Real Estate Principles Practice Exam

According to the EPA, at what level does radon become a health concern requiring mitigation?

4.0 picocuries per liter of air. Although there is no safe level of radon, once the level reaches above 4.0 picocuries per liter of air, the EPA recommends radon mitigation.

Phoebe's gross monthly income is $4,200, and she has $360 in monthly non-housing debt payments. The lender's qualifying ratios are 28% for the housing ratio and 36% for the total DTI ratio. What's the maximum housing payment she can afford?

$1,152 The maximum house payment is the lesser of the amounts calculated using both ratios. DTI: $4,200 x .36 = $1,512. $1,512 - $360 = $1,152. Housing ratio: $4,200 x .28 = $1,176. Phoebe's maximum payment is $1,152.

Jake is saving up to move out of his parents' house. If he finds an unfurnished rental for $1,000 per month, what is the most he will need to have saved up for the security deposit?

$2,000 The security deposit for an unfurnished residential property may equal two months' rent.

A buyer has a 30-year, $400,000 loan with a 7% interest rate. How much of the first month's mortgage payment is interest?

$2,333.33 $400,000 x 0.07 = $28,000; then $28,000 ÷ 12 = $2,333.33

What type of value is of interest to taxing authorities?

Assessed value Local taxing authorities are interested in assessed values, which are used to determine property taxes.

Lorenzo just received a prestigious fellowship to study abroad for a year! However, he'd just signed a one-year lease on his apartment. He substituted his sister's name on the lease, but he may still be liable for the rent if she misses any payments. This is an example of ______.

Assignment Assignment is the substitution of one or more tenants for the original tenant, putting the lease responsibility in the new tenant's hands.

Where are mortgages recorded?

At the recorder's office in the county where the property is located Mortgages are recorded in the recorder's office of the county where the property is located.

Which type of framing involves a single system of wall studs run from the foundation through the first and second floors to the ceiling support?

Balloon This is a description of balloon framing.

When a Department of Fair Employment and Housing complaint reaches litigation, the parties have the option to have the case heard before _____________________.

Civil court When a Department of Fair Employment and Housing complaint reaches litigation, the parties have the option to have the case heard in civil court.

Which type of subdivision is defined as separately owned parcels where purchasers also share interest in common areas?

Common interest subdivision Remember, common interest subdivision purchasers share a portion of the subdivision and hold equal interest in those common areas, but retain some exclusive right to access, use, or occupy the property.

Which of the following is true about ownership or title to a property?

Constructive notice to the public of real property ownership occurs when the deed is recorded. Recording and possession give the public constructive notice that ownership has changed hands. It also protects the buyer from others' claims on the property.

This is a legal written agreement between a buyer and seller that states the purchase price and other terms of understanding by which real property will be transferred.

Contract for sale A contract for sale may also be called a purchase agreement, an earnest money agreement, or a sales contract.

Which agency enforces Title II under the Americans with Disabilities Act of 1990, when it relates to state and local public housing, housing assistance, and housing referrals?

Department of Housing and Urban Development The Department of Housing and Urban Development (HUD) enforces Title II when it relates to state and local public housing, housing assistance, and housing referrals.

What does the Real Estate Advisory Commission do?

Discusses real estate policy and makes recommendations to the Commissioner The Commissioner discusses policy and will make recommendations to the Commissioner. It is the Commissioner's responsibility to determine policy and issue regulations to enforce or clarify that policy.

Francine's landlord never returned her security deposit after she moved, even though it was in writing that she would get it back within three weeks. How long after the deadline for returning the deposit does Francine have to sue, according to California's statute of limitations?

Four years California's statute of limitations allows up to four years to sue for breach of a written contract. Oral agreements have a deadline of two years.

Phil is a property manager, which means he serves as a ______ agent to his landlord/client.

General Property managers are general agents, who, through the property management agreement, are given the authority to act on behalf of the property owner and are responsible for all of the dealings on a specific piece of property.

