How is real property most different from personal property?
A. Different method of conveyance
B. Different method of financing
C. Different method of transfer of title
D. Real property is considered immovable by law
D. Real property is considered immovable by law
Real property is, by definition, that which is immovable. Although the documents used to transfer title to or finance real and personal property have different names (deed vs. bill of sale, deed of trust vs.
If an owner obtains riparian rights to a property:
A. he may take as much water from the stream as he likes
B. he may use the water only with a government permit
C. he has absolute ownership of the stream
D. the riparian rights apply only to the property
D. the riparian rights apply only to the property that is adjacent to the stream and that is located within the watershed
Riparian rights apply only to the property adjacent to the body of flowing water. Properties that are not adjacent to the water may u
A nonriparian owner is given permission by the state to use water from a nearby lake. This is known as a right of:
A. taking
B. percolation
C. capture
D. appropriation
D. appropriation
Under the appropriative rights system (also called the prior appropriation system), an owner of landlocked property may receive the right to take water from a distant source for a particular beneficial use (such as irrigation).
Which of the following would always be categorized as real property?
A. Peaches cultivated but not yet harvested
B. Stock in a mutual water company
C. Timber sold on contract but uncut
D. Minerals extracted from the earth
B. Stock in a mutual water company
Stock in a mutual water company is always appurtenant to land and is therefore always real property. Peaches still on the tree that have already been sold would be considered personal property, just as uncut timber subje
Mineral rights, unless there is an agreement otherwise:
A. are automatically transferred with the sale of real property
B. are always kept by the original owner of the property
C. cannot be conveyed separately from the surrounding real property
D. cannot
A. are automatically transferred with the sale of real property
Mineral rights will automatically pass from the seller to the buyer of real property unless otherwise agreed. Mineral rights can be conveyed or leased separately from the surrounding real pro
Items of personal property that become real property once they are attached to real property are known as:
A. attachments
B. fixtures
C. inclusions
D. appurtenances
B. fixtures
A manmade attachment that has been incorporated into real property is called a fixture
Unless excepted from the agreement, which of the following are implicitly included in a transfer of real property?
A. A building constructed on land
B. Mineral deposits underneath the land
C. Riparian rights appurtenant to the land
D. All of the above
D. All of the above
A building constructed on land is a manmade 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 th
Which of the following elements is not necessary to the existence of every contract?
A.Mutual consent
B.Written agreement
C.Parties capable of contracting
D.Lawful objective
B.Written agreement
Not all contracts are required to be in writing (although most contracts concerning real estate must be). The four necessary elements for any type of contract are mutual consent, capacity, consideration, and a legal objective.
Which of the following contracts would be required under the statute of frauds to be in writing?
A.Any agreement that is not to be performed within one year
B.Employment of a broker to negotiate a six-month lease on manufacturing equipment
Incorrect
C.Emp
A.Any agreement that is not to be performed within one year
The statute of frauds requires a writing for any agreement that will not be performed within one year of its making. The statute of frauds also requires a writing for an agreement authorizing an
A seller sued a broker, alleging that the broker had misrepresented material facts during his sales presentation. The broker responded that the listing contract had only been an oral contract and therefore was not enforceable. A court would find that:
A.t
C.the broker cannot use the statute of frauds as a defense, since that is not at issue
Whether or not the contract was in writing is not an issue in this case, because that isn't relevant to the seller's allegation of misrepresentation. So the broker cann
A buyer signs a deposit receipt, but her consent is based on false information provided by the broker. Which of the following is true?
A.The broker can't accept a commission
B.The offer can be accepted but is voidable by the buyer
C.The offer is illusory
B.The offer can be accepted but is voidable by the buyer
If an offer or acceptance is influenced by a negative force, such as constructive fraud, then the contract is voidable by the injured party (in this case, the buyer).
A voidable contract is one that:
A.would be valid but cannot be proven in a court
B.has no legal effect, since it was never a valid contract
C.may be enforced or rescinded by one of the parties
D.contains all four legal elements necessary for validity
C.may be enforced or rescinded by one of the parties
A contract is voidable if one party's consent was obtained through fraud, duress, or undue influence, or if one party is a minor and the contract does not involve real property. A voidable contract may
A voidable contract remains binding on the victimized party until it is:
A.invalidated
B.ratified
C.qualified
D.rescinded
D.rescinded
The victimized party to a voidable contract must take action to rescind the contract. If this is not done within a reasonable period of time, a court could decide that the contract has been ratified.
A seller accepted a proper offer in writing to purchase his property. He then refused to complete the transaction. If the buyer were to bring suit for failure to perform the contract, under the statute of limitations he would need to do so within:
A.1 yea
D.4 years
In California, the statute of limitations for written contracts is four years. A lawsuit regarding breach of a written contract must be filed within this four-year period.
The term "laches" refers to:
A.a deficiency judgment
B.a contract whose contents cannot be proven in court
C.a court that does not have jurisdiction to decide a question
D.an inexcusable delay in pursuing a legal right
D.an inexcusable delay in pursuing a legal right
Laches is a delay in pursuing a legal right. Even if a lawsuit was filed before the deadline set by the statute of limitations, if the plaintiff unnecessarily delayed taking legal action and the delay preju
Which of the following is not a necessary element in the formation of a contract?
A.Offer
B.Acceptance
C.Performance
D.Consideration
C.Performance
Performance is the desired result of a contract but is not a necessary element in the formation of a contract.
If a contract has been rescinded, that means that it has been:
A.rewritten
B.annulled
C.rejected
D.performed
B.annulled
Rescission annuls a contract. In other words, it invalidates the contract and puts the parties back as closely as possible into the positions they would have been in if they had never entered into the contract.
A broker failed to mention material facts about a property's soil instability problems to a buyer. If the buyer learns about the soil problems after his offer is accepted and decides the property is unacceptable, the buyer may:
A.have no choice but to go
B.request a rescission of the contract
A buyer who entered into a contract based on misinformation has grounds for a rescission of the contract. If the buyer chose to rescind, the contract would terminate and any deposit paid by the buyer would be refunde
An existing contract was replaced by an entirely new contract. This would be defined as a:
A.conversion
B.novation
C.reformation
D.rescission
B.novation
A novation is the substitution of a new obligation for an old one. It can involve substituting a new contract for an existing contract between the same parties, or substituting a new party for one of the original parties to a contract.
Which of the following persons is least likely to request an order of specific performance in a real estate transaction?
A.Seller of a large, subdividable parcel of land
B.Broker acting as agent to the seller
C.Buyer of a single-family residence
D.Buyer o
B.Broker acting as agent to the seller
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 requ
The amount of consideration offered in exchange for real property must be sufficient, relative to the value of the property, to support an action for:
A.rescission
B.specific performance
C.liquidated damages
D.unlawful detainer
B.specific performance
A court will usually not order specific performance if the consideration offered in exchange for the property is substantially less than the actual value of the property.
A buyer of a property fulfilled his part of the contract and then requested the seller to convey title. The seller refused to do so. By fulfilling his part of the contract and asking the seller to perform, the buyer made a:
A.breach
B.tender
C.warranty
D.
B.tender
When one party to a contract performs or unconditionally offers to perform as agreed, it is known as a tender. This is a necessary step before taking legal action against the other party for failure to perform.
A salesperson takes a listing and submits the information to the multiple listing service. The property seller has a contract with the:
A.multiple listing service
B.salesperson
C.salesperson's broker
D.salesperson, the broker, and the multiple listing ser
C.salesperson's broker
A listing agreement is a contract between a seller and a real estate broker. Even if the salesperson fills out the listing agreement form on the broker's behalf, the contract is between seller and broker.
What essential element is necessary between broker and principal in a transaction involving real property?
A.The agreement must state the terms under which the broker may collect a commission
B.There must be a written contract of employment
C.The broker m
B.There must be a written contract of employment
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.
If a property owner refuses to pay a broker a properly earned commission, the broker may seek relief by:
A.filing a complaint with the Real Estate Commissioner
B.filing a statutory vendor's lien on the seller's property
C.filing a court action for damages
C.filing a court action for damages against the seller
The broker could sue the seller for compensatory damages (the amount of the commission). A broker is not entitled to a vendor's lien, and the Real Estate Commissioner cannot help a broker recover a co
The payment of a commission to a real estate broker based only on an oral listing is:
A.illegal
B.contrary to public policy
C.permissible if the seller elects to do so
D.prohibited by the Commissioner's regulations
C.permissible if the seller elects to do so
Ordinarily, a listing must be based on a written employment agreement to be enforceable. However, even though a seller isn't legally required to pay a broker's commission if there is only an oral listing, the se
A prospect calls a broker and asks about a farm property that he wishes to buy. The broker says he does not have a listing on that property, but that he will check into it. He calls the owner of the farm and says that he has an interested buyer. However,
D.is not entitled to a commission
The broker is not entitled to a commission, since he did not have a written listing agreement for the property and did not arrange the sale of the property to the buyer.
