from a mechanic's lien by warning the mechanic that the tenant is responsible for payment, not the owner of the property.
Which of the following is not a fiduciary relationship: (A) Listing broker to seller; (B) Attorney in fact to principal; (C) Attorney to client; (D) Trustor to beneficiary
D) A truster is not a fiduciary of the lender (beneficiary).
One who is licensed as a real estate broker or salesperson in California may legally do all of the following, except: (A) Accept an open listing that has no termination date as part of the contract; (B) Sell his own property and claim a commission as an expense for income tax purposes; (C) Receive a fee for collecting payments on a loan that was not negotiated by him; (D) Claim a commission on an exclusive listing which does not include a specific termination date
D) All exclusive listings must have a definite termination date.
Mr. Jacobs purchased a property for $300,000 with a downpayment of $60,000 cash. He gave a trust deed and note in favor of the seller for of the purchase price. Such a note and deed of trust would be considered purchase money: (A) If it were used to buy a four unit apartment building; (B) Since the seller extended credit to the buyer; (C) Even if the loan were made by an institutional lender; (D) All of the above
D) All of these situations describe a purchase money loan. Any loan which facilitates the purchase of a one-to-four unit dwelling would be considered purchase money.
The tax which the city may levy against a real estate brokerage firm based on its gross receipts would be a: (A) Sales tax; (B) Use tax; (C) Documentary tax; (D) Business license tax
D) Statement of fact.
The Real Estate Settlement Procedures Act covers a federally-regulated loan which is a first loan where the proceeds are used to finance the: (A) Purchase of a property for immediate re-sale; (B) Construction of a single-family residence on a property already owned by the borrower; (C) Purchase of a vacant residential lot; (D) Purchase of a lot upon which a mobile home is located
D) The Real Estate Settlement Procedures Act applies to the purchase of one-to-four dwelling units. The lot on which a buyer intends to place a mobile home would fall into this category.
Which of the following best describes who may be authorized to withdraw funds from a broker's trust account: (A) Any unlicensed person employed by a broker; (B) Any one of the corporate directors; (C) Any person employed by the broker; (D) Anyone who is officially authorized by the broker in writing
D) To be authorized to withdraw from the broker trust account, a person must be employed by the broker. If the person is unlicensed, the broker must carry a fiduciary bond on that person in an amount equal to the maximum amount that would ever be in the trust account. In any event, that person must be authorized by the broker.
When a contract has been rescinded, it means it has been: (A) Revised; (B) Subrogated; (C) Honored; (D) Annulled
D) When a contract has been rescinded, both parties go back . to where they were before the contract. This is also what annulled means. It is as if the contract was never in effect.
If a deed has a restrictive covenant which prohibits the sale of the property to persons of a particular race, that covenant will: (A) Provide the grantor the power to enforce the covenant; (B) Provide the grantee the power to void the conveyance; (C) Have no effect on the conveyance, but the covenant will be unenforceable; (D) Invalidate the conveyance
C Statement of fact.
The solicitation of a fee from an owner to promote the sale or rental of any property by any means other than advertising in a newspaper of general circulation is called: (A) A promotion fee; (B) An advertising advance; (C) An advance fee; (D) None of the above
C Statement of fact.
Sampson offered to fully perform his part of a purchase contract. This would be described as: (A) Demand; (B) Condition; (C) Tender; (D) Covenant
C) "Tender'' is (means) an offer to perform or pay consideration.
Usually a broker has a right to a commission only on the basis of negotiations which he completes during the term of the listing agreement, unless: (A) The listing agreement has a liquidated damages clause; (B) He brings a court suit against his principal; (C) A "protection period" clause is contained in the listing agreement; (D) The listing involves the exchange of properties
C) A "protection period" allows the broker to collect a commission from the seller, if the seller sells the property to someone on a list supplied to the seller within the time period specified in the listing contract.
