Real Estate 06

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4. Most buyer of real property select which of the following types of policies of title insurance: A. A standard policy; B. A leasehold policy to protect against the rights of tenants; C. A certificate of title; D. An ALTA policy.

(A) A standard policy is least expensive, and protects against most of the concerns that a buyer would have in purchasing the property.

14. After Mr. Gardner purchased his home, he discovered, by survey, that his neighbor's garage was three feet over on his newly acquired property. This disturbed him greatly. For remedy, if a friendly settlement cannot be reached, he should bring civil suit against: A. The broker, for failure to disclose the encroachment; B. His neighbor; C. The Real Estate Commissioner; D. The title company, for failure to show the encumbrance on the standard form title report.

(B) Only the neighbor could be sued. The broker, the Real Estate Commissioner, and the standard policy of title insurance would have no liability.

11. As used in real property law, which of the following is most nearly correct as a meaning for the word "tenancy": A. The landlordtenant relationship; B. The obstinacy of a holdover tenant; C. The mode or method of holding title to real property by a lessee or owner; D. None of the above.

(C) By definition, tenancy is the method or mode of holding title.

20. When a governmental body takes private real property for necessary public use, certain legal processes must be followed. Such a taking is an exercise of the right of: A. Police power; B. Escheat; C. Eminent domain; D. None of the above.

(C) Eminent domain is the right of governmental (and quasigovernmental) bodies to acquire private property for necessary public use. Fair compensation must be paid to the owner of that property.

14. Which of the following is regarded as a personal property interest: A. All buildings erected on a parcel; B. A stand of virgin timber; C. Leasehold estates in real property; D. Rights to the unextracted minerals.

(C) Leasehold estates in real property are regarded as personal property, and laws governing personal property apply. Each of the other three items listed is a real property interest.

25. Life insurance companies, not willing to deal directly with mortgagors/trustors, usually pay a loan servicing and preparation fee and make real estate mortgage loans to purchase indirectly through: A. FHA or VA; B. Saving and loan associations; C. Mortgage companies; D. Any of the above.

(C) Life insurance companies usually work through mortgage companies for the making and placing of individual home loans and pay the mortgage companies a loan preparation and servicing fee for their efforts.

8. Mrs. Smith held a life estate in a singlefamily residence. The estate was based upon her own life, She leased the residence to Mr. Jones for a fiveyear period, but died a few weeks after the lease began. The lease was: A. Invalid on its face, because the holder of a life estate does not have the right to lease the property; B. Valid for the remaining term of the lease; C. Valid only during the life of the lessor; D. Valid only if Mr. Jones was unaware of the life estate when the life estate when the lease was created.

(C) The holder of a life estate has rights in the property only as long as the designated life exists. Upon the death of Mrs. Smith, her rights, and any lease based on those rights, would automatically terminate.

24. An acknowledgment may be taken by a notary public who is: A. The grantee in a deed which is being acknowledged; B. The mortgagee in a mortgage being acknowledged; C. An employee of a corporation who has executed an instrument being acknowledged, if he is not personally interested; D. The grantor in a deed being acknowledged.

(C) The notary public who takes the acknowledgment cannot be an interested person in the transaction. The grantee and the grantor in a deed would be interested parties, and the mortgagee in a mortgage would be and interested party

2. If an owner wanted to sell his property, extending credit himself, and retain the legal title, the instrument used would be: A. A security agreement; B. A mortgage; C. A real property installment/conditional sales contract; D. A bailment.

(C) This is another name for a land contract, and under a land contract, the seller of the property retains the title and provides the credit to the buyer, giving the buyer the use and possession of the property and "equitable title."

17. The right to foreclose a trust deed, under a trustee's power of sale, outlaws: A. In four years; B. In three years; C. In two years; D. Never.

(D) A trust deed is not a contract but, rather, a conveyance of the naked legal title with the power of sale from the trustor to the trustee. Therefore, the trustee retains the right to sell the property under the trust deed at any time for the benefit of the beneficiary. The conveyance has been performed and, thus, is not under the Statute of Limitations; therefore, it never "outlaws."

2. The primary purpose of a city's master plan is to indicate existing and future: A. Commercial, industrial and residential districts; B. Public streets and highways; C. Seismic safety; D. All of the above.

(D) All of the features listed would be included in a city's master plan.

13. What is the meaning of a quiet title action: A. Purchasing property through a dummy transaction; B. An action to quiet a noisy tenant; C. Foreclosure action; D. Court action to remove a cloud on the title.

(D) Quiet title action is a court suit used to remove conditions affecting the title.

14. If a broker presents an offer to purchase real property for the listed price from a ready, willing, and able black buyer, and the offer is refused by the seller because of the buyer's race, the broker may: A. Sue the seller for his commission; B. Advise the black buyer of his right to complain to the United States Department of Housing and Urban Development; C. Warn the seller that his refusal is a violation of the Fair Housing Act of 1968; D. Do all of the above.

(D) Since this is a violation of the Federal Fair Housing Laws, the broker may do all of the above.

8. When property is being purchased under the California Veterans Farm and Home Purchase Plan, title is held by the: A. Veteran; B. Trustee; C. Veterans Administration; D. Department of Veteran's Affairs.

(D) The Department of Veterans Affairs of the state of California holds the title to the property and is selling the property to the veteran with an installment/conditional sales contract.