Charlie, who owns and leases out a commercial building, pays taxes, maintenance, and insurance on the building. What type of lease agreement does Charlie have with his tenants?

Gross With gross leases, the landlord typically pays all expenses, such as taxes, maintenance, and insurance.

Shannon is moving to California in seven months to attend college and has already signed a nine-month lease agreement. Which of these statements about her lease agreement is true?

Her lease needs to be put in writing in because the entire agreement will cover a period of 16 months. The California Statute of Frauds requires that any contractual relationship that lasts more than a year be put in writing. In Shannon's case, the seven-month pre-rental period counts toward the length of the contract. Look at it this way—the landlord is obligated to have the property ready for her possession in seven months and she's obligated to start paying rent in seven months. That counts for something!

What economic principle is related to a property's most profitable use that is both legal and economically feasible?

Highest and best use Highest and best use has to do with a property's most profitable use that is both legal (in other words, conforms to zoning) and economically feasible (won't cost more than the increase in value).

Which of these situations represents the illegal practice of redlining?

Hunter, a mortgage broker, refuses to underwrite mortgage applications from applicants who are buying in specific neighborhoods. Redlining is the practice of selecting geographical areas in which no mortgage loans will be written (based on demographics instead of creditworthiness).

Why do lenders care so much about their borrowers' debt reduction?

It makes it easier for borrowers to pay their mortgages. Fewer debts make it more likely the remaining debts will be repaid.

Lenders look at a HELOC balance of less than $50,000 as if ________________.

It were a credit card Unpaid balances on a HELOC are similar in the eyes of a lender to debt incurred on a credit card.

Which of these statements about mobile home tenancies is true?

Mobile home landlord and tenant rights and responsibilities are spelled out by the Mobilehome Residency Law. Mobile home landlord and tenant rights and responsibilities are spelled out by the Mobilehome Residency Law. There is no such thing as a mobile home real estate license, and other landlord and tenant laws apply, except when the mobile home law is more specific.

Which of the following is a type of zoning action?

Moratorium Some of these describe zoning types, but only one describes a zoning action, and that is a moratorium.

How large is one square yard?

Nine square feet One square yard is equal to nine square feet.

Which of these scenarios includes a landlord using the right to terminate a lease after breach of contract?

No pets are allowed at Hartford Arms. Bob has been warned twice, and now his landlord tells him to move out. When a lease is terminated, the tenant must vacate and is no longer obligated to pay rent.

Which map only contains the boundary and division lines for lots of land?

Parcel map A parcel map contains the boundary and division lines for lots of land.

Mortgages may still, but only rarely, contain which of the following clauses?

Prepayment penalty clause The prepayment penalty clause is still allowed, but under very limited circumstances and only with full disclosure to the consumer that there are loans available without the penalty.

Which of these properties are exempt from the FIRREA federal appraisal guidelines?

Properties valued at $400,000 or less Properties valued at $400,000 or less are exempt from federal appraisal requirements.

Which term is defined as an increase in land by the permanent and gradual withdrawal of water?

Reliction Reliction is defined as an increase in land by the permanent and gradual withdrawal of water.

Another term used to describe an executor or executrix who was named to carry out the provisions of a will is a personal ______.

Representative Another term used to describe an executor or executrix who was named to carry out the provisions of a will is a personal representative.

You're a seller of a home built in 1975. What must you have installed before selling your property?

Smoke detector Smoke detectors are required for any home sold after January 1, 1986 (the date the home was built is not relevant). Carbon monoxide detectors are only required for specified properties.

In a contract, consideration is the giving of ______.

Something of value in exchange for something of value Consideration is the giving of something of value in exchange for something of value.

What is a sketch that shows the location, size, and shape of any improvements on a property being surveyed?

Spot survey A spot survey includes the location, size, and shape of any improvements on a property.

What's the first step an appraiser will perform when conducting an appraisal?

State the problem. The first step is to state the problem so the appraiser can identify what data is needed. After that, the appraiser will identify the data needed, gather it, and analyze it.

