California Principles Midterm Exam
1 . Which of the following sources would be the least satisfactory for obtaining a legal description of a parcel of real property? A. Deeds B. Preliminary title reports C. Escrow instructions D. Real property tax bills
1 . D Explanation: A real property tax bill usually identifies the property by the tax assessor's parcel number. While the bill may also include a legal description of the property, that's often an abbreviated description instead of the complete legal description.
10. A person was judicially declared incompetent and then was willed a parcel of real property by his brother. Can he take title to this property? A. He can accept title only if it is placed with a trustee B. He can accept title to real property that passes to him by will C. He cannot accept title because he is incompetent D. He can accept title to personal property but not real property
10. B Explanation: An incompetent person may not contract to purchase property, but may receive real or personal property by gift or will.
100. In which of the following ways are joint tenancy and community property similar? A. Both are limited to husband and wife B. Both require that the property be owned by no more than two parties C. Both involve equal ownership interests D. Both require the signature of all parties to sell any interest in the property
100. C Explanation: Each joint tenant must have an equal undivided interest in the joint tenancy property. Similarly, each spouse has an undivided 50% interest in the couple's community property.
11. Which of the following statements concerning estates is correct? A. A life estate is a leasehold estate B. An estate may be held with another estate in the same property C. Title to an estate must pass using a grant deed D. An estate always gives the right of immediate possession
11. B Explanation: A common example of two estates being held in the same property is when a landlord leases her property. The landlord (the owner) continues to have a freehold estate, while the tenant has a leasehold estate.
12. How many acres are in a property that is described as the "S 1/2 of the NW 1/4 of the NE 1/4 of the NE 1/4 of Section 23"? A. 5 B. 10 C. 20 D. 40
12. A Explanation: To solve this problem, start with the size of a section (640 acres) and work backwards. 640 ÷ 4 = 160. 160 ÷ 4 = 40. 40 ÷ 4 = 10. 10 ÷ 2 = 5.
13. A buyer consented to purchase a property, but his consent was induced by fraudulent statements made by the seller's broker. The buyer's purchase agreement would be: A. valid B. voidable C. void D. illegal
13. B Explanation: If a party is induced by fraud to enter into a contract, that contract is voidable. This means that the defrauded party may rescind the contract or proceed with it. The other party must abide by whichever decision the defrauded party makes.
14. A reversionary interest would be held by a: A. state government under the right of eminent domain B. mortgagee in the event of default by the borrower C. lessor under the terms of a lease D. person who gained title through adverse possession
14. C Explanation: A lessor (landlord) has a reversionary interest in the leased property. When the lease expires and the tenant vacates, the property will revert to the lessor.
15. A minor who owns property asks a broker to assist in the sale of the property. The broker may not accept a listing from the minor because: A. a minor is incapable of appointing an agent B. the minor may be able to disaffirm a real estate contract later C. a broker is incapable of a fiduciary relationship with a minor D. it is illegal for a minor to enter into any sort of contract
15. A Explanation: A minor may not appoint an agent because a minor does not have contractual capacity.
16. Which of the following is not a consideration in determining whether or not an item is a fixture? A. Relationship between parties B. Intention of annexor C. Manner of annexation D. Time of annexation
16. D Explanation: Time of annexation is not one of the fixture tests that courts apply. The tests include the relationship of the parties, intention of the annexor, and method of attachment (manner of annexation), along with adaptation of the item to the realty and written agreement.
17. If the owner of a large parcel of property plans to subdivide it, what is the minimum number of parcels that would make the project subject to the Subdivided Lands Law? A. Two B. Three C. Four D. Five
17. D Explanation: The Subdivided Lands Law applies to most residential subdivisions with five or more lots.
18. A lessee has all of the following, except: A. a less-than-freehold estate B. a leasehold estate C. a chattel real D. a freehold estate
18. D Explanation: A lessee (tenant) does not own or have title to the property, and therefore does not have a freehold estate. A lessee does have a leasehold (less-than-freehold) estate. And his lease is considered a chattel real, because it is personal property that's closely related to real property.
19. What document would be used to convey possessory rights without conveying ownership rights? A. License B. Mortgage C. Patent D. Sublease
19. D Explanation: A sublease is used to transfer possessory rights -- the right to possession of leased property -- to a subtenant; the subtenant does not have an ownership interest. Licenses and mortgages transfer neither possessory rights nor ownership rights, while patents convey both possessory rights and ownership rights. (A patent is a grant of land from the government to private owners.)
2. The land description method that makes reference to sections, townships, and ranges is the: A. government survey method B. recorded map method C. metes and bounds method D. Torrens system
2. A Explanation: The government survey method of land description identifies property by specifying its location in a particular section, township, and range.
20. A broker misrepresented his principal's property when showing it to a buyer. The actions of the broker may subject his principal to: A. rescission of the sale by the buyer B. court action for damages resulting from fraud C. civil liability for the broker's misrepresentations D. All of the above
20. D Explanation: A principal is liable for the actions of his agent when the agent is acting within the scope of his authority. Therefore, the principal could be subject to a civil suit for any damages that result from the fraudulent misrepresentation. The misrepresentation would also be grounds for rescission of the purchase agreement.