6. It is proper business practice for real property managers to be compensated in all of the following ways, except by a: A. Percentage of gross receipts; B. commission on new leases; C. Commission on major repairs or alterations; D. All of the above conditions exist.

(D) The Institute of Real Estate Management (IREM) recommends that property managers refrain from taking discounts or commissions arising out of purchases, contracts, or other expenditures of clients' funds, unless such income is fully disclosed to the property owner and accepted with his permission.

21. Property is being sold whereby the purchaser is to continue the payments of an existing amortized loan secured by a first mortgage. In order for the buyer to assume the existing mortgage without penalty, the real estate agent should check to be sure the mortgage does not include: A. An acceleration clause; B. A release clause; C. A subordination clause; D. A requit clause.

(A) If a loan has an acceleration clause that allows the lender to call the loan upon alienation of the title, then a buyer could not assume that loan.

18. Unpaid real property taxes constitute a lien: A. Prior to a mortgage lien; B. Concurrent with a mortgage lien; C. After a mortgage lien; D. None of the above.

(A) In California, real property taxes become a specific lien on the assessed property as of March 1st, preceding the current tax (fiscal) year. Tax liens take priority over all mortgage liens, regardless of date.

18. A husband, who owns separate property, dies without a will. Concerning that separate property, it would be distributed in which of the following ways: A. Onehalf to wife and onehalf to children; B. Onethird to wife and twothirds to more than one child; C. It would escheat to the state; D. It would be divided equally among his heirs.

(B) If there is no will, separate property is divided, onehalf to the wife and one half to an only child; or onethird to the wife and twothirds to more than one child.

25. A standard policy of title insurance protects the insured against: A. Defects known by the insured to exist at the date of the policy that are undisclosed to the insurance company; B. Lack of capacity of a party to any transaction involving title to the land; C. The power of eminent domain; D. Unrecorded easements.

(B) No insurance will cover choice "A" which represents fraud, nor choice "C" which is governmental regulations. Choice "D" is covered by extended coverage but not by a standard policy.

25. Smith executes a deed to Brown and records it. Later, Smith seeks to set the conveyance aside, claiming that there had been no delivery to Brown. Why will he probably be unsuccessful in his effort: A. Brown has come into possession of the property; B. Delivery is presumed with recording; C. The recording validates the deed; D. Recording establishes the priority of lien.

(B) Recording a deed presumes that it has been delivered and accepted voluntarily. Smith would need to prove in court that the presumption was false. Because Smith recorded the deed himself, it would be rather difficult to overcome the presumption of voluntary delivery and acceptance.

11. When Williams subdivided a 40acre parcel of land into 65 lots in 1955, he included the following in every deed: "The ownership, use, and/or occupancy of this property is limited to persons of the Caucasian race." This deed restriction is: A. Prohibited by local, state, and federal statutes and by rules and regulations of real estate commissioners in all states; B. Unenforceable because it violates the U.S. Constitution; C. Valid, but only as long as Williams lives; D. Enforceable as a privately imposed equitable servitude.

(B) Subdivision racial restrictions of this type have been found unenforceable as per a United States Supreme Court case, Shelly vs. Draemer, which is based on the Fourteenth Amendment to the United States Constitution. However, the deed is still valid but the restriction is not.

4. Under the Federal Truth-in-Lending Law, the cost of credit on certain loans is expressed as: A. A maximum percentage rate; B. An annual percentage rate; C. A minimum percentage rate; D. A monthly percentage rate.

(B) The Truth-in-Lending Law (Regulation Z) of the Federal Consumer Credit Protection Law, requires lenders to state interest rates in annual percentage rates (APR) to afford borrowers the opportunity to comparatively shop for money.

6. A young married couple purchased a lot and planned to build a home on it. They wanted someone to supervise and make sure their home was constructed according to plans and specifications. They should contact: A. An attorney; B. An appraiser; C. An architect; D. The local building inspector.

(C) An architect could supervise the construction. The local building inspector works for the city or county.

11. When acquiring an easement, which of the following methods would create an easement that could be most easily terminated for nonuse: A. Express reservation in a deed; B. A quitclaim deed from a valid owner; C. Prescription; D. Implication.

(C) An easement acquired by prescription may be terminated if not used for a continuous period of five years. The other methods of creating an easement do not offer that opportunity.

15. A dress factory is being built in an area. It will employ mostly women. The owner of real estate office told his employees to do the following: [1] direct their advertising to appeal to women who are married and have no children; [2] charge more rent to certain ethnic and religious groups than to others. Which of these instructions is in violation of the Fair Housing laws: A. [1] only; B. [2] only; C. Both [1] and [2]; D. Neither [1] nor [2].

(C) Both of these acts are in violation of the Fair Housing Laws.

7. "If you enter into an agreement to purchase or lease an interest in the land covered by the public report to which this notice is attached, you have a legal right to rescind (cancel) the agreement and have the return of any money or other consideration that you have given toward the purchase or lease until midnight of the fourteenth calendar day following the day you executed the contract to purchase or lease. you may exercise this right without giving any reason for your action and without incurring any penalty or obligation by notifying: __________" The preceding statement refers to the rescission rights to purchasers in: A. A standard subdivision; B. A condominium; C. A land project; D. None of the above.

(C) Buyers of property in a land project have a fourteenday right of rescission. It is the only type of subdivision that has this fourteenday rescission right.