Most real estate offices will spend money for advertising. In budgeting the advertising dollar, little money would be spent on: (A) Classified ads in the local newspaper of exclusive listings; (B) Attractive "for sale" signs showing broker's firm name and telephone number; (C) Display advertising in the local newspaper concerning open listings; (D) . Membership fees for a multiple listing service
C) A broker would not usually spend money advertising an open listing because the chance of collecting a commission is not good.
A seller sued a broker for failing to disclose a material fact to him. In defense, the broker proved that his listing contract with the seller was oral. Under these circumstances: (A) The defense is a bar to the lawsuit because of the Statute of Frauds; (B) The Statute of Frauds does not apply because the transaction was completed; (C) The defense is not a bar to the lawsuit because it is not applicable to the issue of the case; (D) The defense does not bar the lawsuit unless the seller can show actual damages exceeding $100
C) A material fact must be disclosed, period. The fact that the contract was oral and not written, is not a defense for failure to disclose a material fact.
Which of the following statements is true with respect to options: An option is: (A) Valid without consideration; (B) Valid if the consideration is exactly $10, but not delivered; (C) Valid if consideration is delivered, even if it is less than $10; (D) Not valid if the delivered consideration is less than $10
C) An option is valid when consideration, no matter how small, is delivered to the optionor.
Mr. Smith died in an accident on January 15, 1999. The broker insisted that a son, who inherited the property, sell to a buyer who had made an offer that Mr. Smith had been considering. Under these circumstance: (A) Inasmuch as the estate of a deceased person is liable for all contracts entered into by that person before death, the son must complete the sale; (B) Inasmuch as the estate of the decedent is liable for all contracts entered into by the decedent, if the son refuses to complete the transaction and sell the property, he will owe the broker a full commission; (C) The contract was terminated by the death of the seller, and the son has no obligation to sell, or to pay a commission; (D) The listing is binding upon the heirs of the deceased, and the son would have to present the offer to the probate court, and if it were approved, complete the sale
C) Death cancels a listing agreement. Mr. Smith had not accepted an offer, so there is no obligation on the part of the son to continue with any sale.
An owner of a single-family residence is planning to sell the residence and wishes to obtain an FHA appraisal to permit selling with FHA financing. In order to do this, the owner should go through the process of: (A) Contacting an FHA office and arranging for an appraisal of the property; (B) Having a lender apply for a firm commitment; (C) Having a lender apply for a conditional commitment; (D) Submitting a recent appraisal of his home to FHA
C) FHA does not lend money, it insures mortgages. A lender will only give a conditional commitment until all the terms are met.
Mr. Peter Rogers is seeking and FHA loan. Mr. Rogers will be evaluated in relation to: (A) Marital status; (B) The repayment period; (C) Credit characteristics; (D) The age of the house and total square footage of the lot on which it rests
C) FHA evaluates potential borrowers according to their credit characteristics, just as any other lender would. Note: FHA does not lend money. The borrower qualifies according to lender standards and FHA insures the loan.
An offer on a listed property was accepted and the acceptance was communicated to the buyer. However, before going to escrow, the seller found a buyer who was willing to pay all cash and notified the broker that the original deal was rescinded: (A) The buyer must be refunded the amount of the deposit, but he has no further claim or right against the seller; (B) The broker would not be entitled to compensation since escrow had not opened and the transaction had not closed; (C) The broker has good legal basis for a commission claim; (D) The broker could probably void the truncation which the seller made with the all-cash buyer
C) Once the seller accepted the offer, the seller owed the broker the commission. The broker did what he was hired to do.
Personal property is easily distinguished from real property by its: (A) Lower unit value; (B) Multiplicity of use; (C) Mobility; (D) Greater variety
C) Personal property is moveable; real property is immovable.
"Zero interest mortgages" are loans where the borrower makes a large cash down payment and the balance is paid off in equal monthly payments over a short period of time, usually five years with no interest. This type of loan can be handled by the borrower in which of the follow ways for federal income tax purposes: (A) The borrower cannot take a deduction for interest since no interest was paid; (B) A percentage of interest which is less than the treasury minimum interest rate may be used; (C) Although no interest is paid, a portion of each payment can be treated as deductible as interest under the imputed rule of interest; (D) The borrower may take a deduction for interest for the prevailing rate in the year of the income tax filing
C) Statement of fact.