21. A salesperson working for a listing broker: A. owes fiduciary duties to the seller B. owes fiduciary duties to the buyer C. is limited by the terms of the power of attorney D. is not limited by the broker's scope of authority
21. A Explanation: A listing broker always represents the seller. A salesperson affiliated with the listing broker therefore also represents the seller and owes fiduciary duties to the seller. In a dual agency situation, the broker and the salesperson would also owe fiduciary duties to the buyer, but that would be in addition to the fiduciary duties they owed to the seller.
22. A neighborhood that was originally zoned to allow multiple-unit dwellings was rezoned to allow only single-family dwellings. What effect would this have on an already existing apartment building in the neighborhood? A. It would be in violation of the zoning laws B. It would have to be demolished immediately C. It would need to be issued a variance D. It could probably continue as a nonconforming use
22. D Explanation: The owner of the apartment building would probably be allowed to continue to operate the building as a nonconforming use.
23. A corporation may not hold title to a property as a joint tenant because: A. no corporation may hold title to real property B. it is prohibited by Securities and Exchange Commission regulations C. only a husband and wife may hold property in joint tenancy D. a corporation has a potentially perpetual existence
23. D Explanation: Corporations may not hold title in joint tenancy. Because a corporation has a potentially perpetual existence, the other co-owner(s) couldn't have a true right of survivorship.
24. Which of the following persons would be responsible to her employer for results only? A. Employee B. Independent contractor C. Principal D. Stockholder
24. B Explanation: An independent contractor is a person who sets her own schedule, works with little supervision, and is paid for each task accomplished, often by commission.
25. Adam leased a property from Casey for a five-year term. Casey died, at which point Adam found out that Casey had only a life estate in the property, with Casey's life as the measuring life. The lease is: A. valid for the remaining five years B. valid until invalidated by the executor of Casey's estate C. valid only during the life of Casey D. invalid since it is fraudulent and illegal to lease a life estate
25. C Explanation: A person with a life estate may lease the property to another person, but the lease is effective only until the end of the measuring life. At that point, the property will either revert back to the grantor or pass to a third party holding an estate in remainder.
26. Cities and counties regulate land use by limiting building size, lot size, and setbacks through: A. the Subdivided Lands Law B. zoning restrictions C. covenants, conditions, and restrictions D. community redevelopment agreements
26. B Explanation: City and county zoning ordinances typically include requirements concerning building height, lot size, and setbacks. (The Subdivided Lands Law is a state consumer disclosure law. CC&Rs are private, not public, restrictions.)
27. Chen gave his son a power of attorney to sell his house. Which of the following statements is false? A. The power of attorney must describe the property that will be conveyed B. Chen's son may legally deed the property to himself C. The attorney in fact may sign the name of his principal D. The attorney in fact may encumber the property with a deed of trust where another person is the beneficiary
27. B Explanation: An attorney in fact is not allowed to deed the principal's real property to himself.
28. Which of the following is a type of lien? A. An easement B. An attachment C. A restriction D. All of the above
28. B Explanation: An attachment lien may be imposed on a defendant's property during a lawsuit. Easements and private restrictions are nonfinancial encumbrances, not financial encumbrances (liens).
29. A builder submitted plans that included several minor deviations from the building standards required by local building codes. If the local building department decided this inconsistency did not constitute a health or safety hazard and permitted construction to continue, it would be known as a/an: A. exception B. variance C. infraction D. permit
29. B Explanation: An authorized departure from existing building codes or zoning rules is called a variance.
3. A ranch is 36 miles square. What is the number of townships contained in the ranch? A. 1 B. 6 C. 36 D. 1,296
3. C Explanation: A township is six miles on each side. Therefore, the ranch (which is 36 miles long on each side) is 6 townships wide and 6 townships high. Multiply 6 times 6 to find that the ranch contains 36 townships. Note: Miles square and square miles mean different things. 36 miles square means a square that is 36 by 36 miles. A square property that was only 36 square miles would be 6 miles square.
30. Ownership rights to a property are determined through which of the following legal actions? A. Quiet title B. Interdiction C. Declaratory relief D. Injunction
30. A Explanation: If several conflicting parties claim the ownership of a property, a quiet title action will result in a binding determination of who is the proper owner of the property.
31. Of the following, which is a means by which a person might gain title to real property? A. Riparian rights B. Accession C. Appurtenance D. Mortgage
31. B Explanation: A real property owner may gain title to additional property through accession, which is an addition to real property resulting from natural forces. A mortgage is a security instrument, not an instrument that conveys title.
