Real Estate Mock Exam #2
A real estate broker arranged a second deed of trust for a client. The loan was for $18,000, and was repayable in 36 monthly payments. What is the maximum commission that the loan broker may collect?
$2,700 Exp: If the loan is repayable in 36 monthly payments, it is a three-year loan, so the maximum commission rate is 15%. Fifteen percent of $18,000 is $2,700 ($18,000 x .15 = $2,700). Note that this question asks only about the maximum commission, not the maximum loan costs.
The Garcias' house has a fair market value of $186,000 and rents for $1,200 per month. The house next door belongs to Yolanda and rents for $1,300 per month. Assuming the same rate of return, what is the fair market value of Yolanda's property?
$201,500 Exp: First, determine the monthly multiplier for the Garcias' house by dividing the market value by the monthly rent ($186,000 / $1,200 = 155). Then multiply the multiplier by the rent Yolanda collects for her neighboring property (155 x $1,300 = $201,500) to determine the value of her property.
Two parcels of land are exchanged. The first parcel is the NW 1/4 of the SE 1/4 of Section 21 and is valued at $800 per acre. The second parcel is the S 1/2 of the NE 1/4 of Section 22 and is valued at $500 per acre. What is the difference in value between the exchanged properties?
$8,000 Exp: First calculate the area of the first parcel (640 acres/4 = 160, and 160 acres/4 - 40 acres). Multiply that by $800 per acre to find that the first parcel is valued at $32,000 (40 x $800). Next, calculate the area of the second parcel (640 acres/4 = 160, and 160 acres/2 = 80 acres). Multiply that by $500 per acre to find that the second parcel is valued at $40,000 (80 x $500). Subtract $32,000 from $40,000 to find that the difference is $8,000.
Which of the following is NOT a true statement regarding the cost approach to appraisal?
(NOT true) - It tends to set the lower limit for property values (true): -It requires extensive knowledge of economic factors -It is appropriate for new construction -It is appropriate for special-use properties Exp: The cost approach generally sets the upper limit (not the lower limit) for a property's value, since buyers generally will not pay more for a property than it would cost to replace it with a new one that's essentially just like it. The cost approach requires knowledge of economic factors, mainly materials and labor costs. It is particularly suited to appraising new construction that has not yet depreciated significantly, and it is the only method suitable for appraising properties such as public buildings that are not regularly sold on the open market.
A valid contract requires consideration. Which of the following could be consideration?
-$1 or more -Performance of services -A promise to give something that the parties consider to be of value All of the above Exp: Consideration may be money, property, services, or a promise to provide something of value in the future
Unless excepted from the agreement, which of the following are implicitly included in a transfer of real property?
-A building constructed on land -Mineral deposits underneath the land -Riparian rights appurtenant to the land All of the above Exp: A building constructed on land is a man-made attachment (a fixture), so it is considered part of the real property. That means it is implicitly included in the transfer when the land is sold, unless the parties have explicitly agreed that it will be excluded. Appurtenant rights, including mineral rights and riparian rights, are also part of the real property and included in the transfer unless otherwise agreed.
When a contingency clause is used in a purchase agreement, which of the following information should be included?
-Nature of the contingency -Duration of the contingency -Conditions for removal of the contingency All of the above Exp: A contingency clause should describe what has to be done to fulfill the contingency and set a time limit for getting it done. The clause should also specify how one party will notify the other when the contingency has been fulfilled, and explain the rights of the parties if the contingency isn't fulfilled.
An exclusive listing agreement is:
-a bilateral executory contract -an employment contract -a promise for a promise All of the above Exp: An exclusive listing agreement contains a promise for a promise, which means that it is a bilateral contract. It is executory -- in the process of being performed -- until a buyer is found and the sale closes. A listing agreement may be regarded as a contract in which the seller employs a broker to find a buyer (although for taxation purposes, the broker is an independent contractor, not the seller's employee).
The power of eminent domain may be used by:
-cities -public utilities -public universities All of the above Exp: The power of eminent domain belongs to quasi-public organizations such as public utilities and public universities, as well as to municipalities and other government bodies.
Broker Ahmed took a listing from McDonald, and also received an option to purchase McDonald's property within 30 days. On the 26th day, Ahmed decided to exercise the option and purchase the property. He must:
-disclose the full amount of his intended profit -obtain McDonald's written consent -disclose any other outstanding offers All of the above Exp: When a licensee wants to exercise an option on a listed property, he must obtain the written consent of the seller and disclose any anticipated profit. He must also comply with his agency duties, including disclosure of any material facts such as outstanding offers.
A lis pendens action is effective:
-during the time that an action is pending -until the action is dismissed -until a final judgement is rendered All of the above Exp: A lis pendens remain effect as long as the court action is pending - in other words, until the lawsuit is decided or dismissed.
A broker handles the sale of a property in exchange for payment from both parties. He did not disclose his dual agency to either party. As a result;
-he is subject to disciplinary action for violation of the license law -he may not be able to enforce payment from either party -the sale may be rescinded by either party All of the above Exp:
The principle of substitution applies to what property characteristics?
-use -income -structural design All of the above Exp: The principle of substitution refers to substituting one property for another that is equivalent in terms of use, income, or structural design.
A broker sells a used mobile home that is subject to registration requirements. The Department of Housing and Community Development must be notified within:
10 days
The residential earthquake hazards booklet does not need to be provided to buyers of homes built after:
1960 Exp: The Homeowner's Guide to Earthquake Safety must be given to any buyer of a residential property built using light-frame construction before 1960.