A seller lists a vacant parcel of land for $550,000 with the specification that a buyer must agree to an installment sale and cannot make more than a 23% cash downpayment. A potential buyer makes a full cash offer, which is rejected. Under these circumsta
C.No, the offer did not conform to the listing
If a buyer makes an offer that does not match the terms set forth in the listing, the seller will not owe his broker a commission if the seller does not accept the offer.
Hanson contacts a real estate agent to see if a particular ranch property is listed for sale. It isn't listed, but the agent tells Hanson he'll obtain information about the property for him. The agent then contacts the seller, asks about the ranch, and te
C.has no recourse
There was never a listing agreement between the seller and the agent, so there is no enforceable contract that would require the agent to be compensated.
A broker acting in good faith received misinformation provided by the seller, and passed it on to the buyer, who agreed to purchase the property. When the buyer found out, he rescinded the contract. In this situation:
A.the broker is entitled to collect h
A.the broker is entitled to collect his commission from the seller, and the seller must reimburse him for losses caused by a lawsuit by the buyer
Because he found a ready, willing, and able buyer, the broker is entitled to collect a commission from the se
A broker received an offer and a deposit on a property she listed. The seller accepted the offer. Before the deal closed, though, the buyer and seller agreed to cancel the deal, without the broker's knowledge. The buyer requests the return of the deposit.
B.The broker must return all of the deposit, but may then sue the seller for her commission
A broker who has been deprived of an earned commission may not simply withhold the commission from funds she is holding in trust; the trust funds must be returned
The broker most likely to qualify for a commission is the one who:
A.communicated acceptance to the buyer
B.communicated the offer to the seller
C.obtained an offer
D.obtained an offer with a deposit
A.communicated acceptance to the buyer
When a broker communicates the seller's acceptance to the buyer, that is the moment the contract is formed. There may still be contingencies that have to be satisfied, but this is the most important step in creating
Brokers Frank and Dean both took open listings on the same property. Frank shows the property to a prospective buyer, who decides not to buy it. One week later, Dean shows the same property to the same buyer, who decides to purchase the property. Who rece
B.Dean receives entire commission
Even though Frank already showed the property to the buyer, Dean was the one who negotiated and secured the offer and acceptance. Therefore, Dean was the procuring cause of the sale and is entitled to receive the commissi
Which kind of listing agreement is one where the seller will pay a commission to her broker, unless the seller sells the property herself?
A.Exclusive agency
B.Exclusive right to sell
C.Net listing
D.Open listing
A.Exclusive agency
Under an exclusive agency listing agreement, the seller will owe the broker a commission if a buyer is found during the listing term, unless the seller finds the buyer herself.
Broker Beth signed an exclusive agency listing with Chuck and diligently advertised his house. However, during the listing period, Chuck sold the house to a friend, without any assistance from Beth. Chuck refused to pay any commission. Beth is entitled to
D.no commission
Under an exclusive agency listing, no commission will be paid to the broker if the seller sells the property on his own.
A contract that provides for a commission for the broker regardless of who finds a buyer is a/an:
A.exclusive agency listing
B.exclusive right to sell listing
C.net listing
D.open listing
B.exclusive right to sell listing
Under an exclusive right to sell listing, the broker is entitled to the commission if the property sells during the listing period, regardless of who actually arranged the sale.
Under the terms of a listing, the broker may 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:
A.exclusive agency listing
B.exclusive right to sell listing
C.
B.exclusive right to sell listing
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.
An exclusive listing agreement is:
A.a bilateral executory contract
B.an employment contract
C.a promise for a promise
D.All of the above
D.All of the above
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
A broker included the following phrase in a listing contract: "In consideration of execution of the foregoing, the undersigned broker agrees to use due diligence in procuring a purchaser." This phrase is:
A.necessary to the creation of a unilateral contra
B.necessary to the creation of a bilateral contract
A bilateral contract is one that involves a promise for a promise. By promising to use due diligence to find a purchaser in exchange for compensation, the broker proposes a bilateral contract.
A listing agreement concerning community property requires the signature(s) of:
A.the husband and the wife, since it's a real estate contract
B.either the husband or the wife, since it's a personal services contract
C.the husband, the wife, and the broker
B.either the husband or the wife, since it's a personal services contract
A listing agreement is a personal services contract, so it only requires the signature of one owner of the property being listed. The signature of the broker is not required; he can
In order to be enforceable, an exclusive listing must be signed by:
A.the broker
B.the seller
C.the broker and the seller
D.the broker, the buyer, and the seller
B.the seller
A listing agreement must be signed by the seller. The broker is not required to sign, although she almost always does (or the listing salesperson signs on her behalf).
Most listing contracts authorize a broker to:
A.find a buyer and accept the buyer's offer on behalf of the seller
B.guarantee to a prospective buyer that the seller will accept his offer
C.deed the property over to the buyer
D.find a buyer and accept a de
D.find a buyer and accept a deposit with the offer to purchase
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 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:
A.the purchase agreement
B.community standards
C.the listing agreement
D.the br
C.the listing agreement
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
How is the maximum commission rate a broker may charge established?
A.It is set by the local multiple listing service
B.It is mandated by the state Real Estate Law
C.It must be within limits prescribed by real estate professional associations' ethical cod
D.It is set by agreement between principal and broker
There are no legal limits on commission rates. They are determined by agreement between the broker and the principal.
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?
A.Exclusive agency listing
B.Exclusive right to sell listing
C.Net listing
D.Open listing
C.Net listing
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.
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?
A.Net listing
B.Open listing
C.Exclusive agency
D.Exclusive right to sell
A.Net listing
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 fo
What form may the commission paid to a real estate broker take?
A.Assignment of an existing promissory note
B.Assignment of funds from buyer to seller
C.A new promissory note
D.All of the above
D.All of the above
A broker's commission can take the form of anything that has value, if the broker and the seller agree to it. This would include cash, a check, personal property, a new promissory note, assignment of an existing note, or an assignment o
On the last day of the term of the listing agreement, the broker submitted a verbal offer to the seller. The next day, the buyer and seller enter into a written purchase agreement. Based on these facts alone:
A.the broker is entitled to the commission
B.t
C.the broker is not entitled to a commission
The question does not state that the listing agreement included a safety clause. Without a safety clause, the broker is not entitled to a commission on a sale that was agreed upon after the listing term expired
An agent may collect a commission only for sales that are made during the listing period, unless:
A.the listing agreement contains a liquidated damages clause
B.the principal signs a release clause
C.the listing agreement contains a protection period clau
C.the listing agreement contains a protection period clause
When a listing agreement contains a protection period clause (a safety clause), the broker may still be entitled to a commission if the property is sold during a specified period after the listin
If there is a 30- or 60-day safety clause in a listing agreement, which of the following is true?
A.The agent is owed a commission if the property sells during the safety period
B.The agent must provide a list of the people he worked with, and if the sell
B.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
Many safety clauses require the broker to give the seller a list of the potential buyers
Seller Weiss signs a 60-day exclusive agency listing with Broker Hanada. After 30 days, Hanada has not sold the home and Weiss notifies Hanada in writing that he is canceling the listing. One week later, Weiss signs open listing agreements with several ot
C.owes commissions to both Hanada and the broker under the open listing
Under the terms of an exclusive agency listing, the broker is entitled to the commission if anyone other than the seller finds a buyer for the property during the listing period. The
An exclusive listing must have a termination date that is:
A.30 days after signing
B.60 days after signing
C.definite
D.open-ended
C.definite
An exclusive listing can be for as long or short a period as the parties agree on, but the Real Estate Law requires that it must have some sort of definite termination date.
Which one of the following is an illegal act for a real estate broker in California?
A.Using a net listing if the amount of commission is disclosed
B.Claiming a commission on an exclusive listing that had no specified termination date
C.Collecting a commi
B.Claiming a commission on an exclusive listing that had no specified termination date
A broker in California who does not include a termination date in an exclusive listing agreement will be subject to disciplinary action.
What is the standard minimum time limit for employment in an exclusive listing agreement?
A.30 days
B.Six months
C.The average length of time it takes to find a buyer in that particular locality
D.Whatever is agreed upon by broker and property owner
D.Whatever is agreed upon by broker and property owner
The termination date of an exclusive listing is determined by agreement between the broker and the seller.
With a purchase agreement, the date of formation of the contract is:
A.when acceptance is communicated to the offeror
B.the date the contract is prepared
C.the date the buyer signs
D.the date the offer is made
A.when acceptance is communicated to the offeror
A contract is considered to be formed on the date that the offeree communicates acceptance to the offeror.