32. Delia died leaving no known heirs. In her will, she left her real property to her friend Ed. However, at the time of Delia's death, Flora was in possession of the property under the terms of a one-year lease. The probate court then found that Delia's will had not been properly witnessed and was invalid. What happens to Delia's real property? A. It passes to Ed, since that was clearly Delia's intent B. It passes to Flora, since she is in possession C. It is immediately sold at a court auction D. It passes according to statutory provisions, overseen by a court of proper jurisdiction
32. D Explanation: Since there is no valid will, the property will be distributed according to the rules set forth in state statutes, under the supervision of the probate court. If no heirs of Delia can be located, the property will escheat to the state.
33. Proper acknowledgment of a deed may be taken by a notary public who is: A. the grantee of the deed B. a mortgagee in a mortgage being acknowledged C. the grantor of the deed D. an employee of the corporation that is the grantor, if he has no personal interest in the property
33. D Explanation: When a corporation is the grantor on a deed, the notary taking the acknowledgment may be an employee of the corporation, but the notary may not have a personal interest in the property and may not be a corporate officer.
34. When a document concerning title to real property is recorded, it gives all of the following except: A. constructive notice of the contents of the document B. constructive notice of the rights and interests conveyed in the document C. actual notice of the conveyance of title D. None of the above
34. C Explanation: Recording a document creates only constructive notice of a fact, not actual notice of it. Actual notice occurs when a person actually observes something for herself or is informed of it by someone else.
35. Tim has been judicially declared incompetent. His best friend then deeds him a parcel of real property. The deed is: A. invalid, as an incompetent grantee cannot take title to real property B. invalid, since the title must pass to Tim's guardian or conservator C. valid, since a grantee does not have to be legally competent to receive title D. valid only if placed in trust until such time that Tim is declared competent
35. C Explanation: A grantee only needs to be alive at the time of conveyance; he does not have to be legally competent.
36. Which would a court disregard in deciding whether an item of personal property has become real property? A. Agreement between the parties B. Permanence of annexation C. Cost of the item D. Relationship of the parties
36. C Explanation: Cost of the item is not a consideration in determining whether an item is a fixture.
37. Which of the following is not a necessary element in the formation of a contract? A. Offer B. Acceptance C. Performance D. Consideration
37. C Explanation: Performance is the desired result of a contract but is not a necessary element in the formation of a contract.
38. A lis pendens action is effective: A. during the time that an action is pending B. until the action is dismissed C. until a final judgment is rendered D. All of the above
38. D Explanation: A lis pendens remains effective as long as the court action is pending -- in other words, until the lawsuit is decided or dismissed.
39. Most real estate syndicates in California are organized as: A. corporations B. general partnerships C. limited partnerships D. real estate investment trusts
39. C Explanation: Limited partnerships are often used for real estate syndicates, since they don't have to have many investors and their investors are shielded from personal liability for the syndicate's debts. (A limited liability company has the same advantages, but that isn't one of the answer options listed.)
4. Which of the following is not considered to be appurtenant to land? A. Watercourses B. Fences C. Dwellings D. Trade fixtures
4. D Explanation: Trade fixtures (items installed by a tenant for use in a trade or business) are not appurtenant to land. The tenant is presumed to have installed them with the intention of removing them at the end of the lease, so they remain the tenant's personal property.
40. A tenant wants to sublease or assign a leased property. If the lease is silent on this issue, then the: A. property cannot be sublet or assigned B. property cannot be sublet or assigned without the landlord's permission C. tenant may go ahead and sublease or assign the property D. tenant may sublease the property but may not assign it
40. C Explanation: Unless the lease includes a provision prohibiting or restricting subleasing or assignment, a leasehold interest can be sublet or assigned without asking the landlord for permission to do so.
41. Which of the following statements regarding options is correct? A. If a lease containing an option to purchase is assigned, the option right will pass along with the lease B. An option creates a fiduciary relationship between optionor and optionee much like the relationship between agent and principal C. An optionor may give another option to a second optionee before the first option period expires D. An option is the same thing as a right of first refusal
41. A Explanation: As long as there isn't a provision prohibiting assignment of the option, assignment of a lease containing an option to purchase assigns the option along with the lease. An option creates a contractual relationship, but not a fiduciary relationship.
42. A broker took a listing that did not expressly authorize him to accept a deposit. When the broker found a prospective buyer, the buyer gave him a personal check as the deposit on the property. With regard to the deposit, the broker would be: A. agent to the buyer B. agent to the seller C. a dual agent D. agent to the escrow company
42. A Explanation: Since the seller did not expressly authorize it, in accepting the buyer's deposit the broker was acting as the buyer's agent. That agency extends only to the handling of the deposit, however.
43. Jaime sold his landlocked property, which had an easement appurtenant for access to the road. The deed he gave the buyer gave an adequate legal description of the property but did not mention the easement. The buyer: A. has a cloud on the title B. takes title without the easement but receives a new easement by necessity C. loses the easement to the servient tenement D. has the same right to the easement that Jaime did
43. D Explanation: An easement runs with the land and does not need to be specifically mentioned in a deed in order to be transferred with the rest of the property.