Assume that a broker had assured an owner that he was signing an exclusive agency listing, when in fact he was signing and exclusive right to sell listing. Which of the following is true: (A) The broker would receive a larger commission; (B) If the owner sold the property during the listing period, he would owe the commission to the broker; (C) The broker would be subject to disciplinary action because he misrepresented a material fact; (D) The owner should have known what he was signing
C) Statement of fact.
The Federal Truth-in-Lending Law defines the annual percentage rate which is charged on a real estate loan. It is the: (A) Total of all costs which the borrower must pay including taxes, closing costs and title fees; (B) The total of all direct costs of credit which the borrower must pay; (C) Relative cost of credit expressed in percentage terms; (D) Sum of all direct or indirect costs of credit which the borrower must pay
C) Statement of fact.
The National Housing Act which was passed in 1934 basically insures loans. It also had some secondary results. Which of the following is not one of these secondary results. (A) A method of valuing property and rating risks; (B) Investments in mortgages on a nationwide basis; (C) Maximum construction standards; (D) The planning of subdivisions
C) The National Housing Act set up FHA FHA set minimum housing standards, not maximum.
Usually points which are paid by a buyer and which qualify as interest are not deductible in the .year paid. Instead thew are considered prepaid interest and must de deduct d over the term of the loan. The exception to this rule that the IRS has, is when points are charged on a loan for the purchaser's principal residence, then they are deductible provided all but which of the following are true: (A) Charging points is an accepted business practice in the geographic area where the loan was made; (B) The loan is secured by the principal residence of the taxpayer; (C) The loah is made by a federally chartered lender; (D) The points which are charged on the loan are not greater than those usually imposed in the area
C) The loan does not have to be made by a federally chartered lender. The IRS rule would apply to any lender.
During an escrow, the seller found out that the buyer was the broker's brother-in-law. The seller could: (A) Cancel the transaction but would be liable for the commission; (B) Not cancel the transaction; (C) Cancel the transaction; (D) None of the above would apply
C) The owner could cancel the transaction because the broker failed to disclose a material fact. The fact that the broker is related to the buyer is considered a material fact which must be revealed to the seller.
Mr. and Mrs. Jones recorded a declaration of homestead on their California home. The following week, Mr. Jones' employer transferred him to another state, and they both left the state. The declaration of homestead is: (A) Abandoned because the Jones ceased to occupy the property; (B) Invalid because people who record a declaration of homestead must occupy the premises for at least 30 days; (C) Valid because the Jones occupied the premises at the time they recorded the declaration; (D) Transferred to the Jones' new home because once a declaration of homestead is recorded, it applies to each successive home that the declarant's occupy
C) The owner must live in the property at the time of recording a homestead. Moving out of the property does not abandon the homestead.
For a lender, which of the following is a disadvantage of a second trust deed: (A) The interest rate is lower than that of the first trust deed; (B) It gives no provision for notification if foreclosure proceedings are commenced upon the first trust deed; (C) The risk of the junior lien holder is higher; (D) It precludes the right to a deficiency judgment
C) The risk is always higher on a second trust deed. Remember, the holder of the first is paid first in a foreclosure. What is left is applied to the junior liens, based on their priority
A fire insurance policy for $4,000 was issued March 1, 1981, for three years at a premium of $316.80. What is the prorated value of the unused portion on November 16, 1981: (A) $233.20; (B) $121; (C) $242; (D) Insurance premiums are not prorated
C) This is a 3 year policy. 316.80 premium/ 36 months= 8.80 insurance per month From 1/3/81 to 11/16/81 = 8.5 months $8.80 ins. per month x 8.5 months= $74.80 used portion of insurance $316.80 - $74.80 = $242.00 refund on insurance policy
Which of the following is usually received by a veteran using the Cal Vet program when he completes making payments on his Cal Vet loan: (A) A reconveyance deed; (B) A trust deed; (C) A grant deed; (D) A satisfaction of mortgage
C) Title is held by the Department of Veterans Affairs during the' term of the land contract. When the veteran has completely paid off the land contract, he would receive a grant deed from the Department of Veterans Affairs. transferring title to the veteran.