Which one of the following items is real property?
A bearing wall in a single-family home Exp: A bearing wall is a permanent part of the real property. The other options are all personal property.
RESPA requires lenders to give which of the following to loan applicants?
A good faith estimate of closing costs Exp: RESPA requires lender to give loan applicants a good faith estimate of the closing costs they will pay if the loan is approved. This must be provided at the time of application, or mailed to applicants within three days.
Who would be in the weakest position to protect himself against a loss of property to another claimant?
A holder of an unrecorded quitclaim deed who does not occupy the property Exp: 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.
Which of the following would be an example of functional obsolescence?
A one-car garage Exp: A one-car garage is due to outmoded design or poor planning, so it is an example of functional obsolescence. A deteriorated driveway would be an example of physical deterioration, while adverse rezoning and incompatible nearby land uses are examples of external obsolescence.
If an appraiser sees that an abandoned gas station is located next door to a residence she is appraising, she should recommend which of the following?
A soil engineer's report Exp: The appraiser will want to know whether any seepage from the gas station's underground tanks has contaminated the residential property.
When appraising a home located on a hill, the appraiser finds that some of the doors and windows do not close properly. He also sees several cracks in the foundation. What type of document should be ordered?
A soil engineer's report Exp: Foundation cracks and shifting in the house indicate movement in the soil.
Which of the following would be considered real property?
A stud forming part of a wall (not real property) -fixtures that a tenant intends to remove -Shrubs that have not yet been planted -Crops that have not been harvested but where a sale agreement has been reached Exp: Since a stud is part of the frame of a house, it is a permanent part of the real estate. The other options are all personal property.
A broker must have written contract with which of the following?
All salespersons Exp: The Real Estate Commissioner's regulations require a broker to have a written agreement with each salesperson working for her.
Who pays the origination fee or service fee on an FHA loan?
Borrower Exp: With an FHA loan (as with most mortgage loans), the lender usually charges an origination fee (service fee), and it is ordinarily paid by the borrower.
Which of the following persons is least likely to request an order of specific performance in a real estate transaction?
Broker acting as agent to the seller Exp: An order of specific performance may be awarded for breach of a purchase agreement, because real property is unique and damages might not fully compensate the aggrieved party. However, a listing agreement simply requires the seller to pay the broker money (a commission), so monetary damages would be sufficient compensation in a broker's breach of contract suit against a seller.
Which law prohibits an agent from committing fraudulent acts against his principal?
Business and Professions Code Exp: Fraudulent acts are a violation of the Real Estate Law, which is part of the Business and Professions Code. Fraud is also a criminal act, but the criminal laws in California are encompassed within the Penal Code, not the Criminal Code.
What document would most likely be related to the Consumer Price Index (or CPI)?
Commercial lease Exp: A graduated lease includes an escalation clause that provides for periodic increases in the rent. In commercial leases, these increases are often tired to changes in the Consumer Price Index or other measures of inflation.
What principle states that homogeneity in a neighborhood increases the value of an individual house?
Conformity Exp: According to the principle of conformity, a reasonable degree of homogeneity within a neighborhood has a positive effect on property values.
Which of the following would involve a grandfather clause?
Continuation of a nonconforming use Exp: A provision in a zoning law concerning nonconforming uses may be referred to as a grandfather clause, since it allows an old use (old predating the current zoning law) to continue.
Which of the following has a final say on the rate or amount of commission paid to the agent on the sale of real property in the estate of a deceased person?
Court order Exp: Ordinarily, the probate court must approve the amount of the commission in addition to the sale itself.
Once a purchase agreement has been signed, what type of title does a buyer hold in property?
Equitable title Exp: A buyer holds equitable title once the purchase agreement has been signed. This does not entitle the buyer to take possession before the agreed possession date, however.
A tenant remained in possession of the property after her lease expired (without agreement by the landlord). What sort of tenancy is this?
Estate at sufferance Exp: When a holdover tenant stays on without the landlord's consent after a lease has expired, it's called an estate at sufferance or a tenancy at sufferance.
Who would execute a quitclaim deed in order to clear away a cloud on a title?
Grantor Exp: The person who executes a deed is called the grantor, whatever type of deed it is (for example, whether it's a grant deed or a quitclaim deed) and whatever the purpose of the instrument may be (for example, whether it's to convey the property or to clear away a cloud on the title).
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?
Harry did not withdraw his counteroffer in time, so a contract is formed Exp: 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.
What recourse does a licensee have if he fails to renew his license before it expires?
He must renew it within two years by paying all fees and penalties Exp: During the two-year period after a license expires, it can still be renewed if the licensee pays a late renewal penalty in addition to all fees that are owed. Once the two-year period ends, if the former licensee wants to work as a real estate agent again, he must retake and pass the license exam and apply for a new license.
Which of the following documents would be used when a veteran purchases a home through the California Veterans Farm and Home Purchase Plan?
Land contract of sale Exp: When a home is purchased through the California Veterans Farm and Home Purchase Program (Better known as the Cal-Vet program), the state buys the property and then sells it to the veteran using a land contract.
In appraising which of the following properties would an appraiser least need to consider the general state of the economy?
Large electronics factory Exp: An appraiser always needs to consider economic factors among other general data, but this will be of particular concern with a commercial or industrial property that has multiple tenants. A stand-alone factory is less likely to be affected by an economic downturn than properties that could be hurt by the departure of several tenants. Industrial firms tend to sign very long term leases. Further, their market is often national and international - so moving elsewhere won't help them much. The same isn't necessarily true of office tenants.