44. Which of the following easements runs with the land and is binding on all subsequent owners? A. Easement appurtenant B. Easement in gross C. Prescriptive easement D. Easement by implication
44. A Explanation: An easement that runs with the land, binding subsequent owners of the servient tenement for the benefit of subsequent owners of the dominant tenement, is called an easement appurtenant. Technically, all of these answer options can be considered correct, but easement appurtenant is the best answer.
45. Which of the following would be important in the process of filing a mechanic's lien? A. Notice of nonresponsibility B. Notice of completion C. Notice of cessation of labor D. All of the above
45. D Explanation: All three of these notices can be important in regard to filing a mechanic's lien.
46. A broker takes a listing. The seller accepts an offer from a buyer who's being represented by a salesperson who works for the listing broker. The broker is now classified as a: A. buyer's agent B. general agent C. dual agent D. subagent
46. C Explanation: If the buyer and the seller in a transaction are both represented by the same broker, or by different salespersons employed by the same broker (an in-house transaction), then the broker is a dual agent.
47. A prospective buyer submitted an offer to Broker Randolph that met the asking price. As Randolph was on his way out of the office to present the offer to the seller, one of Randolph's salespersons brought in another offer on the same property that was $5,000 less. Randolph should: A. inform the salesperson that the property already has sold on the seller's terms and conditions B. present the offers in the order they were received C. present the two offers at the same time D. present the second offer only if the first offer is turned down
47. C Explanation: An agent has a fiduciary duty to present all offers to the principal. The agent must present all offers promptly; it is up to the principal to decide which offer to accept.
48. When industrial space is rented, the landlord customarily promises that: A. the property is up to current code at the time of the lease B. the property was constructed according to code when it was built C. the property shall be in habitable condition D. the property shall be never be subject to condemnation
48. B Explanation: A landlord leasing industrial space customarily promises that the structures were built in compliance with the building codes that were in force at the time of construction. (The implied warranty of habitability applies to residential tenancies, not to commercial or industrial leases.)
49. The Alquist-Priolo Special Studies Zone Act requires a subdivider to disclose to potential purchasers: A. underground storage tanks B. location in a flood plain C. water quality reports D. earthquake fault lines
49. D Explanation: The Alquist-Priolo Act requires disclosure of known geologic hazards to potential purchasers.
5. When a title company issues an ALTA policy, it will extend the risk beyond that which is covered by a standard policy, to include all of the following, except: A. the rights of parties in possession B. unrecorded easements C. the effect of zoning regulations D. unrecorded mechanic's liens
5. C Explanation: Title insurance policies -- whether standard coverage, extended (ALTA) coverage, or some other type -- do not insure against losses caused by governmental actions, such as zoning changes.
50. Basic responsibility for zoning decisions lies with the: A. planning commission B. city engineer's office C. county assessor D. board of equalization
50. A Explanation: Most city and county governments have a planning commission that creates a general plan for the community. Zoning ordinances and other land use regulations implement the commission's general plan.
51. A vacant lot sold for $50,000, with the buyer assuming an existing $30,000 loan as part of this selling price. The documentary transfer tax rate is 55 cents per $500. How much would the documentary transfer tax on this transaction be? A. $88 B. $22 C. $33 D. $55
51. B Explanation: First, subtract the $30,000 loan amount from the $50,000 selling price to find that the owner received $20,000 in cash for the property. Divide $20,000 by $500 ($20,000 ÷ $500 = 40), and then multiply 40 by 55 cents (40 × $.55 = $22). Consideration in the form of a loan assumption isn't subject to the documentary transfer tax.
52. Which of the following is not a way through which an individual can acquire an interest in real property? A. Patent B. Escheat C. Prescription D. Accession
52. B Explanation: An individual can never receive title to property through escheat; only the state can. An individual may acquire an interest in property through a patent (a grant of land from the state), prescription (a method of obtaining an easement similar to adverse possession), or accession (through natural forces).
53. A grant deed is executed if it has been: A. signed by the grantor B. acknowledged C. delivered to the grantee D. recorded
53. A Explanation: Executed has two meanings. When referring to contractual obligations, it means that the contract has been fully performed. When referring to a document, it means that the document has been signed.
54. Which of the following statements regarding the power of eminent domain is true? A. The proposed use must be practical and just compensation must be paid B. The proposed use must be a public use and just compensation must be paid C. The proposed use must be practical and a public use D. The government must offer the property owner a property of comparable value and utility
54. B Explanation: The two basic constitutional requirements for condemnation are that: 1) the property must be taken for a public use, and 2) just compensation must be paid to the owner.
55. The government has the authority to enact zoning ordinances because these ordinances: A. maintain the quality of building construction B. promote the public health, safety, morals, and welfare C. prevent oversupply of certain types of uses D. encourage conformity within particular zones
55. B Explanation: Zoning ordinances are considered an exercise of the state's police power because they protect public health, safety, morals, and general welfare.