13. Which of the following state agencies is empowered to prevent acts of discrimination in housing accommodations in California because of race, color, sex, national origin, or ancestry: A. Real Estate Commission; B. Labor Commission; C. Department of Fair Employment and Housing; D. Division of Housing.

(C) Complaints involving violations of the Fair Housing Laws are submitted to the Department of Fair Employment and Housing and are investigated by its staff members.

1. In making the decision of whether or not to issue a title policy, the title insurance company would be most concerned with those documents that appear within the: A. Title guarantee; B. Title report; C. Chain of title; D. Title search.

(C) Documents would be discovered during a title search. The documents which are most significant would appear within the chain of title.

3. Smith sold a home to Jones on a land contract and recorded the contract. Jones made a $25 down payment and after the sale, made a few of the required monthly payments. One night Jones moved out and abandoned the house. Which of the following is true? A. A buyer who later bought the property for cash would have no concern about Jones; B. A deficiency judgment could be obtained by Jones; C. There is a cloud on the title; D. The title is very marketable.

(C) If a land contract is recorded and the buyer later defaults on the purchase, then there is a cloud on the title that needs to be cleared off of the records before the next person buys the property.

5. A federal RESPA booklet and disclosures must be given a borrower by a real estate licensee when the federally related loan is a first lien and the money is used to: A. Purchase 30 or more acres of farmland; B. Build five or more residential units; C. Purchase one-to-four residential units; D. Add a room on to the borrower's residence.

(C) RESPA applies to the purchase of one-to-four residential units.

16. The agency of a real estate broker is usually established by: A. Employing contract; B. Estoppel or arbitration; C. Express contract; D. Ratification.

(C) The agency of a broker is usually created by means of a listing, which is an express contract. A listing is an employment contract, but this is a case of picking the "best" answer.

1. In computing the unspecified maturity date on a construction loan, the time for repayment of the loan starts running: A. From the date of first disbursement of funds; B. From the date of the note; C. When money is placed in escrow; D. According to the terms of the deposit receipt.

(C) The date the money is placed in escrow determines the maturity date on a construction loan.

4. Which of the following statements, if any, is correct concerning the relationship between an effective interest rate and a nominal interest rate: A. The effective rate is the rate the buyer will pay; the nominal rate is the rate named in the loan application; B. The effective interest rate is always lower because the nominal interest rate includes charges other than interest; C. The effective interest rate is the rate actually paid by the borrower for the use of the money; the nominal interest rate is the rate specified in the note; D. None of the above is correct.

(C) The nominal interest rate is the rate stated in the note; the effective interest rate is the rate actually paid, and usually is higher, because it includes points, etc

15. Which of the following is the purpose of the Federal TruthinLending Act: A. To limit interest rates; B. To regulate fees charged by lenders; C. To provide consumers information concerning the cost of credit; D. All of the above.

(C) The purpose of the Federal TruthinLending Act is to assure consumers that they are provided information on the cost of credit.

2. Cook gave Ford a power of attorney to sell his home. Which of the following statements is false: A. If a court ruled that Cook is incapable of contracting and Ford was notified, the power of attorney would be terminated; B. The power of attorney must be recorded before Ford may sell the home; C. Ford cannot convey the property if he discovers that the property is the subject of a declaration of homestead; D. If the selling price is equal to or exceeds the fair market value, Ford may legally deed the property to himself.

(D) An attorneyinfact may not purchase the property or mortgage it to himself, by law. In effect, it would be as if you tried to sell your property to yourself.

15. When the state has given permission to a nonriparian owner of a farm to use a nearby lake, the owner has received this right by: A. Eminent domain; B. Estoppel; C. Percolation; D. Appropriation.

(D) Appropriation is the giving of certain rights by a judicial or governmental body. Percolation is the ability of the soil to absorb and drain water (e.g., the ability of the ground to absorb septic tank effluents). Estoppel is a principle of law that bars people from asserting certain rights. Eminent domain is the right of the state to take property for public use.

19. Title to real property can be acquired by an individual by all of the following methods, except: A. Patent; B. Prescription; C. Succession; D. Escheat.

(D) Escheat is a reversion of property to the state when there is no one else competent to inherit. Succession is the acquisition of property upon the death of another. Legally, it is the transfer of title through intestate succession to the deceased person's heirs under the law of descent and distribution. In common usage, it also applies to property acquired by will (need not be related). A patent is a grant of some privilege, property, or authority, made by the government or sovereign of a country, to a private individual(s). Prescription is the acquisition of the title to an intangible, or not visible, interest in real or personal property.

17. A broker who solicits and accepts a deposit on the purchase price of a parcel of real property without express written authorization from the owner to sell the property, is: A. Guilty of violation of his fiduciary duty to the owner; B. Guilty of commingling a customer's funds with his own; C. Acting under a restricted listing; D. Acting as agent for the buyer and not the seller.

(D) For this act, he is the agent of the buyer. A broker is generally employed by the seller (i.e., seller's agent), but a broker can be employed by the buyer. In either case, a fiduciary relationship exists from the broker to "employer."

22. Broker Smith took a listing on commercial acreage and also received the right to purchase the property within 30 days. On the 28th day of the listing, the broker decided to buy the property. Before buying the property, he must: A. Disclose any outstanding offers; B. Give the owner any material information; C. Obtain written consent from the owner which acknowledges any profit or anticipated profit; D. All of the above.