Under what type of lease does a lessee pay for maintenance, utilities, and taxes along with rent?
Net lease Exp: In a typical net lease, the tenant will pay a share of property taxes and insurance, in addition to all utility bills and maintenance costs.
Under what type of listing is it possible that an agent would receive no commission even if the seller accepted an offer presented by that agent?
Net listing Exp: An agent who found a buyer might not be entitled to a commission under a net listing. For instance, suppose a net listing provides that the agent can keep anything above a selling price of $220,000 as her commission. If the property sells for $220,000 or less, the agent won't be entitled to collect any compensation.
A broker was entitled, as a commission, to any amount paid by a buyer that exceeded the seller's desired sales price of $565,000. What kind of listing is this?
Net listing Exp: A net listing is one where the seller establishes a required net amount and the broker keeps, as compensation, any part of the sales price in excess of that net amount.
When may a broker fill out the seller's portion of the transfer disclosure statement?
Never Exp: A broker may never fill out the seller's portion of the transfer disclosure statement. The seller may not delegate this responsibility to her agent.
Which type of title insurance policy protects against all risks?
No policy protects against all risks Exp: No title insurance policy protects against all risks. For instance, no type of policy insures against a loss of value due to governmental action, such as condemnation or zoning changes.
A salesperson presents a seller with a full-price cash offer from a qualified minority prospective buyer. The salesperson's broker presents the seller with a less-than-full-price offer from a qualified non-minority prospective buyer. The seller, however, accepts neither offer; instead, he accepts an offer through the salesperson from his neighbor. The neighbor is buying the home solely to prevent a minority family from moving into the neighborhood. In this situation, which party is NOT subject to penalties under fair housing laws?
Non-minority prospective buyer Exp: The non-minority prospective buyer was making a legitimate offer, not for discriminatory purposes, and therefore has not violated fair housing law.s The seller, the neighbor, the salesperson, and by extension, the broker, all participated in a transaction made for discriminatory purposes. If a salesperson abets his client in discriminating (as the salesperson apparently did, when the seller turned down the full-price offer from the minority buyer, and the salesperson didn't object), then the salesperson has violated the license law, and by extension so has the broker for not adequately supervising.
Regarding escrow procedures, which of the following is true?
Once escrow conditions are fully met, the agency changes from dual agency to separate agency Exp: Before escrow instructions have been fully executed, the escrow agent is a dual agent, representing both parties. Once the conditions have been met and the transaction closes, if there are any further matters for the escrow agent to take care of on behalf of one of the parties, the escrow agent is considered to be acting as a single or separate agent for that party.
Who might take title to property through accession?
One who has gained property through action of natural forces Exp: Accession is any addition to real property through natural forces, such as accretion or reliction.
Ownership rights to a property are determined through which of the following legal actions?
Quiet title Exp: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 property.
What factor would most limit the accuracy of the market data appraisal method?
Rapidly changing economic conditions Exp: In rapidly changing economic conditions, the sales prices of comparable properties are less useful as indicators of current market values.
Which of the following is not a lien against real property?
Recorded private restrictions Exp: Private restrictions are an encumbrance on real property. However, they affect use and do not represent a financial interest in the property, so they are not liens.
Marcie contacted broker Rita to list her house for sale at a price of $250,000. She told Rita that she needed a quick sale. At an open house, Rita told a prospective buyer that Marcie needed to sell fast and that she might accept $225,000. Marcie accepted the offer of $225,000. Which of the following is correct?
Rita violated her fiduciary duty by disclosing confidential information. Explanation: An agent has a fiduciary duty NOT to disclose confidential information concerning the principal, unless she has been specifically instructed that she may disclose that information.
A tenant may abandon a lease if she is constructively evicted by the landlord's actions. Which of the following examples would not be constructive eviction?
The landlord fails to repair excessive wear and tear caused by the tenant constructive eviction examples: -The landlord cuts off the electricity to the tenant's unit -The landlord does not respond within a reasonable time after notice of broken plumbing -Noise and dust from construction work on the building make a unit unfit for occupancy
Which of the following types of lenders is most likely to have the greatest percentage of its assets invested in real estate loans?
Savings and loan associations Exp: Savings and loans have a traditional emphasis on home mortgage loans.
Broker Westland dies and his daughter Susan, who is also a broker, inherits his business. With respect to his 50 current listings, which of the following is true?
She is not the listing agent unless she negotiates a new listing agreememt with each of those owners. Exp: When Westland died, the agency relationship between him and each of his clients terminated by operation of law. Even though his daughter inherited his brokerage business, she would still have to enter into a new agency relationship with each seller in order to keep his listings.
What principle states that a prudent buyer will not pay more for a property than the price of a reasonably close alternative?
Substitution Exp: According to the principle of substitution, if two reasonably similar properties are available, a prudent buyer will choose the less expensive one.
If there is a 30- or 60-day safety clause in a listing agreement, which of the following is true?
The agent must provide a list of the people he worked with, and if the seller sells to any of those people during the safety period, she owes the agent a commission. Exp: Many safety clauses require the broker to give the seller a list of the potential buyers that the broker had contact with during the listing period. That way, the seller will know whether the safety clause will require payment of a commission if the property is sold to a particular person during the safety period.