56. Who is generally responsible for the installation of the curbs, streets, and public utilities in a new subdivision? A. The developer B. City or county planning office C. Bonding companies serving the developer D. Improvement districts formed by lot purchasers
56. A Explanation: The developer is responsible for the installation of "off-site" improvements such as streets and curbs.
57. A mechanic's lien against real property may be filed by: A. contractors and subcontractors B. landscape architects C. suppliers of materials D. All of the above
57. D Explanation: A mechanic's lien may be filed by anyone who provides labor, materials, or professional services for the improvement of real property.
58. The police power is the power of the state to: A. regulate federal lands for the public good B. levy taxes C. enact and enforce laws to protect the safety, health, morals, and welfare of the public D. take private land
58. C Explanation: The police power is the state's power to adopt laws for protection of the public's health, safety, morals, and general welfare.
59. The Real Estate Commissioner has primary authority regarding new subdivisions that includes: A. drainage and sewage B. street layout C. financial arrangements necessary to complete improvements D. All of the above
59. C Explanation: The Subdivided Lands Law requires the Real Estate Commissioner to investigate the financial condition of a new subdivision and issue a public report if the subdivision properties are suitable for sale. (Drainage, sewers, and street layout are governed primarily by the Subdivision Map Act.)
6. The right to use and enjoy another person's property that falls short of an estate is a/an: A. easement B. leasehold C. deed D. devise
6. A Explanation: A nonpossessory right to use another person's property is an easement. (An estate, such as a leasehold, is a possessory interest.)
60. A possessory ownership right or interest in real property is a/an: A. lien B. encumbrance C. fixture D. estate
60. D Explanation: An estate is the right to possess and have exclusive use of real property.
61. Which of the following instances would not terminate an offer to purchase real property? A. Death or insanity of the offeror B. The offeror revokes the offer after the offeree has accepted the offer C. The offeree does not respond to the offer before a deadline for acceptance D. The offeree makes a counteroffer
61. B Explanation: If the offeror revokes the offer after the offeree has communicated his acceptance of the offer, then the offeror is too late. A binding contract was formed when acceptance was communicated.
62. Which of the following would not be considered real property? A. Rights to unextracted oil B. An easement appurtenant C. An uncultivated stand of trees D. A leasehold estate in a rental house
62. D Explanation: A leasehold estate is created by a lease, which is classified as personal property.
63. When a counteroffer is made: A. the offeree becomes the offeror B. the offeror is accepting the terms without modification C. the original offer is amended D. the offeree can later go back and accept the original offer
63. A Explanation: When a counteroffer is made, the original offer is terminated. The counteroffer is a new offer, and the offeree of the original offer is now the offeror of the counteroffer.
64. Alienation is most nearly the opposite of: A. abrogation B. acquisition C. acceleration D. amortization
64. B Explanation: Alienation -- in other words, transfer by will, gift, or sale -- is the opposite of acquisition.
65. A contract that is executory is a: A. binding written contract B. contract that contains a promise for a promise C. contract that has not yet been fully performed D. contract that has been fully performed
65. C Explanation: An executory contract is in the process of being performed. (An executed contract is one that has been completely performed.)
66. In some bilateral contracts, the parties exchange a promise for a promise. Each promise would be: A. partial performance B. an acceptance C. consideration for the contract D. a novation
66. C Explanation: Consideration for a contract can be anything of value, including a promise to do something in the future. In a bilateral contract where each party promises to do something, both of their promises serve as consideration for the contract.
67. How is the maximum commission rate a broker may charge established? A. It is set by the local multiple listing service B. It is mandated by the state Real Estate Law C. It must be within limits prescribed by real estate professional associations' ethical codes D. It is set by agreement between principal and broker
67. D Explanation: There are no legal limits on commission rates. They are determined by agreement between the broker and the principal.
68. On Thursday, Angie decided to accept Harry's counteroffer for the purchase of his house, signed the purchase agreement, and placed it in the mail. On Friday, Harry decided that he had asked too low a price for the house, and faxed Angie stating that the offer was withdrawn. On Saturday, Harry received her acceptance in the mail. Under the mailbox rule, which of the following is true? A. Harry withdrew his offer, so no contract is formed B. Harry did not withdraw his counteroffer in time, so a contract is formed C. Harry may not make a counteroffer D. Harry's withdrawal was ineffective since it was not in writing
68. B Explanation: Angie's acceptance was placed in the mail before Harry communicated his revocation of the counteroffer. Since the mailbox rule applies in California, this means that Angie's acceptance is effective and a binding contract is formed.
69. Before the seller's acceptance of an offer has been communicated to a buyer, the buyer may withdraw the offer: A. if the offer was not stated to be irrevocable B. if the offer was not scheduled to remain open until a particular date C. if the offer was not accompanied by a good faith deposit D. for any reason
69. D Explanation: Prior to the offeree's acceptance, an offeror may withdraw his offer at any time for any reason.
7. A seller accepted a proper offer in writing to purchase his property. He then refused to complete the transaction. If the buyer were to bring suit for failure to perform the contract, under the statute of limitations he would need to do so within: A. 1 year B. 2 years C. 3 years D. 4 years
7. D Explanation: In California, the statute of limitations for written contracts is four years. A lawsuit regarding breach of a written contract must be filed within this four-year period.