(D) If an agent takes a listing and an option on the same property and wants to exercise the option, his responsibilities under the listing are greater than his responsibilities under the option since under the listing he is the agent and owes good faith and loyalty to his principal. Therefore, if he wanted to exercise the option, he would have to disclose any offers, reveal any material information, and obtain the written consent of the owner before he exercises that option.

9. Which of the following is not a characteristic of a fee simple title: A. It is real encumbrances; B. It is of indefinite duration; C. It is transferable with or without consideration; D. It is transferable by will or intestate.

(A) Fee simple title is of indefinite duration; it can be transferred with or without consideration and it is transferable by a will or by intestate succession. Encumbrances may be defined as anything which burdens or affects the title, such as easements, restrictions, encroachments (i.e., nonmoney encumbrances) or trust deeds, mortgages, judgments, etc. (i.e., money encumbrances).

23. Governmental land use, planning, and zoning are important examples of: A. Eminent domain; B. Police power; C. Deed restrictions; D. All of the above.

(B) Governmental bodies may control the use of private property in an effort to provide for the health, safety, morals, and the common welfare of the community. Such authority is police power, which is the broadest power of the government to regulate and control private property.

18. All of the following items are included as a finance charge required by the Federal TruthinLending Law (Regulation Z), except: A. Appraisal fee; B. Loan points; C. Time price differential; D. Finders' fee or similar charge.

(A) Appraisal fees and charges for a credit report are excluded from the costs which must be included in the finance charge.

2. Which of the following would be least necessary for a valid deed: A. Acknowledgment; B. Delivery; C. Proper description of the property; D. A grantee who is sufficiently identified, though not named in the deed.

(A) A deed does not need to be acknowledged in order to be valid. However, it does have to be acknowledged in order to be recorded. A deed must contain a proper description of the property and identify a grantee sufficiently (i.e., "to my oldest granddaughter") but it is not necessary to specify the grantee's name. In order to be effective, the deed must be delivered.

9. An acquired legal privilege for the right of use or enjoyment, short of an estate, which one may have in the land of another is known as: A. An easement; B. A lease; C. A devise; D. A riparian right.

(A) An easement is not an estate, but is a nonpossessory interest one has to use land belonging to another, whereas a lease (leasehold) is a personal interest in real property known as a lessthanfreehold estate (chattel real). A devise is the transfer of real property under a will. Riparian rights are natural water rights which pass automatically with the land.

17. Broker Knorr advertised in the newspaper that anyone who bought a property listed with the broker would receive a free microwave oven valued at $500. Such action is: A. Legal, provided full disclosure is made to all interested parties; B. Illegal under any circumstances; C. Legal, provided that only a chance to win the microwave in a drawing is actually given the buyer; D. Illegal, since the value of such a gift cannot exceed $100.

(A) Anything of value given to the buyer must be disclosed to all parties.

3. In the City of San Diego the local building code conflicts with the uniform building code. Which code would take precedence and for what reason: A. Whichever code imposes the higher standard of safety; B. The local building code because it is in an incorporated area; C. The uniform building code because state and federal laws always take precedence over local ordinances and codes; D. The local building code would prevail because, by definition, the uniform building code only addresses subjects which are not specifically covered by a local building code.

(A) In any conflict among zoning codes, building codes or deed restrictions, whichever is the most restrictive, i.e., providing the highest standards of safety, setbacks, building requirements, etc., will prevail.

1. Mr. Smith purchases a property from Mr. Jones for $12,000. The property is encumbered by a first trust deed of $7,000 and a second trust deed of $2,000. Mr. Smith pays $5,000 cash and agrees to assume the first trust deed. The documents that will be recorded, and the order of their recordation, are: A. Reconveyance of the second trust deed and then the grant deed; B. Grant deed and then the reconveyance of the first trust deed; C. Grant deed and then the reconveyance of the second trust deed; D. First trust deed and then the grant deed.

(A) Inasmuch as Mr. Smith is assuming the first trust deed only, the second trust deed must be pad of and reconveyed before the title is transferred. Therefore, the reconveyance of the second trust deed will take place, and then the recording of the grant deed will take place.

24. Which of the following would cause a grant deed to be invalid at its inception; A. Legal incompetence of the grantor; B. Failing to insert the clause "to his heirs and assigns' following the name of the grantee; C. It was signed and dated on a legal holiday; D. None of the above.

(A) One of the essential elements of a grant deed is the legal competence of the grantor. Lack of competence on the part of the grantor makes the deed invalid, but such incompetency can only be determined by a court.

15. Broker Jones had a listing to sell seller Smith's house. Broker Jones received an offer on the house and presented it to seller Smith who hesitated in accepting the offer. The broker promised Smith verbally to find Smith another suitable residence before escrow closed. On the basis of that, the seller accepted the offer. If broker Jones failed to perform during the time period, which of the following is most nearly correct? A. Seller Smith could initiate a civil suit and the broker would be responsible for damages; B. Since the promise was verbal, the broker has no liability; C. If Smith files a complaint, broker Jones may be liable for criminal negligence; D. Seller Smith may withdraw his acceptance of the offer without liability.

(A) Since the seller relied on the promise of the broker, the broker would be liable in civil court for breach of contract if he failed to perform. This is not one of the types of contracts which are required to be in writing by the Statute of Frauds.