A seller sold her house to a buyer who agreed to assume the existing loan. They proposed this to her lender, who approved the assumption. Which of the following statements is true with respect to the outstanding loan payments?
The buyer is primarily liable and the seller is secondarily liable as a surety Exp: A buyer who assumes an existing loan becomes primarily liable for repayment of the loan. However, the seller will retain secondary liability in the event that the buyer defaults. (A lender who consents to an assumption is often willing to release the seller from liability, but the question does not say that the lender did that in this case.)
A broker pays his son a weekly salary to help him sell homes in a subdivision. The son works out of a model home, greeting and answering phone calls from potential buyers. He provides price and financing information, but never creates or signs any documents. Which of the following is true?
The duties performed by the son require him to have a real estate license. Exp: The son is quoting prices and discussing finance. These are acts of a real estate agent and require a license.
When does the agent's duty of confidentiality end?
The duty of confidentiality continues to exist even after the agency relationship terminates Exp: The duty not to disclose confidential information continues after the agency relationship has formally terminated.
The listing agent provides the seller with a copy of the natural hazards disclosure statement. The seller and the listing agent fill out the disclosure statement and deliver it to the buyer. What disclosure responsibilities does this relieve the agent and the seller of?
The duty to disclose risks from disasters such as earthquakes and floods, although these must still be disclosed on the transfer disclosure statement. Exp: The natural hazards disclosure statement is used to disclose whether a property is subject to hazards such as earthquakes or floods. Any material fact, even those disclosed elsewhere, must be disclosed on the transfer disclosure statement.
What is the difference between the nominal interest rate and effective interest rate?
The effective rate is the rate actually paid by the borrower and the nominal rate is the rate stated on the promissory note Exp: The effective rate is the annual percentage rate : the rate the borrower will actually pay, taking all of the finance charges (not just the interest) into account. The nominal rate is simply the interest rate stated on the promissory note.
A comparable property has a feature that the subject property lacks. Under the market data approach, how will an appraiser treat this feature?
The feature's value is subtracted from the value of the comparable. Exp: In the market data approach (the sales comparison approach), the value of a feature that the subject property lacks is subtracted from the comparable's sales price (the value of the comparable) so that the adjusted price more closely approximates the value of the subject.
A real estate agency would not terminate in which of the following situations?
The principal refuses an offer to purchase that is presented by an agent Exp: Rejection of an offer terminates the offer, but it does not terminate the agency relationship between the seller and the real estate broker.
A condominium unit's seller gave a deed, containing CC&Rs, to the buyer. The buyer objected to the CC&Rs, so the seller provided a written release saying the CC&Rs did not apply to the buyer. Which of the following is true?
The release is not effective, because CC&Rs cannot be abandoned; they're present for the benefit of all of the condominium residents. Exp: Covenants, conditions, and restrictions (private restrictions, in other words) cannot be invalidated in a subsequent sale. They are imposed by a previous owner and continue to "run with the land."
What is the main difference between the natural hazards disclosure statement and the real property transfer disclosure statement?
The transfer disclosure statement is limited to information that the seller has, while the natural hazards disclosure requires additional research Exp: The transfer disclosure statement and the natural hazards disclosure statement are both prepared by the seller. The transfer disclosure statement requires only disclosure of known latent defects, though, while the natural hazards disclosure statement requires disclosure of whether the property is in a zone subject to earthquakes, floods, or other natural hazards according to government maps.
Selling property under an 'as is' contract is permissible under what circumstances?
There is a full disclosure of all material facts by the seller and agent Exp: An 'as is' contract does not relieve a seller or a broker from the affirmative obligation to disclose latent defects and other materials facts concerning the property to the buyer. And in a residential transaction, the transfer disclosure statement should be filled out completely, disclosing defects whether they are latent or not. (latent defects are, by definition, not obvious or clearly visible to an ordinary person.)
What essential element is necessary between broker and principal in a transaction involving real property?
There must be a written contract of employment Exp: Under the statute of frauds, any agreement between a real estate broker and a principal authorizing the broker to find a buyer or a property must be in writing.
There are three processes involved in the insurance of a standard title insurance policy. Of the following, which is not one of those processes?
Three processes involved in the insurance policy: -Examination and investigation of title -Determination of the amount of the insurance requirement -Protection of the insured against possible losses due to title defects (NOT)Determination of correct boundary lines through a survey of the property to be insured. Exp: A standard policy of title insurance is based only on investigation of the public record, not on an inspection or survey of the property in question.
Which of the following does California law require a real estate agent to do in a residential transaction?
Visually inspect the property and inform all parties of any latent defects found Exp: In residential transactions, real estate agents must perform a competent and diligent visual inspection of the property and inform the parties of any latent defects and other materials facts found. The law does not require inspection of condominium common areas or physically inaccessible areas, however.
What is the standard minimum time limit for employment in an exclusive listing agreement?
Whatever is agreed upon by broker and property owner
When would an agent not have to comply with the requirement of presenting all offers to purchase to the principal?
When the agent is acting under written instructions of the principal Exp: If the seller gives express instructions to the agent not to present any more offers, then the agent should not present any more offers.
In some cities, the local building code conflicts with the federal uniform building code. Which would prevail?
Whichever code imposes higher standards of health and safety Exp: Conflicts of law such as this are decided in favor of the regulation that more stringently protects public health and safety.
Even if a change is very minor, a counteroffer should be made on a separate form (such as the C.A.R. CO form) because:
a counteroffer is actually a new offer and a separate form is necessary Exp: A counteroffer is a new offer that terminates the original offer, so it is best to use a separate form.