What's the term for the illegal practice of nudging buyers away from or toward a specific area based on the presence or absence of protected class members?

Steering Using an area's demographic make-up in order to steer protected classes away from or to specific neighborhoods is steering, and it's illegal.

Who has the right to make the first bid during a trustee's sale in California?

The beneficiary (lender) The lender has the right to make the first bid, which can be outbid by others.

Olivia took out a 15-year loan secured with a deed of trust. She worked two jobs in order to pay the loan back and finally made her last payment this month. What happens now?

The lender tells the trustee to release the title to Olivia. Because the property deed was held by a third-party trustee instead of the lender, the trustee grants a reconveyance deed to Olivia, which grants her the title.

Which act provides similar protections for consumers of business services and products as those provided by the California Fair Employment and Housing Act?

Unruh Act The Unruh Act prohibits discrimination of protected classes by businesses.

Kevin and Regina sold their property to Virginia using a general warranty deed. Which of these statements is true?

Virginia is the grantee. The grantor is the former owner, and grantee is the new owner. Property may only be conveyed if both (all) owners agree to convey it.

What is vicarious liability as it applies to real estate?

When a broker is held responsible for the actions or omissions of their licensees. In real estate, vicarious liability refers to the fact that brokers can be held liable for the actions or omissions of their licensees.

How is priority determined in cases where more than one judgment lien is filed against a property?

Whoever filed their claim first receives priority. Whoever filed their claim first receives priority.

Can police power ever be used in a way that restricts citizens' freedom?

Yes, if it's for the public good. While it's not the intent of police power, personal rights are sometimes sacrificed in the name of the public good.

A property sold for a $600,000 in a city that does not impose a transfer tax. What is the total transfer tax this property is subject to?

$660 At a rate of $1.10 per $1,000, the tax amount is $660.

What is an impact fee?

A fee paid to offset the increased burden on area infrastructure that the new subdivision may create Impact fees are a type of municipal fee paid to offset the extra burden on area infrastructure and services.

All lenders have different underwriting standards, but traditionally, the housing debt-to-income ratio has been ______%, with a total debt-to-income ratio of ______ %.

25 to 28; 33 to 36 Although 25% to 28%, and 33% to 36% are often used, the qualifying mortgage rules set total debt-to-income ratio at no more than 43%. While this may seem generous, it's a hard and fast percentage that allows for little lender discretion.

If a landlord wants to increase the rent on a unit that's regulated by the Tenant Protection Act of 2019, what's the maximum allowed as an annual increase?

5% plus the cost of living The Tenant Protection Act limits annual rental increases to 5% plus the cost of living, but the amount can never exceed a 10% increase.

How large is a section used in the rectangular government survey system?

640 acres Sections are one square mile, or 640 acres.

Having ________ on file allows lenders to confiscate personal property pledged as collateral in the event of a borrower default.

A UCC security agreement and financing statement The Uniform Commercial Cod applies when personal property is used as collateral for a real estate loan. The security statement required by the UCC must adequately identify personal property. This allows the lender to confiscate it in the event of default.

Which of the following is an easement?

A path providing neighborhood access to a pond cuts through part of Bill's property. An easement allows a person the right to use or cross over another's property for a specific reason. Residents of a neighborhood using the path that crosses through Bill's property is an example.

What's the Uniform Commercial Code?

A set of business laws created to regulate financial contracts dealing with personal property The UCC applies to personal property. When personal property is used as collateral for a real estate transaction, the UCC security agreement allows the lender to confiscate the personal property in the event of borrower default.

Which of the following properties is considered a manufactured home?

A structure transported in two units and built in 2005 on a permanent chassis To be considered a manufactured home, the property must be transported in one or more units, be built on a permanent chassis, consist of no more than two dwellings, and have been constructed after 1976.

What are building specifications?

A written narrative of the building plan Building specifications are the written narrative of the building plan. They describe major systems, construction details, design features not captured in the building plan, and landscaping.