Once a purchase agreement has been signed, what type of title does a buyer hold in the property?
A.Joint tenancy
B.Pending title
C.Legal title
D.Equitable title
D.Equitable title
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 contract to sell real property that a married couple owns as community property is signed only by the wife. This agreement is:
A.void
B.illegal
C.unenforceable
D.enforceable
C.unenforceable
A purchase agreement involving community property is unenforceable unless it is signed by both husband and wife. The contract is not void without both signatures, but a court will not enforce it.
It is important to include a legal description of the property in a contract for the sale of real estate because:
A.it makes the contract enforceable and discourages litigation
B.it will be used for the description in the deed
C.otherwise the broker could
A.it makes the contract enforceable and discourages litigation
A legal description is important because the property must be identified with sufficient specificity. If not, the contract might be unenforceable.
If a buyer's contingency isn't fulfilled, what happens?
A.The buyer must compensate the seller
B.The buyer doesn't have to perform
C.The buyer will receive liquidated damages
D.The purchase agreement is automatically rescinded
B.The buyer doesn't have to perform
If a buyer's contingency isn't met (for instance, the buyer is unable to obtain financing after making a good faith effort to do so), the buyer may withdraw from the transaction without forfeiting her deposit.
The buyer and seller enter into a purchase agreement that contains a contingency clause. This may mean that the:
A.sale is contingent on the buyer selling his other property
B.sales price will be paid in installments from the buyer to the seller
C.good fa
A.sale is contingent on the buyer selling his other property
A contingency clause in a purchase agreement may make the sale of the property contingent on whether the buyer is able to sell other property that he already owns. Other commonly used contingenc
When a contingency clause is used in a purchase agreement, which of the following information should be included?
A.Nature of the contingency
B.Duration of the contingency
C.Conditions for removal of the contingency
D.All of the above
D.All of the above
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, an
The Harrisons submitted an offer to purchase a property with a deposit. The offer to purchase contained a clause that stated, "Contingent upon buyers obtaining VA loan for $175,000 payable over 30 years at interest rate of no more than 8%." Which of the f
C.If a loan of $175,000 is not available, the Harrisons may withdraw from the transaction and have their deposit returned
If a purchase agreement includes a financing contingency clause and the buyers are unable to obtain financing on the terms described
Which of the following clauses must a purchase agreement contain?
A.Subordination clause
B.Safety clause
C.Contingency clause
D.None of the above
D.None of the above
Contingency clauses are often included in purchase agreements, but they are not required. A safety clause is common in listing agreements; a subordination clause might appear in a mortgage or a deed of trust.
Title will be delivered on a different day than the day the buyer plans to take possession on. The parties should use a/an:
A.interim occupancy agreement
B.quitclaim deed
C.assignment of rents
D.option agreement
A.interim occupancy agreement
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.
Rice purchased a vacant residence; the offer was presented by Rice's broker, Boardman. Before the transaction closed, Rice asked Boardman if it would be acceptable if he entered the house to paint it before taking possession. In this case:
A.Rice has an e
C.Rice may enter if he receives written permission from the property's owner
Until the transaction closes and Rice takes possession, he must have the owner's written permission to enter the property and start making changes. (An interim occupancy agreemen
A buyer takes possession of a property before closing, and an earthquake destroys the house. Under the Uniform Vendor and Purchaser Risk Act, the buyer is:
A.able to avoid closing the transaction
B.not able to avoid closing the transaction
C.covered by th
B.not able to avoid closing the transaction
The Uniform Vendor and Purchaser Risk Act provides that the seller bears the risk of loss until either possession or legal title is transferred to the buyer. Once possession has been transferred, however, the ri
The phrase "time is of the essence" is most likely to be found in a/an:
A.purchase agreement
B.listing agreement
C.grant deed
D.option agreement
A.purchase agreement
When a contract includes a "time is of the essence" clause, failure to comply with any deadline in the contract can be treated as a material breach of the contract. Almost all purchase agreements have a "time is of the essence" clause
A broker received an offer along with a deposit from a prospective buyer. The deposit was a promissory note for $2,000 that was designated "pay to bearer." Which of the following statements is true?
A.The deposit is not valid; it must take the form of cas
D.The seller must be notified that the deposit is in the form of a promissory note when the broker presents the offer
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:
A.he should not have accepted the promissory note as a deposit
B.if the offer
C.the seller must be informed before accepting the offer that the deposit is a promissory note
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 sh
A buyer made an offer in early June. The deposit was a promissory note for $10,000. The buyer would pay the seller that amount, plus 12% interest, by June 30. Which of the following is correct?
A.A deposit must be in check or cash
B.A promissory note for
D.The seller must be informed that the deposit is a promissory note when the offer is presented
A good faith deposit may take the form of a promissory note, but this is a fact that must be disclosed to the seller at the time of the presentation of the off
Which statement concerning the good faith deposit is correct?
A.It may be a promissory note
B.It may be a check that is held uncashed by the broker
C.It may be anything that the parties agree is of value
D.All of the above
D.All of the above
A good faith deposit is customarily a check, but it may take any form that the parties agree upon.
A real estate buyer and seller have agreed to terminate their contract, and they direct the broker holding the deposit to refund the buyer's deposit. The broker:
A.is automatically entitled to keep half the deposit
B.may sue the seller, but cannot keep an
B.may sue the seller, but cannot keep any portion of the deposit
A broker is not entitled to keep all or part of a deposit, in case a transaction is mutually terminated by the two parties. Because a willing and able buyer had been found, the seller may st
If a home buyer breaches the purchase agreement, the seller may retain the good faith deposit (or a portion of it) if the buyer and seller have initialed a:
A.contingency clause
B.default clause
C.liquidated damages clause
D.risk clause
C.liquidated damages clause
A liquidated damages clause in a purchase agreement allows the seller to keep all or part of the good faith deposit if the buyer breaches the contract. In a sale of owner-occupied residential property in California, no more tha
In the sale of an owner-occupied home for $400,000, the broker received a $25,000 deposit from the buyer. The buyer breached the contract, and the seller claimed that the buyer had forfeited the deposit. If the liquidated damages provision in the purchase
B.may retain no more than 3% of the sales price as liquidated damages
Since this is the sale of an owner-occupied home and the parties initialed the liquidated damages provision, the buyer's breach of contract entitles the seller to keep no more than 3% o
In a land sales contract, the seller is often called the:
A.trustee
B.trustor
C.vendee
D.vendor
D.vendor
The parties to a land contract are usually referred to as the vendee (the buyer) and the vendor (the seller).
A buyer and seller sign a real property conditional sales contract. At that point:
A.the seller retains all interests in the property
B.legal title passes to the buyer
C.equitable title passes to the buyer
D.all interests in the property pass to the buyer
C.equitable title passes to the buyer
Under a conditional sales contract (also known as a land contract), equitable title passes to the buyer (the vendee) right away, while legal title is retained by the seller (the vendor) until the contract price has be
A land sales contract:
A.is between a seller and a broker
B.transfers equitable title to the buyer
C.transfers equitable title to the seller
D.transfers legal title to the buyer
B.transfers equitable title to the buyer
Under a land sales contract, the seller (or vendor) retains legal title to the property while the buyer (or vendee) makes payments. During this period, the buyer receives equitable title.
The instrument that would be used by an owner who wanted to sell his property, extend his own credit, and retain legal title, would be a:
A.conditional or installment sales contract
B.grant deed
C.mortgage
D.security agreement
A.conditional or installment sales contract
This describes a land contract, which may also be referred to as a conditional sales contract or installment sales contract.
Under a land contract, which party would hold legal title?
A.Beneficiary
B.Mortgagee
C.Vendee
D.Vendor
D.Vendor
Under a land contract, the vendee (the buyer) receives equitable title right away, but the vendor (the seller) retains legal title until the contract is fully paid off.
A buyer under a land contract will acquire:
A.the right of possession
B.the right to transfer or will the property
C.equitable title
D.All of the above
D.All of the above
Under a land contract, the buyer (the vendee) has equitable title, the right to possession of the property, and the right to sell or will his interest in the property.
A buyer of a single-family home purchased the home using a land contract that included a clause prohibiting prepayment. After two years of making regular payments, the buyer offered to pay the remainder of the balance as a lump sum in full performance of
B.The buyer can pay off the entire balance of a land contract at any point after 12 months following the sale
Under a land contract for residential property, prepayment may be prohibited only for the first 12 months of the contract. A clause that attempts
A seller contacted a broker to list some property. The broker discovered that the seller was still purchasing the property through a land contract. The contract does not contain an alienation clause or any prohibitions against resale or assignment. The se
D.assign to the buyer the right to receive the deed once the contract is paid off
A land contract vendee may assign the right to receive legal title once the contract is paid off, but the vendee cannot assign responsibility for making the payments. In the
A land contract was recorded by the seller. The buyer defaulted on the payments. If a quitclaim deed were to be used in order to clear the cloud from the title, it would be executed by:
A.the buyer
B.the seller
C.both the buyer and the seller
D.the lender
A.the buyer
A quitclaim deed signed by the buyer (the vendee), in which he releases his interest in the property to the seller (the vendor), would be recorded by the seller in order to clear away the cloud on title created by the recorded contract.