70. An attachment lien is good for: A. one year B. two years C. three years D. four years
70. C Explanation: An attachment lien is valid for three years. It may be renewed.
71. In which of the following circumstances would a deed always be void? A. A forged deed in the hands of a bona fide purchaser B. A deed signed by an incarcerated convict C. A deed signed by an unmarried person under age 18 D. A deed that is not supported by consideration
71. A Explanation: A forged deed is always void, even in the hands of a good faith purchaser. (A convict may convey property unless it would pose a threat to public safety. An unmarried person under 18 would ordinarily not be able to convey real property, but a person under 18 who has married and then divorced would be legally emancipated and thus have capacity. A deed does not require any consideration to be valid.)
72. A broker sells a used mobile home that is subject to registration requirements. The Department of Housing and Community Development must be notified within: A. 3 days B. 7 days C. 10 days D. 20 days
72. C Explanation: When a mobile home that's subject to registration requirements is sold, the Department of Housing and Community Development must be notified in writing within 10 days of the transaction.
73. Which of the following organizations is considered to be an artificial person? A. Joint venture B. Corporation C. Partnership D. All of the above
73. B Explanation: A corporation is an artificial person, a legal entity that can enter into contracts and own property.
74. Title will be delivered on a different day than the day the buyer plans to take possession on. The parties should use a/an: A. interim occupancy agreement B. quitclaim deed C. assignment of rents D. option agreement
74. A Explanation: If the buyer will be taking possession before closing or the seller will remain in possession after closing, the parties should sign an interim occupancy agreement for that period.
75. A broker is working under an open listing. When prospective buyers are shown the property, the broker should: A. withhold disclosure of latent defects B. notify the multiple listing service C. require each prospect to sign an agreement to pay a commission if they purchase the property D. notify the seller of the prospects' names
75. D Explanation: Under an open listing, the broker must be the procuring cause of the sale in order to be entitled to a commission; and the seller may have given open listings to other brokers as well. If each broker gives the seller the names of the prospects he or she brought to the property, the seller will be able to determine which broker was the procuring cause if the property is sold to one of those prospects.
76. A seller accepted an offer on a property and communicated her acceptance to the buyer. However, before the deal went to escrow, the seller received a second, all-cash offer. The seller rescinded the first acceptance in order to accept the second offer. A court would find that: A. the broker is not entitled to compensation since the transaction did not go to escrow B. the buyer is entitled to return of the good faith deposit but has no further claim against the seller C. the acceptance of the second offer was void because a contract for the sale of the property already existed D. the broker was entitled to a commission as soon as the first offer was accepted
76. D Explanation: The broker was entitled to a commission as soon as the seller accepted the first offer, and is still entitled to it even though the sale didn't close. Note: A seller can form a valid contract to sell something that she's already agreed to sell to someone else; the second contract isn't void (unless one of the essential contract elements is missing). However, the seller will have to breach one of the contracts and accept the consequences.
77. If a broker is authorized through an agency agreement to negotiate a sale of property, but the seller strikes the portion of the listing form that provides for the authority to accept a buyer's deposit, then the broker: A. is therefore implicitly authorized to accept a buyer's deposit B. may accept a buyer's deposit but becomes the buyer's agent in regard to the deposit C. will violate the Real Estate Law if he accepts a buyer's deposit without the express authority to do so D. must be given express permission by the seller before being able to accept the buyer's deposit
77. B Explanation: A broker who has not been authorized to accept deposits on the seller's behalf may still accept a buyer's deposit, but that will make the broker the buyer's agent in regard to the deposit.
78. Which of the following is a requirement for a tenancy in common relationship to exist? A. The tenants in common must have the right of survivorship B. Each tenant in common must have an equal interest C. There must be unity of possession D. Each tenant must take title to the property at the same time
78. C Explanation: Co-owners, including tenants in common, have undivided interests. That means each tenant in common has the right to the use and possession of the entire property. This is called unity of possession.
79. A land contract was recorded by the seller. The buyer defaulted on the payments. If a quitclaim deed were to be used in order to clear the cloud from the title, it would be executed by: A. the buyer B. the seller C. both the buyer and the seller D. the lender
79. A Explanation: A quitclaim deed signed by the buyer (the vendee), in which he releases his interest in the property to the seller (the vendor), would be recorded by the seller in order to clear away the cloud on title created by the recorded contract.
8. A city passes a bond issue to improve streets in a particular neighborhood. The properties in that area will be burdened: A. according to the value of the property B. according to the size of the lot C. in proportion to the benefits that the land will receive D. identically
8. C Explanation: While general real estate taxes are levied based on the value of the taxed properties, special assessments are levied according to the amount each property will benefit from the improvement.