19. According to the Seller Transfer Disclosure Act, a broker can: A. Visually inspect the property and reveal pertinent information; B. Inspect the common areas in a condominium; C. Inspect even the inaccessible areas and report his findings to the buyer and seller; D. Pay for the pest control company's inspection.

(A) The Seller Transfer Disclosure Act requires the broker make an inspection and reveal the results to the buyer. While the broker may have the right to do the other listed acts, the referenced law does not grant those rights.

7. In order to secure an FHA loan, a new buyer would normally do all of the following, except: A. Find a lender who will be willing to grant him the loan; B. Apply to the nearest office of the FHA for an appraisal; C. Agree to pay for mortgage insurance protection; D. Buy a home which meets the FHA requirements and restrictions.

(B) A buyer who wants to use FHA financing must find a lender who will grant him the loan, agree to pay for the mutual mortgage insurance, and buy a home which meets FHA requirements.

20. The Federal TruthinLending Law (Regulation Z) gives the borrower a 3day right of rescission when the loan is: A. A purchasemoney loan secured by a deed of trust on commercial property; B. A loan secured by a second deed of trust on owneroccupied singlefamily residence when the money is borrowed subsequent to the purchase; C. An FHA or VA loan to purchase a singlefamily, owneroccupied residence; D. A conventional purchasemoney loan secured by a deed of trust on residential property.

(B) A first trust deed loan used to purchase owneroccupied residential property generally does not include the 3day right of rescission.

5. A lien may be created by recording: A. A notice of nonresponsibility; B. A mortgage; C. An easement; D. A restriction.

(B) A mortgage is a lien. It's the legal right of disposition in the event of a default (i.e., breach) by the mortgagor.

23. When comparing a straight note with an installment note, the straight note: A. Will have equal annual principal reduction payments; B. Will have no principal payments during the term of the loan except on the last payment; C. Will have a total effective interest rate greater than if the loan were an installment loan; D. None of the above.

(B) A straight note is a promissory note in which there are no payments on the principal until the end of the loan. There may be payments on the interest during the term of the loan or the interest may be paid at the same time the principal is at the end of the loan. The rate of interest will not necessarily be greater.

21. Accretion would result in the acquisition of title to real land by which of the following: A. An adverse possessor; B. An owner who acquired land by natural causes; C. The county government following a condemnation action; D. None of the above.

(B) Accretion is the acquisition of title by virtue of its being added to other real property by natural causes, such as soil deposited by a river.

11. A contract between the seller of real property and a licensee, whereby the seller agrees to pay the licensee commission if he produces a "ready, willing, and able" buyer and the licensee agrees to use due diligence in procuring the buyer, is called: A. A unilateral executory contract; B. A bilateral Executory contract; C. A unilateral executed contract; D. A bilateral executed contract.

(B) Bilateral indicates that both parties are bound. Executory indicates that the contract is yet to be performed.

10. Which of the following rights of ownership in real property do individuals normally not have: A. Severance rights; B. Eminent domain rights; C. Riparian rights; D. Reliction rights.

(B) Eminent domain rights are those normally held by the various units of government (or quasigovernmental entities such as utilities).

13. Cassidy purchased one of 30 lots in subdivision and signed a sales contract which stated, "No purchaser of a lot in this subdivision shall erect a 'for sale' sign to sell his lot before the subdivider has sold all of his lots, he may: A. Not erect a 'for sale' sign because of the statement in the sales contract; B. Erect a 'for sale' sign of reasonable dimensions because the statement in the sales contract is declared by law to be void; C. Erect a 'for sale' sign of any dimension to get the best results because the statement in the sales contract is a restraint of trade; D. Not erect a 'for sale' sign without being held liable by the seller.

(B) The courts have held that prohibiting the use of a 'for sale' sign infringes upon the power of alienation which the owner of a property has; therefore, they have declared such an agreement void by law. However, the courts have further held that the 'for sale' sign must be of reasonable dimensions, which would vary with the courts and the size of the property.

23. Which of the following would least influence a lender in establishing the eligibility of a borrower: A. Wife's income; B. Overtime earnings of husband; C. Outstanding debts of the husband and wife; D. Size of the down payment.

(B) The overtime of a husband would least influence a lender when establishing the eligibility of the borrower, because there is no certainty that the overtime earnings will continue.

4. The basic responsibility for the zoning of real property lies with the: A. Assessor's office; B. Planning commission; C. Engineer's office; D. Board of Equalization.

(B) The planning commission is the one that bears primary responsibility for zoning.

22. An easement may be acquired by prescription in a manner similar to acquisition of land by: A. Eminent domain; B. Adverse possession; C. Both of the above; D. Neither of the above.

(B) The requirements for acquiring an easement by prescription are very similar to the requirements for acquiring land by adverse possession. However, in an easement by prescription, the acquiring party does not receive ownership of the property, but rather, only the use of the property.

7. When making a loan, amortization tables are used in order to determine the: A. Interest rate; B. Monthly payment; C. Term of the loan; D. APR.

(B) When a person uses an amortization table, he refers to the correct table for the right interest rate, finds the amount of the loan and the term of the loan, and those factors will tell him what the monthly payment is.

16. Income properties are considered attractive by equity investors for all of the following reasons, except: A. Accelerated depreciation can make a large part of the cash return tax free in the early years; B. A high degree of liquidity is characteristic of income properties; C. High "leveraging" is possible because of high loantovalue institutional first and junior financing; D. Tax deductible repairs and maintenance can be used to maintain the property in a marketable condition.