In real property law, tenancy most nearly means:
a method or mode of owning real property Exp: Tenancy refers to a method or mode of holding title to real property, such as tenancy in common or joint tenancy. It also refers to a method or mode of holding a leasehold interest, such as term tenancy or periodic tenancy.
Escheat will occur when:
a property owner died without a valid will or any known heirs Exp: Escheat occurs when a probate court can't locate any beneficiaries of a will or heirs under the intestacy statue, in which case title to the property will pass to the state government.
A seller wants to transfer title to his apartment house in a tax-free exchange. He's most likely to accomplish his goal if he exchanges his apartment house for:
a single-family home with the same amount of equity, to be used as a rental property Exp: Anything received in a tax-free (tax-deferred) exchange other than like-kind property is treated as boot and taxed in the year of the exchange. Cash and debt relief (the difference between mortgage balances) are examples of boot. If two rental homes are exchanged with no cash or debt relief involved., there is no boot, and the taxpayer will not have to pay taxes on the transaction in the year the exchange occurs.
The clause in a deed of trust which enables the lender to declare the entire unpaid sum due upon the borrower's default is that:
acceleration clause Exp: An acceleration clause allows the lender to demand full payment immediately if the borrower defaults on any part of the loan agreement. An acceleration clause —or acceleration covenant— in the law of contracts, is a term that fully matures the performance due from a party upon a breach of the contract. Such clauses are most prevalent in mortgages and similar contracts to purchase real estate in installments.
Alienation is most nearly the opposite of:
acquisition Exp: Alienation -- in other words, transfer by will, gift, or sale -- is the opposite of acquisition
A contract where one party makes regular installment payments and the other party makes payment conditioned on a specific event happening is known as:
an insurance policy. Exp: Insurance requires the insured person to make regular premium payments, requires the insurer to pay a specified amount if an event that is covered by the insurance policy occurs and the insured suffers a loss.
A buyer makes an offer and gives a good faith deposit to the broker, who deposits the funds into her trust account. After the seller has accepted the buyer's offer; the buyer decides to back out and calls the broker to demand his deposit back. Instead of attempting to resolve the disposition of the deposit money, the broker turns the funds and the issue over to a court. The resulting court proceeding is called:
an inter-pleader action Exp: An inter-pleader action is a legal action asking a court to determine which of two parties is the rightful owner of property held by a third party. The action is filed by the third party.
If a structural pest control report has been prepared for property within the previous two years, a copy of the report can be requested from the Structural Pest Control Board by:
any person Exp:Anyone may obtain a copy of a report by submitting a request to the Structural Pest Control Board.
If discrepancies exist between the purchase agreement and the escrow instructions:
as the most recent document, the escrow instructions prevail Exp: Where there is a conflict, the later document prevails over the earlier document. The escrow instructions are prepared later than the purchase agreement.
Land is torn away by a sudden change in the direction of a river's flow. This is called:
avulsion Exp: Avulsion is a form of accession, where there is an addition or subtraction to property because of natural forces. Avulsion occurs when land is violently torn away by flowing water and deposited elsewhere.
A developer who owns six unencumbered parcels of land gave a lender one deed of trust on all six properties. This would be known as a/an:
blanket deed of trust Exp: When a single loan is secured by several pieces of a property, it's called a blanket loan.
An open-end provision in a mortgage would be beneficial to a borrower who wants to:
borrow additional funds Exp: An open-end mortgage allows a borrower who has paid off a certain amount of the loan to re-borrow additional funds without having to apply for a new loan.
When a dual agency exists, it is legal if:
both buyer and seller agree to it Exp: Both buyer and seller must give written consent to a dual agency. The disclosure must be made as soon as possible.
Direct enforcement of local building codes is the responsibilities of the:
building inspector Exp: building inspectors enforce local building codes. An inspector can stop work on a project that violates building code requirements, and will issue a certificate of compliance to a completed project that meets all requirements.
When a property is sold, a copy of a required structural pest control report must be delivered to the:
buyer Exp: A copy of the pest control report must be provided to the buyer if the inspection is required by the purchase agreement or by the buyer's lender
An executed contract is a contract that is:
completely performed by both parties Exp: An executed contract is one that has been fully performed. This is in contrast to an executory contract, which is still in the process of being performed.
The repair of broken appliances is categorized as:
corrective maintenance Exp: Corrective maintenance refers to fixing problems that already exist. Property managers prefer to focus on preventive maintenance, to prevent maintenance problems from cropping up in the first place.
Which would a court disregard in deciding whether an item of personal property has become real property?
cost of an item
A broker strongly suggests to his salespersons that they should all refer clients to the in-house closing company and associated loan officers, and that they will receive extra compensation for their referrals. The salespersons should:
give referrals to other providers of closing and loan services instead Exp: The Real Estate Law specifically prohibits real estate licensees from receiving compensation for a referral to an escrow, pest control, home warranty, or title company. (That would also be a violation of the Real Estate Settlement Procedures Act.)
An exclusive listing must have a termination date that is:
definite Exp: An exclusive listing can be for as long or short of a period as the parties agree on, but the Real Estate Law requires that it must have some sort of definite termination date.
A deed of trust with an unpaid balance of $50,000 was sold to an investor for $40,000. This would be known as:
discounting Exp: When a deed of trust is sold on the secondary market for less than its face value, that is known as discounting.