A real estate broker negotiated the exchange of real property and represented both parties with their knowledge and consent. The principals agreed that the broker's commission would be a 30-acre parcel of land valued by an independent appraiser at $200 per acre. Two days after the escrow closed, the broker received an offer of $500 per acre for that land from a person with whom the broker had not previously dealt. The broker accepted the offer and sold the land for $25,000. Under these circumstances, the broker has: (A) Engaged in dishonest dealings; (B) Received a secret profit; (C) Failed to disclose material facts to the buyer of the land; (D) Apparently violated no moral or legal duty
D) The broker did nothing wrong in this situation. There is no indication the broker knew the property would bring a higher price than the professional appraiser stated.
Broker Amos is selling a property on which he holds an option. Broker Amos is under a legal obligation to inform the buyer that the broker is acting as: (A) A mortgagor; (B) A trustee; (C) An optionor; (D) A principal
D) The broker is a principal in this transactions as well as an agent. This must be revealed to the potential buyers.
When a broker sells a property on which he holds an option, he must inform the buyer that he is acting as: (A) An optionor; (B) A grantor; (C) An agent; (D) A principal
D) The broker is acting both as an agent and principal. This must be disclosed to a potential buyer.
Sanderson purchased a home in which he expects to live. As a part of the purchase price, he contracted for a first mortgage with a federal savings and loan association. Under the provisions of the Federal Truth-in-Lending Act, he may: (A) Have a right to cancel because the mortgage creates a lien against his property; (B) Not cancel because a federal savings and loan is exempt from the Act; (C) Cancel because all real estate loans are entitled to certain cancellation rights under the Act; (D) Not cancel because a first mortgage to finance the purchase of his home carries no right to cancel
D) There is no right under Truth-in-Lending to cancel when the loan is being originated for the purchase of the home. A right to cancel would exist when the loan is a refinance of the owner occupied residence.
In which of the following ways can a joint tenancy be created? By deed from: (A) Joint tenants to themselves and others as joint tenants; (B) Tenants in common to themselves as joint tenants; (C) A husband to himself and his wife as joint tenants; (D) All of the above
D) These are all ways in which a joint tenancy may be created.
A voidable contract is a contract that: (A) Was valid at the time that it was signed, but for some reason cannot be proved or sued upon by either or both parties; (B) Contains all of .the legal essentials that are required for its existence; (C) Has no legal effect because it really is not a contract; (D) Is valid and enforceable on its face, but may be rejected by one of the parties
D) This is a good definition of a voidable contract.
When two or more parties own property together as tenants in common: (A) Each owner's interest must be equal; (B) Each owner's interest may not be transferred by will or intestate distribution; (C) The last surviving owner would hold title to the property in severalty; (D) Each owner's interest may be conveyed separately
D) This is one of the characteristics of a tenancy in common. Each owner may transfer their interest separately. Their interest may also be willed. The owners do not have to have equal shares of interest
Which of the following is not essential to a valid deed: (A) Parties which are competent to convey and capable of receiving the property; (B) A granting clause; (C) It must be in writing; (D) It must be acknowledged
D) Acknowledgment is not required for a deed to be valid and to transfer title. It is required in order to get the deed recorded.
When homesteaded property is being sold under the direction of the court, the money is divided. Which of the following would have first priority: (A) The homestead claimant; (B) The satisfaction of the execution; (C) The trustee; (D) The discharge of prior encumbrances
D) All encumbrances filed before the homestead would be satisfied before the homestead exemption. Remember, the homestead protects the owner only against judgment liens filed after the homestead
Which of the following is responsible to his employer for his results only: (A) Clerk; (B) Employee; (C) Servant; (D) Independent contractor
D) An independent contractor is responsible to his employer only for results.