Gene purchased a property from Paul on a land contract. He made a $2,500 downpayment and made some of the payments, but soon stopped making payments and abandoned the house. Paul reclaimed possession. Which of the following is correct?
A.The title to the
D.There would be a cloud on the title
The partially performed land contract created a cloud on Paul's title. Paul would need to obtain a quitclaim deed from Gene or else file a quiet title action in order to clear the cloud from the title.
A contract in which one party promises not to revoke an offer during a specified period of time is a/an:
A.exchange agreement
B.novation
C.option
D.rescission
C.option
An option establishes a specified period of time in which the optionee can accept an offer made by the optionor, such as an offer to sell property to the optionee at a specified price. It would violate the option contract if the optionor revoked
Hector gave Kim an option to purchase his property at a price of $390,000. The option was good for 90 days, and Kim gave Hector a check for $100. This would be considered a/an:
A.offer to execute a potential future contract
B.agency agreement
C.encumbranc
D.contract to keep an offer open
An option is sometimes described as a "contract to keep an offer open." An option to purchase gives the optionee the right to buy property at a specified price during a set period. An option is only a contractual right, no
A prospective buyer paid $3,000 for a three-month option to purchase a $400,000 property. In this case, all of the following are true except:
A.only the optionor is bound to the sale
B.a unilateral contract has been established
C.the optionee has acquired
C.the optionee has acquired a legal interest in the property
The optionee acquires no interest in the property, only a contractual right to purchase it. An option is a unilateral contract because the optionee is free to exercise or not exercise the right,
Which of the following is an encumbrance?
A.Freehold estate
B.Homestead exemption
C.Lease
D.Recordation as a subdivision plat
C.Lease
A lease is a right in land that reduces the completeness of the owner's title, so it can be considered an encumbrance even though it grants the lessee a possessory right. A homestead exemption may affect foreclosure of a particular kind of encumbr
A lease for longer than one year will require all of the following, except:
A.a written agreement
B.a termination date
C.an adequate description of the property
D.the signatures of the landlord and tenant
D.the signatures of the landlord and tenant
A lease for longer than one year must be in writing and signed by the landlord, but the tenant's signature is not required. When the tenant moves in, that's considered implied acceptance of the lease. (Neverthel
State law places limits on the size of the security deposit that can be required for a residential lease. The limits are based on:
A.the length of term of the lease
B.whether the unit is furnished or unfurnished
C.the square footage of the rental unit
D.B
D.Both A and B
In California, the security deposit for an unfurnished unit can't exceed two months' rent; for a furnished unit, it can't exceed three months' rent. If the lease term is six months or more, though, the deposit may be equal to six months' re
If a tenant ends his tenancy, how long does the landlord have to return his security deposit?
A.Two weeks
B.Three weeks
C.One month
D.Two months
B.Three weeks
After a residential tenant moves out, the landlord has three weeks (21 days) to return the tenant's security deposit or else provide a statement explaining why the deposit is being retained.
A lessee had a one-year lease, on which he made monthly payments of rent. After the lease expired, he continued to pay rent, which the lessor accepted. What happens?
A.The lease is renewed for one year
B.The lease is renewed for one month
C.This is a tena
B.The lease is renewed for one month
When the landlord accepted another rent payment after the original lease term expired, the tenancy was renewed by implication. However, since the rent was previously paid on a monthly basis, the tenant now has a month-
If a lessor sells the property that is subject to a lease, the lease:
A.applies to the new owner
B.terminates
C.becomes a sublease
D.is assigned to the new owner
A.applies to the new owner
If a leased property is sold in the middle of the lease term, the lease is still binding on the new owner. The lease would not be assigned to the new owner; an assignment occurs when a tenant transfers his entire leasehold inter
In a tenant's valid assignment of a lease, the assignee becomes the new:
A.landlord
B.lessor
C.sublessee
D.tenant
D.tenant
In an assignment, the assignee is the new tenant, who takes over the old tenant's entire interest and has primary responsibility for payment of the rent.
If a tenant transferred an entire leasehold interest, he would do so by:
A.alienation
B.assignment
C.sublease
D.surrender
B.assignment
Assignment transfers the tenant's entire leasehold interest to a new tenant (an assignee). In contrast, a sublease transfers only part of the tenant's leasehold interest (only part of the remaining lease term, or only part of the property).
What document would be used to convey possessory rights without conveying ownership rights?
A.License
B.Mortgage
C.Patent
D.Sublease
D.Sublease
A sublease is used to transfer possessory rights -- the right to possession of leased property -- to a subtenant; the subtenant does not have an ownership interest. Licenses and mortgages transfer neither possessory rights nor ownership rights,
If the terms of a sublease conflict with the terms of the original lease:
A.the sublease is converted to an assignment
B.the sublease is subordinate to the lease
C.the sublease is superior to the lease
D.the sublease is void
B.the sublease is subordinate to the lease
The terms of the original lease control, even if a sublease has different provisions that conflict with the original lease.
What is a sublease?
A.An assignment of a lease
B.Transfer of possession for less than the remainder of the lease term
C.Transfer of possession for the entire remainder of the lease term
D.The surrender of a lease and substitution of a new lease
B.Transfer of possession for less than the remainder of the lease term
A sublease is the transfer of possession of leased property for only part of the remaining lease term. (Alternatively, it can be a transfer of possession of only part of the leased pro
A tenant wants to sublease or assign a leased property. If the lease is silent on this issue, then the:
A.property cannot be sublet or assigned
B.property cannot be sublet or assigned without the landlord's permission
C.tenant may go ahead and sublease or
C.tenant may go ahead and sublease or assign the property
Unless the lease includes a provision prohibiting or restricting subleasing or assignment, a leasehold interest can be sublet or assigned without asking the landlord for permission to do so.
The term "quiet enjoyment" in a lease would refer to which of the following situations?
A.Possession with freedom from interference by the property's owner
B.Freedom from nuisances created by neighbors
C.Freedom from encumbrances created by the previous o
A.Possession with freedom from interference by the property's owner
Every lease carries an implied covenant of quiet enjoyment; the landlord promises the tenant that her exclusive possession of the property will not be disturbed by the landlord (or by thi
When industrial space is rented, the landlord customarily promises that:
A.the property is up to current code at the time of the lease
B.the property was constructed according to code when it was built
C.the property shall be in habitable condition
D.the
B.the property was constructed according to code when it was built
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?
A.The landlord cuts off the electricity to the tenant's unit
B.The landlord does not respond withi
D.The landlord fails to repair excessive wear and tear caused by the tenant
If the tenant is the cause of damage to the property, the landlord's failure to perform repair work does not constitute constructive eviction.
A landlord would file an unlawful detainer action to expel a tenant who:
A.had too many people living in the rented space
B.is three months late on rent
C.put property to an illegal use
D.Any of the above
D.Any of the above
A landlord may evict a delinquent tenant by:
A.giving three days' notice
B.giving thirty days' notice
C.obtaining a writ of execution
D.filing an unlawful detainer action
D.filing an unlawful detainer action
After giving the tenant a notice of default, the landlord must then file an unlawful detainer action in order to evict the tenant. If the court decides the tenant should be evicted, it will issue a writ of possession.
An unlawful detainer action would be filed by an offended:
A.grantor
B.trustor
C.lessor
D.beneficiary
C.lessor
A lessor, or landlord, would file an unlawful detainer action against a tenant in default.
A commercial tenant has a full service gross lease. The tenant:
A.has expenses past the expense stop
B.must pay for utilities
C.owes nothing more than monthly rent
D.owes property taxes, insurance, and maintenance costs in addition to monthly rent
C.owes nothing more than monthly rent
A full service gross lease will require a tenant to only pay a flat monthly rental fee; the landlord will be responsible for all other costs, including utilities.
Under what type of lease does a lessee pay for maintenance, utilities, and taxes along with rent?
A.Net lease
B.Commercial lease
C.Percentage lease
D.Graduated lease
A.Net lease
In a typical net lease, the tenant will pay a share of the property taxes and insurance, in addition to all utility bills and maintenance costs.