A 20-year-old residence has been well maintained. An appraiser determines its age to be nine years. This illustrates:
effective age Exp: The effective age of a structure may be more or less than its actual age, depending on construction quality and maintenance.
An appraiser adjusts a rental property's gross income by deducting a vacancy factor. The resulting figure is the property's:
effective gross income Exp: Effective gross income is calculated by making a deduction from the property's gross income for vacancies and collection losses.
A lower loan-to-value ratio indicates a higher:
equity in the property Exp:A lower loan-to-value ratio indicates that the borrower has a greater equity interest in the property. For instance, with an 90% loan on a $100,000 property, the borrower's equity is $20,000; with a 70% loan on the same property; the borrower's equity would be $30,000.
Estates of inheritance or estates of infinite duration are known as:
estates in fee Exp: An estate that is inheritable and of infinite duration is an estate in fee, commonly called a fee simple estate.
Under the terms of a listing, the broker receive a commission regardless of whether the broker, a cooperating broker, or the seller was the procuring cause of the sale. This must be a/an"
exclusive right to sell listing Exp: Under an exclusive right to sell listing, a broker is entitled to a commission if the property sells during the listing period, regardless of who finds the buyer.
Backfill is typically used for:
filling in excavated areas Exp: Backfill is soil used to fill excavation holes and ground foundation walls.
Most listing contracts authorize a broker to:
find a buyer and accept a deposit with the offer to purchase Exp: A typical listing agreement only authorizes the broker to find a buyer and accept the buyer's deposit. To authorize a broker to accept an offer or convey title, a seller would need to execute a power of attorney that specifically empowers the broker to do those things.
Jack and Jill sign a contract in which Jill grants Jack the right sell, exchange, or distribute goods or services using her particular marketing plan. This type of agreement is called a:
franchise agreement Exp: Typically, the grantee pays a franchise fee to operate a business under the franchisor's (grantor's) brand name, logo, and/or marketing plan.
A lien created by court order, covering all of a debtor's property within the county where it is recorded, is a/an:
general lien Exp: The question is describing a judgement lien. A judgement lien is a general lien because it attaches not just to specified property, but to all of the judgement debtor's property in any county where the judgement creditor has recorded an abstracted of judgement.
A broker is selling property on which she holds an option to purchase. She must disclose to any prospective buyer that she is acting as a/an:
principal Exp: She must disclose that she is a principal in the transaction as well as an agent, since she has the option to purchase the property on her own behalf. She is acting as an optionee, not an optionor.
A real estate agent arranged with a title company to receive a referral fee for every title policy she sent to them. The referral fees were:
illegal under the Real Estate law Exp: The Real Estate Law specifically prohibits licensees from accepting compensation for referring customers to escrow, pest control, home warranty, or title companies. (That would also violate the Real Estate Settlement Procedures Act.)
A mortgagee is most likely to waive a prepayment penalty when:
inflation is occurring and interest rates are rising Exp: If interest rates are rising because demand for money is greater than the supply, a mortgagee may benefit from prepayment of its loans. It can take funds received from prepayment of existing loans and loan them out again at a higher interest rate. This may offset the reduction in profit from the loans that were prepaid.
Title will be delivered on a different day than the day the buyer plans to take possession on. The parties should use a/an:
interim occupancy agreement Exp: 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.
After a county-run airport changed its flight patterns, an owner of a nearby property was bothered by constant aircraft noise. The owner brought suit against the airport demanding just compensation for the damage to the value of his property. This is an example of:
inverse condemnation Exp: If a private owner believes that action by a government entity has destroyed the value of his property, he may file an inverse condemnation action.
A deed contains a restrictive covenant barring the sale of the land to persons of non-Caucasian descent. This covenant:
is unenforceable but does not invalidate the conveyance. Exp: The covenant is unenforceable, but the deed otherwise remains valid.
If the Real Estate Commissioner needed to terminate approval for sale of lots in a new subdivision, he or she would:
issue an order for the subdivider to desist and refrain from selling lots. Exp: The Commissioner may stop violations of the Subdivided Lands Law with a desist and refrain order. The subdivider then has 30 days to request a hearing.
The Easton v. Strassburger decision required the disclosure of:
known latent defects as well as potential ones The real estate agent's duty to inspect originates with the 1984 case of Easton v. Strassburger. The court held that an agent has a duty to perform a reasonably competent inspection of a listed property, in order to disclose any defects that might be found.
The three phases of building a home are:
land acquisition, development, and construction
Dmerjian is appraising two parcels of property. One is leased to the government for use as a post office; the other is leased to a private owner for use a hardware store. Both parcels have recently started long-term leases. The capitalization rate of the post office property as compared to the capitalization rate of the hardware store property will be:
lower Exp: The post office will use a lower capitalization rate because it is less risky investment and a real estate investor will not expect as great a return on the investment. A hardware store is more likely than a post office to go out of business, so the store will need a higher capitalization rate.
The appraisal method that is the most readily adaptable for real estate brokers and salespersons is the:
market approach Exp: The market approach (sales comparison approach) is the method used most often for single-family properties and vacant land, and it's the method that the competitive market analysis used by real estate agents is modeled on.
What is the ultimate test of a property's functional utility?
marketability Exp: A property's functional utility is best shown by its marketability. If a property suffers from functional obsolescence is to such an extent that it is unable to fulfill the desires of its users, it won't be marketable.