80. The payment of a commission to a real estate broker based only on an oral listing is: A. illegal B. contrary to public policy C. permissible if the seller elects to do so D. prohibited by the Commissioner's regulations
80. C Explanation: Ordinarily, a listing must be based on a written employment agreement to be enforceable. However, even though a seller isn't legally required to pay a broker's commission if there is only an oral listing, the seller may still choose to pay the broker.
81. A seller's agent owes which of the following duties to the buyer? A. The duty of confidentiality B. Only the duty to disclose latent defects C. The duty of honesty and good faith D. All of the same fiduciary duties
81. C Explanation: A seller's agent owes the buyer a duty of good faith and fair dealing. This encompasses not only disclosure of latent defects, but honesty in all dealings with the buyer.
82. With a purchase agreement, the date of formation of the contract is: A. when acceptance is communicated to the offeror B. the date the contract is prepared C. the date the buyer signs D. the date the offer is made
82. A Explanation: A contract is considered to be formed on the date that the offeree communicates acceptance to the offeror.
83. A buyer and seller of a house initialed a liquidated damages provision in a standard residential purchase agreement. The buyer defaulted. The damages money will usually be: A. divided equally between seller and listing agent B. limited to 5% of purchase price C. retained entirely by the seller D. returned to the buyer, less any seller's expenses
83. A Explanation: When a buyer defaults and the good faith deposit is treated as liquidated damages, the money is customarily divided between the seller and the listing agent, since the listing agent won't be collecting a commission from the transaction. (This arrangement is usually provided for in the listing agreement.)
84. Which of the following methods would create an easement that would be easiest to terminate for nonuse? A. Express reservation B. Implication C. Prescription D. Quitclaim deed
84. C Explanation: Easements created by prescription terminate automatically after only five years of nonuse. With easements created by other methods, the servient tenant can file a lawsuit asking a court to declare the easement terminated due to nonuse, but only after the dominant tenant has failed to use the easement for 20 years.
85. Broker Stevens listed a property. Broker Yamasaki located a buyer for the property. Under a unilateral offer of subagency, Yamasaki would be a/an: A. buyer's agent B. inadvertent dual agent C. agent of Broker Stevens D. dual agent
85. C Explanation: If a listing contains a provision known as a unilateral offer of subagency, a cooperating agent who locates a buyer is an agent of the listing broker and therefore a subagent of the seller.
86. What is the most common way for a corporation to generate additional funds? A. Sell common stock B. Authorize preferred stock C. Order a bond issue D. Take on additional limited partners
86. A Explanation: A corporation customarily raises funds to operate and expand its business by selling shares of its common stock to investors.
87. How do riparian rights differ from littoral rights? A. Riparian rights are associated with water; littoral rights are associated with land B. Riparian rights are only use rights; littoral rights are possessory rights C. Riparian rights relate to streams and rivers; littoral rights relate to lakes and oceans D. Riparian rights are appurtenant to the land; littoral rights are not
87. C Explanation: Riparian rights involve water that is flowing in a defined channel, such as a river. Littoral rights involve standing bodies of water, such as lakes and oceans.
88. Who would be in the weakest position to protect himself against a loss of property to another claimant? A. A holder of a recorded deed who rents the property out B. A holder of an unrecorded deed who occupies the property C. A holder of a certificate of title issued by a title company D. A holder of an unrecorded quitclaim deed who does not occupy the property
88. D Explanation: Recording a deed and taking possession of property both provide notice of an interest in the property. Without either of those, the grantee could lose title to a subsequent good faith purchaser who didn't have actual notice of the grantee's interest.
89. Leo purchased a mobile home, which is now located in a mobile home park and properly registered. He wants to hire a broker to list the home. Which of the following is true? A. A broker could not list it since the land is not being sold with it B. A broker could not sell it without a mobile home sales permit from the DMV C. A broker could arrange a sale of the home and a sublease of the land D. A broker could list the mobile home only if it has been registered for more than one year
89. C Explanation: A real estate licensee may list a registered mobile home even if it is not permanently attached to real property.
9. Al willed his property to his three children (Barry, Chris, and Dara) as joint tenants. Barry then died, leaving behind a will stating that his share of the property would pass to his daughter Mary. Dara then sold her portion of the property to her friend Vera. At this point, how is the property owned? A. Mary and Chris own it as joint tenants B. Vera and Chris own it as tenants in common C. Mary, Vera, and Chris own it as tenants in common D. Mary and Chris own their shares as joint tenants, while Vera owns her share as a tenant in common
9. B Explanation: When Barry died, his attempt to pass his share to Mary failed. A joint tenant may not will his interest. Therefore, Chris and Dara were left as joint tenants. When Dara sold her share of the property, that terminated the joint tenancy between Dara and Chris. Chris and Vera continue to own the property together, but as tenants in common.