A tenant with a net lease would pay a proportionate share of all of the following EXCEPT:
A.property taxes
B.insurance
C.leasing commissions
D.janitorial expenses
C.leasing commissions
In a net lease, the tenant will assume partial or total responsibility for paying for property taxes, insurance, utilities, and maintenance expenses.
What document would most likely be related to the Consumer Price Index (or CPI)?
A.Residential lease
B.Lease of multi-family dwelling
C.Condominium CC&Rs
D.Commercial lease
D.Commercial lease
A graduated lease includes an escalation clause that provides for periodic increases in the rent. In commercial leases, these increases are often tied to changes in the Consumer Price Index or other measures of inflation.
A lease that is based on the gross income generated by the tenant's business is a:
A.graduated lease
B.gross lease
C.net lease
D.percentage lease
D.percentage lease
A percentage lease usually includes a flat minimum rent plus a percentage of the tenant's gross or net income.
Agency law is concerned with the duties and rights among:
A.agent and principal
B.agent and third party
C.principal and third party
D.All of the above
D.All of the above
Agency law governs relationships among agents, principals, and third parties.
An agency relationship may be created in all of the following ways, except:
A.agent agrees to appointment by the principal
B.voluntary offer by the agent
C.oral contract
D.agreement without consideration
B.voluntary offer by the agent
An agency relationship can't be created unilaterally by a potential agent's offer. The principal would have to accept the agent's offer in an express agreement or by ratification, for instance to create the agency. Neither c
Which of the following elements is not necessary for the creation of an agency relationship?
A.A competent principal
B.Mutual agreement between principal and agent
C.Payment of consideration
D.A fiduciary relationship
C.Payment of consideration
Creation of an agency relationship does not require an exchange of consideration; an agency may be gratuitous. But whether or not the agent will be paid, the relationship is always a fiduciary relationship.
An agency relationship is best created through:
A.conduct
B.consideration
C.cooperation with other brokers
D.express agreement
D.express agreement
An agency relationship is ordinarily created through express written agreement. An agency created only through conduct or cooperation with other brokers may leave considerable doubt as to whom the agent represents. Consideration is not
Which of the following, by itself, would not result in a transfer of property?
A.Deed of conveyance
B.Equitable estoppel
C.Marriage between two property owners
D.Public dedication
B.Equitable estoppel
Equitable estoppel is a legal doctrine that states that a party can't take a position that contradicts her previous conduct if someone else reasonably relied on the previous conduct. Estoppel can be a method of creating an agency rela
The seller's agent is most likely to be liable for damages to a buyer if she:
A.executes a contract in the seller's name under proper authorization through a power of attorney
B.fails to disclose that the seller is eager and might take a lot less than the
D.exceeds the authority given to her by the seller
An agent may be liable to third parties for actions that exceed the scope of authority granted by her principal (and the principal generally will not be liable for those actions).
An agent has as much authority as:
A.he believes he has been granted through a contract
B.is allowed under general agency law
C.the principal has granted him
D.third parties dealing with him believe he has
C.the principal has granted him
The scope of an agent's authority is no greater than the authority that has been actually or implicitly granted by the principal.
Rafael signed an offer and gave the seller's broker a personal check that was to serve as his deposit. He specified that the broker was to hold the check uncashed until the offer was accepted. The broker should:
A.not submit the offer since he does not ha
D.submit the offer and hold the check until the offer is accepted
A seller's broker may hold a buyer's deposit check uncashed until the seller accepts the buyer's offer. (The broker should inform the seller that he's doing this.) If the seller did not exp
If a broker accepts a deposit from a prospective buyer without express written authorization from the seller, she is:
A.guilty of a breach of her fiduciary duty to the seller
B.guilty of commingling customer funds with her own funds
C.operating within her
D.acting as the buyer's agent
A seller's agent who accepts a buyer's deposit without the express authorization of the seller acts as the buyer's agent, but only in regard to the deposit.
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
D.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
Under the doctrine of vicarious liability, a person injured by an agent's acts may sue the principal as well as the agent. H
A buyer's agent helps the buyer prepare an offer and also helps arrange financing by helping with the loan application and submitting it to a lender. The licensee is:
A.a fiduciary to the buyer with respect to both transactions
B.a fiduciary under the pur
A.a fiduciary to the buyer with respect to both transactions
An agency relationship, whether it is in the context of a real estate transaction or a loan transaction, is a fiduciary relationship, meaning the agent is in a position of trust and confidence i
A real estate agent's relationship with her principal would be described as all of the following, except a/an:
A.agency relationship
B.fiduciary relationship
C.broker/client relationship
D.power of attorney
D.power of attorney
A real estate agent ordinarily does not have a power of attorney from her principal. (She might be given power of attorney in unusual circumstances -- for instance, if a seller will be out of the country and wants the agent to be able
A buyer's agent has a fiduciary duty to:
A.advise the buyer on how best to take title
B.use utmost care when dealing with the buyer
C.instruct the buyer which title insurance company to use
D.disclose to the seller the maximum the buyer will pay for the p
B.use utmost care when dealing with the buyer
Among the fiduciary duties that an agent owes to her principal is the duty to use utmost care in carrying out her work. An agent may not advise a principal on legal issues such as how to take title; legal issu
When does the agent's duty of confidentiality end?
A.The duty of confidentiality continues to exist even after the agency relationship terminates.
B.The duty of confidentiality terminates when the agency relationship terminates.
C.The duty of confidential
A.The duty of confidentiality continues to exist even after the agency relationship terminates.
The duty not to disclose confidential information continues after the agency relationship has formally terminated.
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
A.Rita violated her fiduciary duty by disclosing confidential information
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.
Kim, who does not have a real estate license, offered Francis $10,000 per acre for a 20-acre parcel of land. Francis accepted this offer, unaware that Kim had a standing offer from a third party who was willing to pay $20,000 per acre for the same parcel.
D.No remedy is available
Because Kim is not a licensee or acting as an agent, she does not owe fiduciary duties to Francis. It is legal for an unlicensed individual to purchase a property and immediately resell it for a profit without informing the seller
A listing agent must reveal material facts to the seller because the agent is a/an:
A.attorney in fact
B.fiduciary
C.guardian
D.receiver
B.fiduciary
Because the broker/client relationship is founded on trust and confidence, it is a fiduciary relationship. An agent's fiduciary duties include disclosure of material facts to the principal. A listing agent must not withhold any information fro
A broker, in dealing with the public, may not:
A.delegate responsibilities to other persons
B.receive a commission from both buyer and seller
C.refuse to take a listing
D.remain silent about material facts about the property that are known only to the bro
D.remain silent about material facts about the property that are known only to the broker
The broker's duty to disclose material facts is an affirmative duty; he may not remain silent even if he isn't asked for the information. While a broker may not refu
A seller's agent intends to give part of her commission to the buyer. The agent:
A.is guilty of fraud
B.will be subject to discipline by the Real Estate Commissioner
C.must disclose this fact to the seller
D.may freely do so
C.must disclose this fact to the seller
Any relationship between a seller's agent and the buyer is a conflict of interest and a material fact that the agent must disclose to the seller. There is nothing necessarily illegal about sharing the commission wit
After a sale closed, the seller discovered that her broker had sold the property to his own brother. The seller:
A.could sue for damages or to rescind the transaction
B.could sue for damages, but only if the buyer paid less than the listed price
C.could n
A.could sue for damages or to rescind the transaction
The broker breached his fiduciary duties by not disclosing his relationship with the buyer, and he may be liable to the seller for damages. This applies even if the buyer paid the full price. (It's pos
When would an agent not have to comply with the requirement of presenting all offers to purchase to the principal?
A.When the agent notifies the principal in writing that he will not present a particular offer
B.When a new offer is substantially lower tha
C.When the agent is acting under written instructions of the principal
If the seller gives express instructions to the agent not to present any more offers, then the agent should not present any more offers.
A broker received a second offer on a property, but did not present it. Instead, he held it as a backup offer while the seller considered the first offer. Which of the following statements is correct?
A.This was permissible, because it was a discretionary
D.This was not permissible, because the broker is obligated to present all offers to the seller promptly.
A seller's agent has a fiduciary duty to the seller to promptly present all offers, even one that's lower than another offer. (Remember that the sell
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 $5,00
C.present the two offers at the same time
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.
A property manager has an ownership interest in a pool repair and maintenance company that is responsible for the upkeep of the pools at one of his managed properties. The manager should:
A.disclose his interest in the pool company to the property owner
B
A.disclose his interest in the pool company to the property owner
An agent is duty bound to disclose any relationship which may create a conflict of interest, as this is a material fact that might affect decisions about whether to continue the agency rela
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. I
B.the broker should disclose this information to the seller
The true 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 mark
A real estate licensee owes the duty to be honest and to disclose material facts. Failure to disclose such material facts would be:
A.a felony
B.fraud
C.misrepresentation
D.permissible
C.misrepresentation
An agent should avoid misrepresenting a property to potential buyers; to do so, she should disclose all known material facts about the property.