You, as a salesperson, have a listing on a home for $31,000. The seller is willing to carry back a note and second trust deed. You find a buyer who has $4,000 cash and wants an FHA loan. You obtain a $24,000 FHA loan commitment. You should: (A) Write up an offer of $31,000 "subject to financing"; (B) Write up an offer of $31,000 "subject to purchaser obtaining a $31,000 FHA loan and executing a personal note to the seller for $3,000"; (C) Write up an offer of $31,000 "subject to the purchaser giving a $3,000 note payable to the seller secured by a second trust deed"; (D) Refuse to arrange a second trust deed over the FHA insured loan
D) FHA loans do not permit second trust deeds on the original purchase. You must refuse to arrange this loan.
The Federal Housing Administration (FHA) was created primarily to provide: (A) Depositors' insurance for funds in a federally-chartered bank; (B) A secondary market for real estate loans; (C) A consistent flow of money and credit in the economy; (D) Insurance for home loans by approved lenders
D) FHA was created to provide insurance for lenders willing to make FHA loans. FHA loans have very low downpayments and it is the insurance that entices lenders to make these loans.
Which of the following types of transactions would most frequently allow the real estate agent to collect a commission from more than one party: (A) Long-term open-end listings; (B) Business opportunity sales; (C) Short-term leases; (D) "Tax-free" exchanges
D) In a "tax-free" exchange the broker can collect a commission from both parties.
Interim construction loans are rarely made by: (A) State banks; (B) National banks; (C) Savings and Loan associations; (D) Life insurance companies
D) Life insurance companies will invest in real estate loans on existing properties; usually working through mortgage companies. They do not make construction loans. These are made primarily by commercial banks.
The broker who most qualifies for a commission is the broker who: (A) Has an Exclusive Right to Sell Listing; (B) Gets the seller's signature on the Offer to Purchase; (C) Has the signed Offer to Purchase by the buyer; (D) Communicates acceptance to the buyer
D) Neither broker may earn a commission until there is a valid contract between the seller and buyer. A contract is only created between seller and buyer when the buyer receives proper communication of the seller's acceptance. Therefore, the broker who has most likely earned the commission is the one who communicates acceptance to the buyer.
If the parties to the document have no other agreement, which of the following trust deeds would normally have priority: (A) The one which is executed and delivered first; (B) The one which is executed first; (C) A trust deed securing the payment of a construction loan; (D) The one recorded first
D) Priority is determined by the date and time of recording. The first trust deed is recorded first, the second trust deed is recorded second, etc.
An out-of-state broker refers a buyer to a California real estate broker, and a sale is consummated. If the California broker wishes to share the commission with the out-of-state broker: (A) This is against California Real Estate Law and therefore the broker could be disciplined; (B) This is considered unethical since this involves a kickback; (C) He must obtain the permission of the Real Estate Commissioner; (D) He may divide the commission with the out-of-state broker in any manner acceptable to them
D) Statement of fact.
Which of the following statements is true: (A) Points may only be deducted by the borrower and there are statutory maximums that they cannot exceed; (B) Points can always be deducted; (C) Points are only deductible if the lender refers to them as points and they are separately charged for specific services; (D) Whether or not points are deductible as interest depends upon what the charge covers
D) Statement of fact.
An agent sells a piece of property and negotiates a first loan from a bank and a second loan by the seller. The agent has been asked to record a "Request for Notice of Default." This is usually done for the protection of the: (A) Beneficiary of the bank loan; (B) Trustee of the bank loan; (C) Truster of the second loan; (D) Beneficiary of the second loan
D) The "Request for Notice of Default" is filed for the protection of the beneficiary of the second trust deed. It requires the County Recorder to notify the beneficiary of the second when a "Notice of Default" is filed by the trustee on the first trust deed.