90. An appurtenant easement is: A. a possessory interest in another person's land B. a right held by condominium owners to use property owned in common C. an interest in land capable of being transferred by the owner of the easement D. incapable of being sold because it is intangible
90. C Explanation: An easement appurtenant runs with the land; when the dominant tenement is sold, the easement is transferred along with the rest of the property. An easement is a nonpossessory interest in someone else's land, not a possessory interest.
91. On March 1, Craig paid $100 for a 60-day option to purchase a property. The option stated, "Upon exercise of option, optionee is to purchase within 30 days." On March 15, he sold and assigned the option to Sharon for $10,000. On April 20, Sharon informed the seller that she intended to purchase the property on May 15. What is the status of the option? A. Valid, since an option may be assigned, but Sharon will need to purchase the property before April 30 B. Valid, since Sharon will purchase within 30 days after the exercise of the option C. Invalid, since an option may not be assigned D. Invalid, since the purchase date will be after the option has expired
91. B Explanation: The assignment of the option is valid. Sharon's proposed purchase is also valid, since it complies with the clause requiring purchase within 30 days of exercising the option, and the option was exercised within the stated option period.
92. A buyer's agent has a fiduciary duty to: A. advise the buyer on how best to take title B. use utmost care when dealing with the buyer C. instruct the buyer which title insurance company to use D. disclose to the seller the maximum the buyer will pay for the property
92. B Explanation: Among the fiduciary duties that an agent owes to her principal is the duty to use utmost care in carrying out her work. An agent may not advise a principal on legal issues such as how to take title; legal issues should be referred to an attorney at law.
93. A farm was sold where a field of corn was growing; there was no discussion between buyer and seller as to who would own the corn. If there was a dispute as to who could harvest the corn, a court would find: A. the corn is real property, so the buyer is entitled to it B. the seller receives the corn because it has been constructively severed from the land C. the seller may return to harvest the corn under the doctrine of emblements D. the seller may harvest the corn because his intention is the controlling factor
93. A Explanation: The corn plants are natural attachments, which are considered part of the real property. Because there was no separate agreement, the corn passes with the rest of the real property to the buyer. The doctrine of emblements can't apply here; it applies only when farmland has been leased.
94. The Springers hired a contractor to build a swimming pool for their house. If the Springers did not pay for the construction and the contractor filed a lien, the resulting encumbrance would be a: A. general lien B. specific lien C. voluntary lien D. None of the above
94. B Explanation: Mechanic's liens attach only to the property for which labor or materials were provided, so they are classified as specific liens. And since they attach without the owner's consent, they are involuntary liens, not voluntary liens.
95. Barry hired Broker Teri to find a warehouse to lease. Carrie hired Teri to find a lessee for her warehouse. Each party agreed to pay Teri a commission. Teri negotiated a lease between the two parties. Barry knew Teri also represented Carrie, but Carrie didn't know that Teri represented Barry. Which of the following is correct? A. Barry and Carrie are both liable for commissions B. Barry is liable for a commission C. Carrie is liable for a commission D. Neither party may be liable for a commission
95. D Explanation: The situation described is an undisclosed dual agency. Although one party knew of the arrangement, to be legal both parties must know of and consent to the dual agency. If a dual agency is undisclosed, neither party may have to pay the commission.
96. How can a homestead recorded under California law be invalidated? A. Destruction of the improvements on the property by fire B. A declaration of homestead is filed on another property C. Moving to another property D. Moving to another state
96. B Explanation: A property's status as a homestead is terminated if the owner sells the property, records a declaration of homestead for a new property, or records a declaration of abandonment. Simply moving away does not terminate the declaration of homestead, as long as the homesteader continues to own the property.
97. Broker Arbogast had an open listing on a residential property. He verbally agreed to pay one-half of any commission to Broker Bates if Bates found a buyer. Bates succeeded in arranging a sale of the property, but Arbogast refused to pay half of his commission to Bates. How would a court decide this case? A. Bates would not be able to collect because of the open listing B. Bates would not be able to collect because verbal commission split agreements are unenforceable C. The matter would be referred to the Real Estate Commissioner for arbitration D. Bates would be able to file a civil action and collect his commission
97. D Explanation: Based on the facts given, Bates would be legally entitled to half of the commission. A commission split is a customary arrangement, and this type of agreement between brokers does not have to be in writing. The fact that this was an open listing would have no effect on Bates's eligibility to share the commission.
98. An agent fails to do a visual inspection of a house as required by law. How many years after occupying the property can the buyer bring an action against the agent for failure to inspect the property? A. One year B. Two years C. Five years D. Seven years
98. B Explanation: A buyer has two years from the date of possession to bring legal action against an agent for failure to perform the required visual inspection.
99. If an owner obtains riparian rights to a property: A. he may take as much water from the stream as he likes B. he may use the water only with a government permit C. he has absolute ownership of the stream D. the riparian rights apply only to the property that is adjacent to the stream and that is located within the watershed
99. D Explanation: Riparian rights apply only to the property adjacent to the body of flowing water. Properties that are not adjacent to the water may use the water only with a government permit.