An agent representing a seller owes the buyer:
A.the duty of honesty and fair dealing
B.the duty of confidentiality
C.the same fiduciary duties that she owes the seller
D.nothing, under the rule of caveat emptor
A.the duty of honesty and fair dealing
A seller's agent owes third parties the duty of honesty and fair dealing. An agent doesn't owe third parties fiduciary duties (such as the duty of confidentiality); those are owed only to the agent's principal.
Puffing occurs when:
A.a broker convinces a seller to pay a larger commission
B.a licensee claims to have a connection to influential persons in the community
C.a licensee exaggerates the positive qualities of a home or neighborhood
D.a licensee intention
C.a licensee exaggerates the positive qualities of a home or neighborhood
Puffing constitutes nonfactual or exaggerated statements about a property that a buyer shouldn't rely on, in other words, "sales talk." While puffing isn't necessarily actionable, a
Kelly is the listing agent for the Winkles. She notices a stain on the ceiling. The Winkles tell her that the roof leaks, but that they're getting it fixed next week. A month later, when Kelly is showing the house to a potential buyer, she notices that th
C.tell the prospective buyer that the roof leaks
A seller's agent has the duty to disclose any known latent defects in the property to buyers. In this case, the fact that the roof has not been repaired is indicative that the roof will continue to leak.
A purchase and sale agreement has been signed. The listing agent realizes that the neighboring homes have been red-tagged based on failing septic systems. The licensee should:
A.do nothing since the contract has already been signed
B.immediately inform bo
B.immediately inform both the buyer and seller
When a real estate agent discovers a latent defect -- or even a red flag suggesting a potential latent defect, as in this case -- the agent should disclose the problem to the parties to the transaction.
A seller contacts a broker to list property, but then asks that the broker not disclose that the property is in a dangerous slide zone. What should the broker do?
A.The broker should refuse to take the listing
B.The broker should take the listing and comp
A.The broker should refuse to take the listing
The broker should refuse the listing. If she accepted it, she would have to choose between either breaking the law by failing to disclose latent defects, or disobeying the principal. Either of those actions w
Selling property under an as is' contract is permissible under what circumstances?
A.There is a full disclosure of all material facts by the seller and agent
B.The latent defects are clearly visible to an ordinary person
C.The buyer does not inquire as to
A.There is a full disclosure of all material facts by the seller and agent
An as is' contract does not relieve a seller or a broker from the affirmative obligation to disclose latent defects and other material facts concerning the property to the buyer. A
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 that would not be apparent to an ordinary person; the broker did not dis
A.the buyer would prevail, since the duty to disclose latent defects is not affected by an "as is" clause
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 transfe
An agent is showing a property that belongs to a seller with AIDS. What should the agent do?
A.Disclose this fact since it is a material fact
B.Disclose this fact only if asked
C.Never disclose this fact
D.Withdraw from the listing
C.Never disclose this fact
Under California law, an agent is not required to disclose that a home was once occupied by a person with AIDS. While an agent may not intentionally misrepresent whether or not a person with AIDS occupied the property, she shoul
Which of the following does California law require a real estate agent to do in a residential transaction?
A.Inspect the common areas of a condominium
B.Inspect physically inaccessible areas of a property
C.Pay for maintenance to correct defects found in
D.Visually inspect the property and inform all parties of any latent defects found
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 oth
An agent fails to do a visual inspection of a house as required by law. How many years after occupying the property can the buyer bring an action against the agent for failure to inspect the property?
A.One year
B.Two years
C.Five years
D.Seven years
B.Two years
A buyer has 2 years from the date of possession to bring legal action against an agent for failure to perform the required visual inspection.
The Easton v. Strassburger decision required the disclosure of:
A.agency status
B.known latent defects as well as potential ones
C.seismic hazards
D.sex offenders living in the neighborhood
B.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
When may a broker fill out the seller's portion of the transfer disclosure statement?
A.When given express authority to do so by the seller
B.When authorized to do so by an escrow agent
C.Only when acting as a dual agent
D.Never
D.Never
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 of the following transactions would require a transfer disclosure statement?
A.Sale of a four-unit residential property
B.Foreclosure sale of residential property
C.Sale of residential property between spouses as part of a divorce settlement
D.All o
A.Sale of a four-unit residential property
Sales of one- to four-unit residential properties are subject to the transfer disclosure statement requirement. Exceptions are made for certain kinds of sales, including foreclosure sales, probate sales, transfer
One of the requirements for a seller's agent is to provide a transfer disclosure statement. This must be given to:
A.the county recorder
B.the listing brokerage and all its agents
C.the MLS
D.the prospective buyer
D.the prospective buyer
The seller's agent is responsible for providing a copy of the transfer disclosure statement to a buyer.
In a transaction involving a single-family residence, a Transfer Disclosure Statement must be completed by:
A.one spouse to the other in a divorce settlement
B.the administrator of an estate
C.the transferor
D.the trustee in the sale of an REO property
C.the transferor
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.
Which of the following transactions would not require a transfer disclosure statement?
A.A lease for nine months
B.Resale of a home in a subdivision that is one year old
C.The sale of a four-unit residential rental property
D.The sale of a mobile home tha
A.A lease for nine months
In a few limited instances, such as a lease with an option to purchase, a transfer disclosure statement may be required for a lease. Under ordinary circumstances, though, a lease does not require a transfer disclosure statement.
A buyer who is given an amended transfer disclosure statement receives:
A.the right to rescind the contract within five days
B.the right to sue for specific performance
C.a guarantee that the property is free of latent defects
D.a guarantee that title is
A.the right to rescind the contract within five days
A buyer who receives either an original or an amended transfer disclosure statement may rescind the purchase agreement if he is unsatisfied with the contents of the disclosure. The rescission must occur
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
B.The duty to disclose risks from disasters such as earthquakes and floods, although these must still be disclosed on the transfer disclosure statement
The natural hazards disclosure statement is used to disclose whether a property is subject to hazards s
What is the main difference between the natural hazards disclosure statement and the real property transfer disclosure statement?
A.The transfer disclosure statement is limited to information that the seller has, while the natural hazards disclosure requi
A.The transfer disclosure statement is limited to information that the seller has, while the natural hazards disclosure requires additional research
The transfer disclosure statement and the natural hazards disclosure statement are both prepared by the se
The residential earthquake hazards booklet does not need to be provided to buyers of homes built after:
A.1937
B.1960
C.1967
D.1978
B.1960
The Homeowner's Guide to Earthquake Safety must be given to any buyer of a residential property built using light-frame construction before 1960.
A property is subject to a Mello-Roos lien. The listing agent received an offer from the buyer, who was represented by a buyer's agent. Who is responsible for making sure that the buyer knows about the presence of the lien?
A.Buyer
B.Seller
C.Listing agen
B.Seller
The seller is responsible for disclosing to the buyer that the property is subject to a Mello-Roos lien. A Mello-Roos lien is a type of special assessment used to fund community facilities.
Flatt listed his home with Broker Short. Broker Short found a prospective buyer and induced Flatt to accept the buyer's offer by promising to find Flatt a suitable home for purchase before the first transaction closed. Short was unable to do so. Which of
C.Flatt may sue Short for damages in a civil suit
Because Short didn't perform as promised and Flatt relied on the promise, Flatt may sue for any damages this failure to perform caused (for instance, rent Flatt paid while continuing to look for a new prop
A broker misrepresented his principal's property when showing it to a buyer. The actions of the broker may subject his principal to:
A.rescission of the sale by the buyer
B.court action for damages resulting from fraud
C.civil liability for the broker's m
D.All of the above
A principal is liable for the actions of his agent when the agent is acting within the scope of his authority. Therefore, the principal could be subject to a civil suit for any damages that result from the fraudulent misrepresentation.
Which of the following ways of terminating an agency might lead to a suit for damages?
A.Death of one party
B.Mutual consent of the parties
C.Revocation by the principal
D.Sale of the listed property
C.Revocation by the principal
A principal may revoke an agency, but the revocation may serve as a breach of contract. If the agent suffered any damages because of the breach, the principal may be liable for those damages.
If a principal no longer desires an agent's services, which of the following is correct?
A.The principal may not unilaterally revoke an agency
B.The agent may compel the principal to complete the contract under the theory of specific performance
C.The pri
C.The principal may revoke the contract, but may be liable for damages
Either party to an agency agreement can unilaterally revoke or renounce the relationship, but may be liable for any damages that the end of the relationship causes.
Which of the following would terminate an agency (listing) agreement?