Broker Smith arranged a $7,000, 5-year second trust deed loan for Bates. The maximum percentage of the loan amount that Smith may charge Bates as a commission for negotiating the loan is: (A) 5%; (B) 6%; (C) 10%; (D) 15%
D) The Loan Broker Law regulates commission rates charged on first trust deeds under $30,000 and junior loans under $20,000. A $7,000 second trust deed is under this law. The broker may charged 15% if the loan is to run more than 3 years
Which of the following statements is false concerning equal opportunity housing: (A) The Civil Rights Act of 1968 applies to buyers of recreational properties; (B) Panic selling can occur only when the buyer is also a seller; (C) All prospects are entitled to information concerning availability of home financing; (D) White prospects do not need to be shown houses in racially transitional neighborhoods unless they ask to be shown these properties
B) Panic peddling occurs when a real estate broker convinces a seller that he should sell as a result of minorities buying property in the area in.which the seller owns property.
The Federal Fair Housing Law contains which of the following provisions: (A) A Code of Ethics which requires brokers to follow the "golden rule"; (B) A provision which allows all prospective buyers to be given the same opportunity to select among available houses without restriction because of race, color religion or national origin; (C) A provision that real estate licensees should not discriminate in the sale of any real estate; (D) A provision which provides for mortgage subsidy insurance on government loans
B Statement of fact.
If a real estate broker received a $400 check as a deposit with an offer on a Tuesday, and the seller is going to be out of town for the next week, the broker should: (A) Cash the check; (B) Put the deposit in his trust account by Friday; (C) Hold the check; (D) Return the check to the buyer until the seller returns
B) A broker must deposit the check in the trust account within 3 business days unless he has written authorization from buyer and seller as to alternate disposition.
Mr. and Mrs. Juan Perez sold their home to Jack Smith, using an agreement of sale contract. From a financing point of view, the Perez's relationship to Smith most closely resembles that of: (A) Landlord to tenant; (B) Beneficiary to truster; (C) Optionor to optionee; (D) Granter to grantee
B) A contract of sale is another name for a land contract. The Perez's are the lenders and Smith is a borrower, similar to Beneficiary to Truster
Actual fraud has been described as: (A) The suppression of that which is true by a person who has knowledge or belief of the fact; (B) The intentional and successful circumventing or cheating of another person; (C) A promise which has been made without any intention of performing; (D) All of the above
B) A person who is married prior to the age of 18 has legal capacity. The fact that a divorce occurs before the person reaches the age of 18 is irrelevant. Once Tom has legal capacity, he does not lose it
Thompson, a 16-year old divorcee, went to Broker Amos trying to list Thompson's portion of the community real property. Broker Amos can legally: (A) Accept the listing provided the commission is approved by a court of competent jurisdiction; (B) Accept the listing and agree to sell according to the instructions of Thompson; (C) Not accept the listing unless Thompson is declared emancipated by a court of competent jurisdiction; (D) Not accept the listing until Thompson is 18 years old
B) A person who is married prior to the age of 18 has legal capacity. The fact that a divorce occurs before the person reaches the age of 18 is irrelevant. Once Tom has legal capacity, he does not lose it
Assume that a man made out a grant deed naming his son as grantee for all of his real property. He gave the grant deed to a friend with the instructions to record it upon his death. Which of the following would probably defeat the deed: (A) Recordation; (B) Delivery; (C) Acknowledgment; (D) Consideration
B) Deeds must be delivered during the grantor's lifetime.
When an abstract of judgment for money is duly recorded, it creates which of the following types of liens: (A) Specific lien; (B) General lien; (C) Lis pendens; (D) Limited lien
B) Judgments are general liens. A judgment affects all property owned by the judgment debtor in the county in which the judgment is recorded.
Assume that a lawsuit has been filed under the 1968 Fair Housing Act or the 1866 Fair. Housing Act. Which of the following remedies is not available to the person who has. been denied equal housing opportunities: (A) Punitive money damages to insure nondiscrimination in the future; (B) Revocation or suspension of the license of the agent who was involved in the discrimination; (C) Money damages for expenses which have been incurred; (D) Money damages for insult and humiliation
B) Only the Department of Real Estate can suspend or revoke a real estate license.