(B) When compared with other investments, real estate is not very liquid, as it takes a longer period of time to convert it into cash.

9. When a real estate agent acts exclusively as a buyer's agent, he can: A. Present offers directly to the seller; B. Present offers to the seller and seller's agent; C. Withhold negative information about the buyer from the seller; D. Act as agent of the seller when his commission is paid by the seller.

(B) When the licensee is the agent of the buyer, he should present all offers to the seller through the seller's agent.

23. A broker obtained a 6% listing on a selling price of $108,000. The seller incurred additional closing costs of $1,450. Based on the preceding information, the seller's total cost of sale would amount to: A. $10,750; B. $9,350; C. $7,930; D. $7,670.

(C) (1) $108,000 selling price x 6% broker's commission = $6,480 selling commission; (2) $6,480 commission + $1,450 closing cost = $7,930 expense of sale.

16. The inability of a corporation to qualify as a joint tenant in the ownership of property is due to the fact that: A. It is controlled by a board of directors; B. It can be domestic or foreign; C. It has perpetual existence; D. Only community property can be held in joint tenancy.

(C) A corporation usually does not die and, since the distinguishing characteristic of joint tenancy is the right of survivorship, it would be an unfair advantage for a corporation to hold title as a joint tenant. In almost all cases, because of its perpetual existence, the corporation would end up being the surviving person.

17. If a lien has been created by court action, and it covers all properties of the debtor in that county where it is recorded, it is known as a: A. Lis pendens; B. Specific lien; C. General lien; D. None of the above.

(C) A general lien covers any and all property of the debtor in the county where it is recorded. A lis pendens and a specific lien apply only to a specific property.

5. The owner of a duplex decides to sell each unit to different individuals. He structures the arrangement so that each owner would own his unit in fee and own the common areas of the structure and land in undivided joint ownership. His plan would probably be legally construed to be a: A. Lot split; B. Variance; C. Subdivision; D. Partition.

(C) A lot split would result in totally unrelated parcels; the variance would allow uses not permitted in the present zoning; partition would result to the division of formerly coowned property in which there were undivided interests. By elimination, "C" would be the correct answer.

19. Most lenders, when they are deciding whether or not to make a proposed real estate loan, try to minimize the: A. Overall net yield; B. Loantovalue ratio; C. Chance of a substandard loan becoming a part of their portfolio; D. The borrower's difficulties which may arise in the future, such as a divorce or death.

(C) A substandard loan is one that is more likely to go into default. A lender would try to reduce the possibility of any new loan being substandard.

14. If two parties want to create an enforceable broker-principal relationship concerning a right, title, or interest in real property, the most essential element to do so would be: A. Written authority for the broker to accept a deposit; B. A written offer to purchase; C. A written employment contract; D. An agreement concerning the commission.

(C) A written employment contract would be, of the items listed, most essential to create an enforceable contract.

9. A real estate broker presented an offer to a seller which met the terms of the listing. The offer was from a financially qualified black person. Later, his salesperson presented the seller an offer at a lower price from white prospects. The seller did not accept either offer, but instead, sold the property to a neighbor through the same salesperson. The neighbor wanted to buy the property so as to prevent a minority person moving into the neighborhood. Which of the following parties has not violated the Civil Rights Act of 1968? A. Seller; B. Neighbor; C. White prospects; D. Salesperson.

(C) The white prospective buyers who made an offer that was turned down have not violated the Federal Civil Rights Act. The neighbor has because he is attempting to prevent minorities from moving into the area, and the seller has because he has cooperated in the process in presenting that offer from the neighbor to the seller.

25. A buyer made an offer on a property but refused to give a $500 deposit to the broker, as specified in the listing. He agreed to give the broker $500 as deposit as soon as the seller accepted the offer. Which of the following should be written in the form: A. Buyer agrees to deposit $500 upon acceptance by the buyer; B. Broker to collect $500 from buyer on seller's acceptance; C. Buyer agrees to deposit $500 cash with the broker immediately upon seller's acceptance; D. This offer would be void since there was no consideration for the contract.

(C) This would be the best wording to place in the deposit receipt.

20. The gross rent multiplier is arrived at by dividing: A. Gross monthly rental by market value; B. Gross monthly rental by selling price; C. Sales price by gross monthly rental; D. Value arrived at by gross monthly rental.

(C) To determine the gross rent multiplier, the sales price is divided by the gross monthly rental.

3. Typically, when leasing real property, the commission of the leasing agent is based upon a percentage of: A. Total annual rent collected during the first year of the lease; B. Total cash paid by the lessee at the time of the negotiation of the lease; C. Total rent collected over the term of the lease; D. None of the above.

(C) Usually, the commission of a leasing agent is figured on the total rent to be collected over the term of the lease. The commission can be any amount negotiated and specified in the employment contract.

7. The conscious charging by a private lender of more than the maximum amount of interest allowed by law is known as: A. Penury; B. Leverage; C. Usury; D. Assemblage.

(C) Usury is defined as a conscious taking by a lender of more than the maximum amount of interest as allowed by law.

10. When loaning money to two or more coborrowers on a single promissory note, the lender would be best advised to increase the security on the note by inserting which of the following phrases after the names of the coborrowers: A. Personally and corporately; B. Together as individuals; C. Individually and severally; D. Jointly and severally.