A.A qualified buyer submits a full-price offer
B.The death or incapacity of the seller or the broker
C.The seller rejects the buyer's offer
D.The buyer rejects a seller's counteroffer
B.The death or incapacity of the seller or the broker
If the seller or the broker dies or becomes legally incapacitated, the agency relationship between them is terminated by operation of law.
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?
A.Susan automatically receives commissions if any of those listings sell
B.She can call the
C.She is not the listing agent unless she negotiates a new listing agreement with each of those owners
When Westland died, the agency relationship between him and each of his clients terminated by operation of law. Even though his daughter inherited his b
A real estate agency would not terminate in which of the following situations?
A.The principal refuses an offer to purchase that is presented by an agent
B.The agent unilaterally renounces the agreement
C.The principal dies
D.The subject property is destr
A.The principal refuses an offer to purchase that is presented by an agent
Rejection of an offer terminates the offer, but it does not terminate the agency relationship between the seller and the real estate broker.
A seller, in her interactions with her listing broker, would be known as a/an:
A.agent
B.client
C.customer
D.patron
B.client
The principal who engaged the agent's services is known as a client. Third parties, such as prospective buyers, are known as customers.
A salesperson working for a listing broker:
A.owes fiduciary duties to the seller
B.owes fiduciary duties to the buyer
C.is limited by the terms of the power of attorney
D.is not limited by the broker's scope of authority
A.owes fiduciary duties to the seller
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
Which of the following is a true statement regarding buyer agency?
A.The agent does not represent the seller or the listing agent, and will therefore not be liable for their misconduct
B.The buyer's agent owes the duties of loyalty and confidentiality to
A.The agent does not represent the seller or the listing agent, and will therefore not be liable for their misconduct
A buyer's agent represents only the buyer, not the seller or the seller's agent. He is not liable for anything done by the seller or sell
Broker Arbogast had an open listing on a residential property. He verbally agreed to pay one-half of any commission to Broker Bates if Bates found a buyer. Bates succeeded in arranging a sale of the property, but Arbogast refused to pay half of his commis
D.Bates would be able to file a civil action and collect his commission
Based on the facts given, Bates would be legally entitled to half of the commission. A commission split is a customary arrangement, and this type of agreement between brokers does not
What would be the best definition of "single agency"?
A.The agent has not disclosed that he represents both parties
B.The agent represents both buyer and seller
C.The agent represents either buyer or seller
D.The agent is acting in excess of his or her au
C.The agent represents either buyer or seller
In a single agency, the agent represents only one party to a transaction. This is the opposite of dual agency.
A real estate broker has listed a property using a written listing agreement. He locates a buyer for the property: another one of his clients. He receives a commission from the seller for 6% of the property's listing price. This is an example of:
A.buyer
B.dual agency
A dual agency is one where the same agent represents both the seller and buyer in the same transaction. This requires the written consent of both parties.
When a dual agency exists, it is legal if:
A.both buyer and seller agree to it
B.both brokers agree to it
C.the seller and the agent agree to it
D.it is disclosed when the transaction closes
A.both buyer and seller agree to it
Both buyer and seller must give written consent to a dual agency. The disclosures must be made as soon as possible.
A dual agency requires the agent to:
A.obtain the written consent of both parties
B.observe his fiduciary duties to both parties, including the duty of confidentiality
C.treat both parties impartially
D.All of the above
D.All of the above
Dual agency requires the agent to treat both parties impartially and fulfill fiduciary duties to both of them, which includes protecting each party's confidential information. A dual agent must obtain the written consent of both parties
A broker takes a listing. The seller accepts an offer from a buyer who's being represented by a salesperson who works for the listing broker. The broker is now classified as a:
A.buyer's agent
B.general agent
C.dual agent
D.subagent
C.dual agent
If the buyer and the seller in a transaction are both represented by the same broker, or by different salespersons employed by the same broker (an in-house transaction), then the broker is a dual agent.
In an in-house transaction, all of the following are true EXCEPT:
A.a broker can present an offer on one of her own listings
B.the broker will negotiate only on behalf of the seller
C.the broker must obtain both parties' written consent
D.the broker owes
B.the broker will negotiate only on behalf of the seller
In an in-house transaction, the broker is a dual agent, and therefore can't negotiate on behalf of only one party. The broker owes fiduciary duties to each party and must obtain written consent to t
A real estate agency disclosure must be given to the buyer and seller by a real estate licensee in all of the following transactions, except:
A.Exchange of life estates
B.Lease agreement for nine months
C.Sale of an estate of inheritance
D.Sale of real pr
B.Lease agreement for nine months
A lease agreement does not involve the sale of real property, so an agency disclosure statement is not necessary.
Barry hired Broker Teri to find a warehouse to lease. Carrie hired Teri to find a lessee for her warehouse. Each party agreed to pay Teri a commission. Teri negotiated a lease between the two parties. Barry knew Teri also represented Carrie, but Carrie di
D.Neither party may be liable for a commission
The situation described is an undisclosed dual agency. Although one party knew of the arrangement, to be legal both parties must know of and consent to the dual agency. If a dual agency is undisclosed, neithe
Which of the following is not a step in the disclosure process as required by the Real Estate Law?
A.Acknowledgment
B.Confirmation
C.Disclosure
D.Election
D.Election
An agent must give the parties the agency disclosure form, and have them sign a copy to acknowledge that they received it. In addition, the parties must sign an agency confirmation statement at the same time as they enter into a contract.
A licensee who is acting as the buyer's agent should let other parties to the transaction know that:
A.after submitting a purchase agreement
B.once the transaction goes to escrow
C.as soon as possible
D.once the offer has been accepted
C.as soon as possible
An agent should inform the parties of her agency status as soon as possible. The disclosure must be confirmed in writing before or at the same time either party signs a purchase agreement.
Which of the following persons would be responsible to her employer for results only?
A.Employee
B.Independent contractor
C.Principal
D.Stockholder
B.Independent contractor
An independent contractor is a person who sets her own schedule, works with little supervision, and is paid for each task accomplished, often by commission.
Under the Real Estate Law in California, a salesperson is usually an:
A.independent contractor, because he is paid on a commission basis only
B.employee, because he is working under the license of his supervising broker
C.independent contractor, because h
A.independent contractor, because he is paid on a commission basis only
A salesperson is customarily an independent contractor. He is ordinarily paid only on a commission basis, and taxes aren't withheld from his earnings. Although his broker has supervis
A real estate salesperson's status as independent contractor is important in connection with:
A.the extent to which the salesperson may work outside of the broker's control and supervision
B.the broker's responsibility for the salesperson's actions
C.with
C.withholding of social security and income taxes
If no social security or income taxes are to be withheld from a salesperson's earnings, then the salesperson must be working under a contract stating that she will be treated as an independent contractor,
If a salesperson is considered to be an independent contractor for purposes of income taxation, which of the following is true?
A.The broker will still be liable for the misconduct of the salesperson
B.The broker will withhold taxes and social security
C.
A.The broker will still be liable for the misconduct of the salesperson
Even if a salesperson is an independent contractor rather than an employee, the salesperson's broker still has supervisory responsibility and liability for any misconduct by the sales
What would be characteristic of a market in transition from buyer's market to seller's market?
A.Prices would rise as supply decreases and demand increases
B.Prices would decrease as demand decreases and supply increases
C.Land development and new constru
A.Prices would rise as supply decreases and demand increases
A seller's market is one that benefits sellers, in that prices are higher. Under the theory of supply and demand, higher prices are created by increased demand and diminished supply.
The interest rate on a deed of trust would be most profoundly influenced by which of the following?
A.Status of government-backed loans
B.Gross national product
C.Supply of and demand for money
D.Value of U.S. dollar in foreign exchange
C.Supply of and demand for money
Interest rates are most directly influenced by the supply of and demand for loan funds. Increased demand for and decreased supply of funds available for mortgages will drive interest rates higher.
All of the following factors would influence the movement of mortgage interest rates directly, except:
A.the rate of unemployment
B.a tight money market
C.the rate of inflation
D.scarcity of mortgage funds
A.the rate of unemployment
In an inflationary market, interest rates would tend to rise. When interest rates are high and available funds are scarce, it is known as a tight money market. On the other hand, the rate of unemployment has no direct impact on
Which of the following will decrease the available supply of funds for mortgage lending?