Stacy has gone into default on her mortgage. Her lender is demanding that the entire loan balance be paid in full. Which mortgage clause permits her lender to do this?

Acceleration The acceleration clause gives the lender the right to accelerate payment of the loan if the borrower defaults.

After the closing, Donna ensures that her client has keys to the property and copies of all the transaction paperwork. Which fiduciary duty is Donna performing?

Accounting The duty of accounting refers to accounting for funds, property, and paperwork related to the transaction.

Eric's residential tenant hasn't paid rent for more than three months, and so Eric went to court to start eviction proceedings. He's now been granted the right to remove the tenant. This is a(n) ______ eviction.

Actual An actual eviction is when the tenant is physically and legally removed from the premises.

The Unruh Civil Rights Act requires: "Full and equal accommodations, advantages, facilities, privileges or services in ______ business establishments."

All The Unruh Civil Rights Act requires: "Full and equal accommodations, advantages, facilities, privileges or services in all business establishments."

Which law applies to smoke detectors and carbon monoxide detectors in California?

All laws, with the more restrictive law taking precedence The more restrictive law takes precedence. For instance, if state law requires at least a battery-operated detector, but local law requires the detectors to be hard-wired, local law has priority.

Which agency administers the Interstate Land Sales Full Disclosure Act?

Consumer Financial Protection Bureau It may help to remember that the Interstate Land Sales Full Disclosure Act is designed to protect consumers from the fraudulent sale of property sight unseen through the regulation of land sales across state lines.

Which economic principle pertains to how a change in a property affects its value as a whole?

Contribution Contribution pertains to how a change in a property impacts the value as a whole. Does converting a garage into a family room contribute to or detract from value? The answer to that would be in the eyes of the buyer.

Philip owns land in a state where growing marijuana is illegal. He wants to set up a small marijuana growing operation and export to states where marijuana has been legalized. He asks his attorney about the possibility. "No," his attorney explains. "It's not possible. Although you own the property outright, the right of ______ only allows you to manage the property in ways that are legal in this jurisdiction.

Control The right of control allows owner Philip to manage the property in any way he sees fit—as long as the enterprise is legal in the given jurisdiction. Other regulations, such as HOA regulations, may also apply.

A real estate transaction has a closing date of May 20. The seller, who's responsible for closing costs up to but not including the day of settlement, has already paid annual property taxes of $1,949. Using calendar year proration, the seller will be ______ on the closing statement.

Credited $1,207 The seller will be credited $1,207, because $1,949 ÷ 365 = $5.34, and $5.34 × 226 days = $1,206.84. That's $1,207 if rounded to the nearest whole dollar.

In order to convey real property, what document would you use?

Deed A deed is a method of conveying real property from one party to another. A deed should be recorded to protect the parties' interests.

Shirley's lender discharged the mortgage lien on Shirley's property after processing her final payment. Which clause requires the lender to take this action?

Defeasance The defeasance clause means the lender may not pursue the borrower for additional funds when the loan balance is paid in full.

Which of the following scenarios is an example of novation?

Doug is buying Norm's farm but has a serious accident and no longer wants to own a farm, so his daughter Linda decides to buy the property. Norm agrees to the substitution of Linda for Doug in the purchase contract, effectively creating a new contract. Novation creates a new contract by substituting one or more parties to the contract, which releases the original party from liability.

The Town of Petersville has just decided to restrict density in one area of town that previously allowed a higher density. This is known as ______.

Downzoning While it may result in more beautiful neighborhoods and does result in lowering density, downzoning also reduces possible uses and potential value.

The three companies that track credit for lenders are TransUnion, Equifax, and Experian. Which of the following is a true statement?

Each company a uses a slightly different scoring system The system used by each credit bureau varies.

As a stipulation of the ______, lenders must offer reasons when rejecting loan applications and must respond to all applications within 30 days.

Equal Credit Opportunity Act of 1974 The Equal Credit Opportunity Act of 1974 requires lenders to give businesses and consumers equal access to credit.