(D) "Jointly and severally" would mean that the coborrowers were obligated both together and individually for the repayment.

22. A lender who refers to a loan as "seasoned" is referring to the: A. Quarter of the year in which the loan was made; B. Maturity date of the loan; C. Loan quality; D. Record of consistent payments on the loan.

(D) A "seasoned" loan exists when the payments on the loan have been made by the borrower when due, over a certain period of time, indicating the good faith of the borrower.

12. A landlord can evict a delinquent tenant by: A. Giving him three days notice; B. Giving him thirty days notice; C. Calling the sheriff; D. Bringing court action.

(D) A landlord must institute court action in order to evict a tenant, which is called an unlawful detainer action.

19. If a real estate licensee misrepresents a property to a buyer while he is acting as an agent, he may subject himself to: A. Disciplinary action by the licensing authority; B. Civil action; C. Criminal action; D. All of the above.

(D) A licensee is subject to three separate and distinct bodies of authority: (1) Real Estate Commissioner's Rules And Regulations; (2) California Civil Codes; (3) California Criminal/Penal Codes. Action under, or by, one or two authorities does not exempt the licensee from action by the other authorities. This is not double or triple jeopardy.

5. A real estate agent may legally represent all principals in the same transaction if: A. He has informed all principals that he is the agent for each principal; B. He has obtained consent of all to this agency relationship; C. He is collecting commission from each principal with the knowledge of the others; D. All of the above conditions exist.

(D) A real estate agent may only represent all principals in the same transaction if he has obtained their knowledge and consent. In this case, he could then collect a commission from all parties.

21. When the real estate market changes from a buyer's market to a seller's market, which of the following results could naturally be expected: A. Prices would probably drop because of the increased supply and reduced demand; B. Construction activity in new subdivisions would decline; C. Prices would be unaffected, since every parcel is unique; D. Prices would rise because of the increased demand and lagging supply.

(D) A seller's market indicates demand greater than supply.

6. Which would all be specific liens: A. Judgment lien, federal estate tax lien, corporation franchise tax lien; B. Federal income tax lien, attachment, surety bail bond lien; C. Vendor's lien, lien for a decedent's debts, vendee's lien; D. Mechanic's lien, property tax lien, mortgages and attachments.

(D) A specific lien applies to a specific parcel of property. The other answers all included at least one general lien.

8. A straight note A. May be used in a real estate transaction; B. Is a note providing that the principal owing is to be paid at one time; C. May be secured by a mortgage; D. May be any of the above.

(D) A straight note may be secured by a mortgage when it is used in a real estate transaction. It is also a note providing that the entire principal is to be paid at maturity of the loan.

24. A title company could make a title search by searching the records of the A. County clerk's office; B. County recorder's office; C. Federal land office; D. All of the above.

(D) All three offices could be searched by a title company when making a title search.

18. Seller Smith employed Broker Jones under an open listing. While Broker Jones was discussing Smith's property with Prospective Buyer Ford, the broker indicated that the roof was in good condition and did not leak. In fact, Seller Smith had instructed Broker Jones to explain to all prospective buyers that the roof was old and would have to be replaced. After purchasing the property, Buyer Thomas discovered a severe leak in the roof. The buyer, seeking relief, would most logically sue: A. The broker alone, for contract rescission; B. Both the broker and the seller, for specific performance; C. The broker alone, for damages for breach of warranty of authority; D. The seller and the broker, for damages and fraud.

(D) In the situation given, the injured buyer would in all likelihood bring a lawsuit against both the broker and the seller, due to the fact that under an agency relationship, the employing person is responsible for the acts of the agent. In reality, the seller would be entitled to file an additional suit against the broker for breach of the fiduciary relationship and fraudulent conduct.

10. Discrimination in the sale or rental of residential housing accommodations based on sex, marital status, color, religion, race or national origin of the prospective tenant or buyer, is: A. Unenforceable; B. Illegal; C. Contrary to public policy; D. All of the above.

(D) It should be noted that the act of discrimination is illegal; therefore, unenforceable. It should also be noted that this conduct is contrary to public policy and is subject to penalties as provided for under both state and federal laws.

12. The stated policy of the Real Estate Commissioner is to create a "color blind" industry which can help society obtain voluntary, peaceful, equal opportunities in fair housing. What does this mean: A. maintain an attitude that is absolutely free from bias and "color blind"; B. That race, creed, or color is not a material fact in a real estate transaction; C. Do unto others as you would have them do unto you; D. All are correct interpretations.

(D) Learn all three of these answers.

1. Local government laws for the regulation and control of land use include which of the following: A. Building codes; B. Zoning ordinances; C. Subdivision ordinances; D. All of the above.

(D) Local governments, such as cities and counties, have the right to pass laws which are building codes, zoning ordinances and subdivision ordinances. All of these regulate and control the use of land.

10. Which of the following closing costs would be classified as a recurring cost: A. Recording fees; B. Title insurance premiums; C. Escrow fees; D. Impound account items.

(D) Of the costs listed, impound account items are normally paid with the monthly payment of principal and interest, and thus "re-occur" throughout the loan. The other items normally are paid once, at the closing of the escrow.