If an unlicensed assistant is preparing advertising materials regarding loan programs, a broker:
needs to read and approve in writing materials prepared by the unlicensed assistant prior to their publication Exp: A real estate broker's unlicensed assistant may prepare advertising, but the broker must review the advertisements and give his written approval before they are published.
The cost approach to value is best suited for appraising:
new homes Exp: The cost approach is best suited for appraising new construction, since new structures have not had time to depreciate. Estimating depreciation can be the most difficult part of the cost approach.
When interest rates increase, property values will most likely:
not experience an immediate short-term effect Exp: Property values, for the most part, respond to supply of and demand of properties within a particular market. Significantly higher interest rates, as happened in the early 1980s, can reduce potential buyers' buying power and thus reduce demand, but in most periods in time, the effect of interest rates has not been that great.
When a home is constructed, consideration is given to the positioning of the building relative to its surroundings and the sun, wind, and other elements. This placement is called:
orientation Exp: Orientation, the positioning of the home on the land, requires the developer to consider sun, wind, noise and other factors.
A salesperson working for a listing broker:
owes fiduciary duties to the seller Exp: 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.
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:
present the two offers at the same time Exp: 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.
One difference between an FHA loan and a typical conventional loan is that the FHA loan:
probably has a higher loan-to-value ratio Exp: The required down-payment for an FHA loan is smaller, not larger, than the down-payment required for a typical conventional loan. An FHA loan often has a loan-to-value ratio over 95%; the maximum FHA LTV is 96.5% of the appraised value or sales price. In contrast, LTVs over 95% are not typical for conventional loans. FHA loans are insured by the government, but they are issued by commercial lenders just like conventional loans. There's no difference between FHA loans and conventional loans in regard to repayment periods.
By law, pest control operators are required to:
provide a copy of a pest control report to the owner (or her agent) of the property within 10 days of inspection.
For buyers of homes located in subdivisions, the Final Subdivision Public Report provides assurances of all of the following EXCEPT:
provided assurance: -streets and other improvements will be completed -any blanket or mechanic's liens will be lifted -adequate water and other utilities will be available (EXCEPT) the homes' prices reflect their fair market vales Exp: The Subdivided Lands Law does not prevent developers from selling homes for more than their market value. To obtain a final public report, however, the developer must demonstrate that improvements will be completed, adequate utilities will be available, and liens will be lifted.
The holder of an easement may terminate the easement by recording a:
quitclaim deed Exp: To terminate an easement by release, the dominant tenant (the easement holder) will execute and record a quitclaim deed in favor of the servient tenant.
The Federal Reserve could create a tight money market by:
raising the discount rate and selling bonds Exp: To create a tight money ticket, the Federal Reserve would take actions that reduce the amount of funds available to lend. Those actions might include increasing key interest rates (the discount rate and/or the federal funds rate), raising reserve requirements, and selling bonds.
When a deed of trust is terminated, the trustee will prepare a:
reconveyance deed Exp: Once a deed of trust has been repaid, the trustee is required to execute and record a deed of reconveyance, releasing the property from the beneficiary's security interest.
"In-fill development" is a term for:
replacing low-density residences with higher-density properties. Exp: In-fill development refers to increasing the density in close-in neighborhoods where the current improvements may not match the neighborhood's highest and best use. For instance, it might mean tearing down single-family residences and replacing them with multi-unit condominiums.
An Asian buyer meets with a broker and asks to be shown homes. If she doesn't ask to see homes in areas with no Asian residents, the broker:
should choose homes for showing as the broker would for any other customer Exp: Under the Fair Housing Act, the broker is required to treat all clients equally. If the buyer has not specified certain areas in which she is or is not interested, the broker must choose homes as he would for any other buyer.
A clause that states that the rights of a deed of trust's beneficiary are secondary to those of the beneficiary of a subsequent deed of trust is a/an:
subordination clause Exp: A subordination clause in a deed of trust allows another deed of trust to have higher priority, even though that other deed of trust will be recorded later.
A real estate salesperson defrauds a client. The Real Estate Commissioner may:
suspend or revoke the salesperson's license. Exp: The Real Estate Commissioner has the power to suspend or revoke a license. He or she does not, however, have the power to order the payment to a victimized party. To obtain a damages award, the client would need to file a civil suit.
A lender who accepts a deed in lieu of forecloure from a trustor will:
take title subject to any junior liens Exp: A lender who accepts a deed in lieu of foreclosure will take title subject to any existing liens other than its own. Before accepting a deed in lieu the lender should determine whether the borrower has created junior liens.
A broker negotiated the sale of a client's acreage. Shortly after the seller accepted the buyer's offer, the broker found out that the buyer's agent had recently arranged for the same buyer to pay a much higher price per acre for similar acreage nearby. In this situation:
the broker should disclose this information to the seller Exp: The rue market value of the property is always a material fact that must be disclosed, even if a binding contract has already been formed. If the discrepancy between the sales price and the market value is great enough, the seller might find it advantageous to breach the contract, risk a lawsuit, and attempt to obtain a higher price.
During the summer, a buyer purchased a house with a tile roof. In the fall, though, when the first major rain came, the buyer noticed that the roof leaked in many places. When the buyer contacted the broker, the broker stated that the seller had mentioned problems with the roof, but the broker never brought it up with the buyer because "he didn't ask." If this case went to court:
the buyer could recover from the broker and the seller, who could in turn sue the broker for the amount she had to pay the buyer. Exp: Under the doctrine of vicarious liability, a person injured by an agent's acts may sue the principal as well as the agent. However, the principal may in turn sue the agent to recover the amount she paid in injured party.