A reserve fund may also be called a(n) ______ account.

Escrow A reserve fund may also be called an escrow or impound account.

Jake, who was leasing a house, retained possession even after his right to possess had terminated. Jake has a(n) ______.

Estate at sufferance When tenants stay after they no longer have the right to possess the property, it's called estate at sufferance because the landlord is suffering the tenant's presence without express agreement. Jake is now a holdover tenant.

In which of the following types of contract is one or more of the contract's terms yet to be completed?

Executory contract In an executory contract, one or more of the contract's terms is yet to be completed.

In most states, which of the following situations would most likely be grounds for suspension or revocation of a real estate license?

Failure to specify a definite termination date in a listing contract Listing agreements must contain a definite termination date, and automatic extensions are not allowed.

Rhonda and Oliver bought an old schoolhouse with the hope of transforming it into a residence. They owned the property as joint tenants. After Oliver died, how did Rhonda own the building?

In severalty When there are only two joint tenants, the death of one dissolves the joint tenancy. Rhonda is now the sole owner of an estate in severalty.

What's NOT true of an easement appurtenant?

It's an encumbrance on the dominant property. An easement appurtenant involves adjoining property, and it runs with the land. The encumbrance is on the servient property.

Why do you think that handwritten changes take priority over typed changes?

It's less likely to be done accidentally Handwriting is a more personal and is more difficult to do either inadvertently or fraudulently.

Jolene signs a contract to buy Harvey's home. Before closing, it's discovered that Jolene is only 16 years old. Because she's a minor, she's not considered legally competent to enter into a contract. Which of the parties can void the contract?

Jolene If a party doesn't have legal capacity and enters into a contract anyway, the contract is voidable by the party lacking legal capacity.

Kandy was so excited to be buying her first home, a condo in a San Diego beach neighborhood. Thanks to an inheritance, she was able to pay for the property in cash! She gazed adoringly at her deed, admiring each of its elements that proclaimed her the sole owner of 1256 Voltaire Street, Unit 15. Which of these is NOT on Kandy's deed?

Kandy's signature Only the grantor is required to sign a deed to make it valid. Kandy is the grantee. The grantor's signature must be acknowledged in order for the deed to be properly recorded with the county.

A licensee must understand risks and provide disclosure of known environmental issues. A licensee must also do which of the following?

Know when to ask questions. Knowing when to ask questions is key to understanding risks and providing disclosure of environmental issues.

Which one of the following statements is true about land trusts?

Land trusts generally continue for a specified term, such as 10, 20, or 30 years. Land trusts generally continue for a specified term, such as 10, 20, or 30 years. At the end of the term, the trustee can extend the term or sell the land and provide the proceeds to the beneficiary.

Which of these circumstances does NOT require agent disclosure?

Marty is representing Dwayne in both the sale of his current home and the purchase of his new home. A licensee must disclose any situation that presents a conflict of interest. There's no inherent conflict of interest with one licensee representing a client in both the sale and purchase of property.

Meg is considering a move to a foreign country and wants to deed her property to her son, Christian, who's 16. Which of these must occur to make this transfer legal?

Meg must sign the deed and have her signature acknowledged. As the grantee, Christian doesn't have to sign the deed, and he doesn't have to be legally competent or of legal age. The property can be conveyed only if some consideration is in place, but it doesn't have to have a monetary value.

When developers consider what to do with leftover pieces of land that remain after the subdivision is built, they are considering what to do with ____________.

Outlots Outlots are the leftover parcels of land. Some considerations for development of these parcels are possible uses, placement, zoning ordinances, and accessibility.

Mary has a contract to buy her mother's house when her mother is finally ready to move to a senior living community. This way, the house stays in the family. After her mother finds a suitable senior apartment and moves, Mary writes a check for the agreed-upon amount, and her mother transfers the deed to Mary. What is happening in this scenario?

Performance This is an example of contract performance. Performance means that the two parties have met the terms of the contract.