12. Hawkins wanted to purchase 200 acres of land for future subdivision, but did not have the necessary $65,000 cash. He persuaded his friend, Warner, to pay the $65,000 and purchase the land, and Warner then immediately signed a land contract for sale of the property to Hawkins for $88,000. This transaction would be: A. A discounted mortgage; B. A violation of the Real Estate Commissioner's regulations; C. Voidable by Warner; D. A valid purchase and resale.

(D) On the basis of the information given, no violation of the real estate law has occurred. A friend merely accommodated Hawkins in providing the "front money" to purchase the property, and will be paid for his act by a higher purchase price for the property.

12. Which of the following is true concerning promissory notes: A. They are used and security for trust deeds: B. They are recorded at the county recorder's office; C. They are always used when real estate is sold; D. They are the evidence of the debt.

(D) Promissory notes are evidence that money is owed by one person to another. The trust deed is the security for the note.

16. Occasionally, the title to real property becomes unmarketable. Which of the following causes would be least likely to result in that eventuality: A. Imperfect title, due to a breach caused by adverse possession of a prior owner; B. A lis pendens filed by the husband of the owner of record; C. Restrictions imposed by a private owner through a deed notation; D. Public restrictions contained in zoning ordinances and building codes.

(D) Public restrictions rarely cause title to real property to be unmarketable; private restrictions sometimes do.

21. A broker, under the authority of an exclusive authorization and right to sell listing, collected a $10,000 cash deposit on a selling price of $120,000. Through no fault of the seller, the purchaser failed to complete the transaction, and the owner declared that the deposit was to be forfeited. The purchaser agreed to the forfeiture of the deposit. Under these conditions, the broker would be: A. Entitled to the entire deposit as his share of liquidated damages; B. Could retain no part of the deposit; C. Deduct from the deposit any amount of actual out-of-pocket expenses incurred by the broker; D. On a residential property, retain no more than 3% of the selling price as liquidated damages.

(D) The disposition of damages for a breach of contract should be spelled out in the listing and/or deposit receipt contract. Under California law, the amount of liquidated damages cannot be more than 3% of the selling price on residential property.

22. When imposing restrictions on a new large subdivision, the procedure normally used is: A. To publish them in a newspaper of general circulation at least 30 days prior to the first sale; B. To include them in the final public report issued by the Real Estate Commissioner; C. To include them as a covenant in the deed to each individual parcel; D. To record them with the county recorder, with adequate reference made thereto in the deed to each parcel.

(D) The imposition of private restrictions on a new subdivision is normally achieved by recording them once and then referring to the recorded restriction in each deed to an individual parcel.

6. Lenders charge points in connection with FHA insured loans in order to: A. Close the gap between the market rate and fixed rates; B. Increase the effective yield; C. Obtain the market yield; D. All of the above.

(D) The lender is allowed to charge the seller the points to compensate the lender for charging a lower interest rate than he would for a comparable conventional loan.

20. Broker Hays took a 90-day exclusive agency listing to sell a property that was owned by Wilson. After 30 days, Hays had not sold the property, so Wilson sent him a certified mail letter canceling the listing. One week later Wilson listed the property with several brokers using open listings. Two weeks later, one of the brokers who had an open listing on the property completed a sale to new owners. In this situation Wilson most likely: A. Did not have the right to give open listings to the other broker; B. Had a right to relist the property and also the right to cancel Hays' listing and his notice of cancellation would accomplish this without possible liability to Wilson; C. Owes the commission only to the selling broker; D. Is liable for payment of commission to Hays as well as to the selling broker.

(D) The owner has the right to cancel the exclusive agency listing before it terminates, but if he does, he is liable for any damages suffered by Broker Hays, the listing broker. Inasmuch as the property was sold within the 90-day period, the owner is liable for damages which would be a full commission.

24. A man is buying a residence. After signing a valid agreement for sale, he asks the broker for permission to move into the property before the sale closes. The broker should: A. Deny the buyer permission; B. Give the buyer oral permission; C. Have the buyer sign a temporary lease on the property; D. Obtain written consent from the owner.

(D) The property belongs to the seller until the sale closes. The seller would have to give his permission before the buyer could move in, and this consent should be in writing for the protection of all parties involved.

3. Which of the following would be the best and most complete definition of the term "encumbrance": A. The degree, quantity, nature, and extent of interest which a person has in real property; B. The use of property by a debtor to offer a creditor security for a debt; C. Any action taken relative to property, other than acquiring or transferring title; D. Anything which affects or limits the fee simple title to property.

(D) This is an excellent definition of the term "encumbrance."

8. Under the provisions of the Federal Fair Housing Law (Title VIII of the Civil Rights Act of 1968), persons complaining of discrimination in housing are permitted an election of which of the following acts? They may file: A. A civil action in federal courts; B. A civil action in state or local courts; C. A complaint with HUD; D. Any of the above actions.

(D) Under the Federal Fair Housing Law, a person who has been discriminated against has the election of commencing an action in the federal court or in the state or local courts. Note also though, a complaint may be filed with the Department of Housing and Urban Development (HUD).

13. If a broker is an agent of a seller, he owes to the buyer: A. The same fiduciary obligations; B. Only the duty to answer questions honestly; C. Only a duty to disclose any items which relate directly to the sales price; D. A duty of fair and honest dealing.

(D) When a broker is an agent of a seller, he has a fiduciary relationship with that seller and must be loyal to the seller. He does have responsibilities toward the buyer which are not as great as his responsibilities to the seller. Of course, he must be fair and honest with the buyer.


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