A buyer signed a purchase agreement that contained the words, "Buyer to accept property in 'as is' condition." There were defects in the electrical system that the seller knew of but would not be apparent to an ordinary person, the broker did not disclose these defects. if the buyer sued the broker for fraud:
the buyer would prevail, since the duty to disclose defects is not affected by an "as is" clause. Exp: Even if an "as is" clause is present in the purchase agreement, California law still requires the seller to set forth all latent defects in a transfer disclosure statement. The broker is also bound to disclose those latent defects to the buyer. under the imputed knowledge rule, if the seller or his agent knows of a defect but fails to tell the other about it, the other can nonetheless be held liable for that knowledge.
A balloon payment in a first deed of trust is:
the final payment made on the balance at the end of a loan term Exp: A balloon payment is characteristic of a loan that isn't fully amortized. The regular payments aren't sufficient to cover the full amount owned, so the borrower will have a to make a large final payment at the end of the loan term.
A buyer presents a written offer along with a deposit to the selling broker, who accepts them on behalf of the seller. The broker's authority to accept the deposit comes from:
the listing agreement Exp: A listing agreement usually authorizes the broker to accept a good faith deposit from a buyer. (The question states that the selling broker accepts the offer and deposit on behalf of the seller, so the selling broker is acting as a subagent of the seller under the listing agreement.)
In real estate appraisal, "improved value" refers to:
the market value of a property and its improvements
A commercial acre is:
the portion of an acre remaining after the streets and sidewalks have been deducted
Replacement cost, as opposed to reproduction cost, is:
the present cost of replacing a building with another of the same utility Exp: Replacement cost refers to the cost of replacing a building with another of equal utility. Reproduction cost refers to the cost of replacing a building with an exact replica.
For older residential properties, estimates obtained through the gross income multiplier method reflect:
the relationship between market value and rental income Exp: In the gross income multiplier method, gross rental income is used to estimate the market value of a residential rental property.
If an owner obtains riparian rights to a property:
the riparian rights apply only to the property that is adjacent to the stream and that is located within the watershed. Exp: 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.
A salesperson presented his broker with an offer from a prospective buyer and a good faith deposit in the form of a promissory note. The broker should tell the salesperson that:
the seller must be informed before accepting the offer that the deposit is a promissory note Exp: A promissory note may be used as a good faith deposit, but the agent must disclose this fact to the seller when presenting the offer. The form of the deposit should also be indicated in the purchase agreement.
The housing and construction industry in California is regulated through:
the state Contractors License Law, local building codes, and the state Housing Law. Exp: Regulation of the homebuilding industry in California is accomplished through local building codes, the state Housing Law, and the state Contractors License Law. The Real Estate Law regulates brokers and salespersons, not builders.
In a transaction involving a single-family residence, a Transfer Disclosure Statement must be completed by:
the transferor Exp: A transfer disclosure statement is completed by the seller - in other words, the transferor. There are exemptions from the transfer disclosure statement requirement, including for foreclosures, probate proceedings, and divorce settlements.
It is lawful under state law for a broker to pay a referral fee to an unlicensed person as long as:
the unlicensed person did nothing but bring the principal and licensee together Exp: An unlicensed person who introduces a buyer or a seller to a broker, but who does not perform any real estate activities requiring a licensee, may receive a finder's fee.
In residential construction, a footing is:
the wider part of the base of the foundation wall Exp: The bottom, wider part of the foundation wall is called the footing.
Broker Betty refers all of her clients to a particular title insurance company, who in turn pays her $20 per referral. Under RESPA, this is permitted:
under no circumstances Exp: Under RESPA, settlement service providers are forbidden from paying or accepting kickbacks or referral fees. The Real Estate Settlement Procedures Act (RESPA) is a consumer protection statute, first passed in 1974. The purposes of RESPA are to help consumers become better shoppers for settlement services and to eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services.
Amy, a salesperson, helps the Parks find a property to buy. The Parks sign a purchase contract that makes the sale contingent on having the transaction approved by the sellers' Uncle Pete, who has offered to finance the deal as a favor to his nephew. Before they sign the contract, Amy assures the Parks there won't be any trouble getting the approval. However, shortly afterward, she finds out that Uncle Pete is out of the country and no one knows when he'll be back. Amy's actions were:
unlawful Exp: Amy made an unlawful misrepresentation when she said that there would be no trouble getting the approval. While the misrepresentation was negligent rather than intentional, it was still a false statement that the buyers relied on. She could be subject to disciplinary action by the Real Estate Commissioner.
The calculation of effective gross income reflects:
vacancies and collection losses Exp: Effective gross income is calculated by subtracting a bad debt and vacancy factor from the gross rental income, taking into account the probability that the property will not always be rented and all rents owed will not always be collected.
With a purchase agreement, the date of formation of the contract is:
when acceptance is communicated to the offeror Exp: A contract is considered to be formed on the date that the offeree communicates acceptance to the offeror.
A real estate licensee advertises on a website. The Bureau of Real Estate's rules and regulations require barriers, policies, and procedures to ensure that contract and communications with persons responding to those ads are:
with properly licensed agents. Exp: If a brokerage intends to advertise online, it must take steps to create barrier or procedures that ensure that responses to prospective clients are made only by licensees. All online real estate advertising must contain a notice stating whether or not the person making the advertisement is property licensed in California.