What describes both the type of the development and the regulatory process that allows the developer to meet the community's goals for land use and density without being restricted by existing zoning requirements?

Planned unit development Planned unit development, or PUD, describes both the type of the development and the regulatory process that allows the developer to meet the community's goals for land use and density without being restricted by existing zoning requirements.

The government's authority at all levels to ensure the health, safety and welfare of its citizens, which includes the control of public land use is the definition of ______.

Police power While eminent domain and condemnation are part of this, police power defines a larger scope of authority.

Cory is applying for his contractor's license. He has met the educational and experience requirements, and has filed a Certificate of Self-Insurance with the Contractor's State License Board. What else must he do?

Post a cash deposit or bond with the state Contractor applicants must meet educational and experience requirements, post a bond with the state, and file a Certificate of Workers' Compensation Insurance or Certificate of Self-Insurance with the Contractor's State License Board.

Years ago, Rachel held a real estate license. She took some time off to travel and start a family. Now she's ready to get back in the saddle. Her license expired three years ago. What must she do to renew her license and start practicing real estate again?

Requalify for a real estate license by completing pre-licensing courses and passing the state licensing exam. Individuals holding licenses expired two years or longer have to start at the beginning. Rachel must requalify for licensure by completing the education requirements and passing the state exam again.

The right to access rivers, streams, and other flowing bodies of water adjacent to a property is called ______.

Riparian Remember that riparian and river (a flowing body of water) both begin with an R. Littoral and lake both begin with an L.

Which of these transactions in California is exempt from agency disclosure requirements?

Sale of a 10-unit residential building Agency disclosure is not required for transactions involving residential properties with five or more units, as these are exempt from this disclosure requirement.

Which type of lender specializes in taking in savings deposits and then lending money out to consumers through mortgages and other loans?

Savings and loan Thrifts, or savings and loan associations, specialize in taking in savings deposits and then lending out to consumers through mortgages and other loans.

Evelyn's mortgage payments fluctuate. The amount applied toward principal each payment remains the same, but the interest amount varies. What type of amortization is this?

Straight-line amortization With a straight loan (or straight-line amortization), the amount applied toward principal remains the same, but the interest amount varies according to the outstanding loan balance.

Which of these means "to formally offer"?

Tender Tender means "to offer." Its use is becoming obsolete for this meaning, but it may still be on your exam, so if it helps, think of "buyers tend to offer."

Which of these statements about terminating a lease is true?

Termination of a lease differs from rescission of a lease. Termination of a lease differs from rescission of a lease and may occur as the result of a single party to the lease exercising an option to terminate.

In pricing a property, what might expired listings tell the real estate professional?

The price at which a property won't sell Knowing the prices at which similar properties didn't sell can help a licensee show sellers what might be an unreasonable sales price expectation.

You're a landlord who wants to increase your month-to-month tenant's rent from $800 to $900. You may do this if ______.

The rental is a single-family residence. In most cases, a single-family residence is exempt from rent control laws in California.

Which of these statements about transfer of interest in rental property by a landlord is true?

The tenant retains the same rights and responsibilities that were provided by the original lease. A landlord may sell a rental property at any time, and any existing leases remain in effect.

What does the parol evidence rule say about contracts?

The terms agreed to in a written contract are the only terms relating to that contract. The parol evidence rules states that only in limited cases may extraneous evidence be presented to dispute the terms of a signed, written contract.

What are the national requirements for measuring a dwelling's square footage?

There are no national requirements. While national standards exist, they are voluntary.

Charlie represents Sue, a buyer. Charlie is being paid by Claude, the seller, through his brokerage. What's true about this situation?

This doesn't change the agency relationships. You can be paid by someone and not be that person's agent. Compensation doesn't determine agency—the agency relationship agreement does.

Why might a licensee want to make two visits to the property as part of a listing presentation?

To use information from a tour to prepare the CMA A CMA can be more professionally prepared after viewing the property. It also helps build rapport to meet with sellers more than once.