A.A rise in savings by individuals
B.A nationwide increase in personal income
C.A decrease in demand for home mortgage loans
D.A rise in the rates paid by government
D.A rise in the rates paid by government bonds
If there is an increase in the yields paid by investments (such as stocks or bonds) that can be seen as competition to placing money in savings (or investing directly in mortgage-backed securities), then more
When the number of currency units increases, prices rise without an increase in underlying wealth, and the value of the units decreases, it is referred to as:
A.deflation
B.depression
C.inflation
D.recession
C.inflation
If, for instance, too many dollars get pumped into circulation, that will drive prices up and diminish the purchasing power of each individual dollar (for example, it will suddenly cost $5 instead of $4 to buy a widget). That phenomenon is kno
An indicator of the purchasing power of the U.S. dollar would be:
A.consumer price indexes
B.gold standards
C.key interest rates
D.Treasury bill rates
A.consumer price indexes
Consumer price indexes can be used to track how quickly prices are rising (or falling) over time. This can be used to examine how far a dollar will go, toward purchasing certain commodities, at a particular point in time.
If the Federal Reserve implemented a tight money policy, that would increase the:
A.number of single-family home sales
B.amount of new home construction
C.use of first deeds of trust to finance home purchases
D.use of second deeds of trust to finance home
D.use of second deeds of trust to finance home purchases
In a tight money market, interest rates increase. This may make it impossible for consumers to purchase properties that they would be able to purchase under normal economic conditions. To facilitate
The Federal Reserve could create a tight money market by:
A.lowering the discount rate
B.raising the discount rate and buying bonds
C.buying bonds
D.raising the discount rate and selling bonds
D.raising the discount rate and selling bonds
To create a tight money market, 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
If the employment rate and the gross national product both go up, it can be expected that:
A.the level of personal income will increase
B.new home construction will increase
C.sales of existing homes will increase
D.All of the above
D.All of the above
The employment rate and the gross national product are both useful indicators of the economy's general health. If these indexes are increasing, it can be expected that workers will be making more money and will be more likely to purchas
Contact with home buyers, taking loan applications, and underwriting are activities of:
A.primary mortgage lender
B.secondary mortgage lender
C.the Department of Veterans Affairs
D.the Federal Housing Administration
A.primary mortgage lender
Loans are originated in the primary market. They may subsequently be sold to other lenders on the secondary market, but when a buyer interacts with a lender, it's in the primary market.
A deed of trust with an unpaid balance of $50,000 was sold to an investor for $40,000. This would be known as:
A.liquidation
B.hypothecation
C.discounting
D.leverage
C.discounting
When a deed of trust is sold on the secondary market for less than its face value, that is known as discounting.
A lender may refer to a loan in its portfolio as "seasoned." This would refer to the:
A.length of the loan term
B.market in which the loan may be sold
C.low loan-to-value ratio
D.pattern of timely payments by the borrower
D.pattern of timely payments by the borrower
A loan that has a consistent pattern of timely payments by a borrower is referred to as "seasoned." To a secondary market investor, a seasoned loan would generally be preferable to a recent loan with no track r
Of the following, which is not a source of demand for mortgage funds?
A.Sales financing
B.Construction
C.Refinancing
D.Federal National Mortgage Association
D.Federal National Mortgage Association
The Federal National Mortgage Association (FNMA, or "Fannie Mae") is a supply source for mortgage funds. Sales financing, refinancing, and construction all demand mortgage funds.
Which of the following agencies operates in the secondary market in order to increase the availability of mortgage credit?
A.Federal Deposit Insurance Corporation
B.Federal Home Loan Mortgage Corporation
C.Federal Housing Administration
D.Department of Fa
B.Federal Home Loan Mortgage Corporation
The Federal Home Loan Mortgage Corporation (better known as "Freddie Mac") is one of the major secondary market agencies. By purchasing existing loans from lenders, Freddie Mac makes more funds available for the le
A promissory note that is secured by real property is:
A.used as security for a deed of trust
B.used in all real estate transactions
C.evidence of the debt
D.considered real property
C.evidence of the debt
A promissory note is evidence that the maker of the note owes money to a lender. The promissory note is secured by a deed of trust or a mortgage, not vice versa. (A promissory note is used in virtually all real estate loan transacti
If there are several borrowers on a promissory note, which phrase would be used in order to commit all the borrowers to repayment of the entire loan amount?
A.Jointly
B.Individually and severally
C.Individually and jointly
D.Jointly and severally
D.Jointly and severally
The phrase "jointly and severally liable" indicates that each borrower will be individually liable for the entire debt.
A straight note:
A.will involve a balloon payment
B.is often secured by a deed of trust
C.only requires payment of interest during the loan term
D.All of the above
D.All of the above
With a straight note, a borrower repays only interest during the loan term and then pays the entire principal balance as a balloon payment at the end of the loan term. A straight note may be used in a real estate transaction and secured
An important characteristic of straight notes that differentiates them from installment notes is that:
A.straight notes reduce the principal balance over the term of the loan
B.straight notes will have a higher interest rate than installment notes
C.strai
C.straight notes call for no principal payments during the term of the loan, only at the due date of the note
A straight note requires no payments of principal during the term of the loan, only payments of interest. The principal balance is paid off as a
If interest is calculated on accrued interest as well as on the principal balance, it is known as:
A.simple interest
B.compound interest
C.accumulative interest
D.imputed interest
B.compound interest
Compound interest is calculated on both the principal amount and the accrued interest. A savings account typically pays compound interest, for example.
A person who purchases a promissory note for value and without knowledge of any defects is a/an:
A.endorser in blank
B.holder in due course
C.special endorsee
D.qualified endorsee
B.holder in due course
A holder in due course is a third party who purchases a promissory note for value and without knowledge of defects, and therefore is entitled to payment even if there are defenses that the maker could have used against the original
A promissory note that doesn't obligate the payee any further is:
A.a security instrument
B.given with recourse
C.given without recourse
D.non-negotiable
C.given without recourse
A promissory note may be endorsed to a particular person without recourse, which means that the matter of future payments is entirely between the maker and the third party purchaser. The original payee won't be liable to the holde
Ron sold his home for $231,500 and carried back a $225,000 note secured by a deed of trust against the property. The home had a fair market value of $230,000. After several months, he decided to sell the note and deed of trust, and sold it at a discount t
B.foreclose to recover $225,000
Because the note was without recourse, Ron has no further liability to Maria. The dispute over payments would be between Maria and the buyer of Ron's property. Maria would be able to foreclose up to the face value of the no
Which of the following would not be considered to be a negotiable instrument?
A.A promissory note
B.A personal check
C.A bank draft
D.A mortgage
D.A mortgage
A mortgage is a security instrument, not a negotiable instrument. A mortgage is typically used to secure a promissory note, which is a negotiable instrument.
What document is used to hypothecate title to personal property, as opposed to real property?
A.Bill of sale
B.Chattel mortgage
C.Security agreement
D.Certificate of clearance
C.Security agreement
A security agreement is the security instrument used when a loan is secured by personal property (for example, when a refrigerator is purchased on credit). A bill of sale is the instrument that actually transfers title to personal pro
Which of the following is the best definition of a mortgage loan?
A.A loan collateralized with real property
B.A loan secured by a promissory note
C.A recorded instrument related to a transfer of real property
D.An unsecured debt relating to real property
A.A loan collateralized with real property
With a mortgage loan, the lender accepts a security interest in real property as collateral for the loan.
A broker negotiated a loan secured by a first deed of trust. If the beneficiary did not specifically instruct the broker when to record it, when is the broker obligated to record the deed of trust?
A.When the buyer instructs the broker to record
B.When th
C.Before funds are disbursed
If there are no specific instructions from the beneficiary, the broker must record the deed of trust before any funds are disbursed. If the beneficiary gives specific written authorization, the broker may either record the dee
A deed of trust (trust deed) would be signed by the:
A.beneficiary
B.trustee
C.trustor
D.trustee and beneficiary
C.trustor
Only the trustor (the borrower) needs to sign the document, because she's the one who is pledging her property as collateral. Just as a grant deed only has to be signed by the grantor, a deed of trust only has to be signed by the trustor.
The clause in a deed of trust which enables the lender to declare the entire unpaid sum due upon the borrower's default is the:
A.acceleration clause
B.alienation clause
C.forfeiture clause
D.subordination clause
A.acceleration clause
An acceleration clause allows the lender to demand full payment immediately if the borrower defaults on any part of the loan agreement.
A negotiable note contained an acceleration clause. This would:
A.cause the note to lose its negotiability
B.be required for the note to be negotiable
C.have no effect on the note's negotiability
D.be of no benefit to the payee
C.have no effect on the note's negotiability
An acceleration clause does not affect a note's negotiability; it can still be sold to a third party. The acceleration clause is beneficial to the payee of the note, since it facilitates collection of the debt
The Averys' mortgage loan has a due-on-sale clause. If they sell the property, this provision could become a/an:
A.acceleration clause
B.defeasance clause
C.prepayment clause
D.subordination clause
A.acceleration clause
If a loan contains a due-on-sale clause (or alienation clause), that means that if the borrower sells the property before the loan is paid off, the lender will be able to accelerate the loan and demand payment of the entire loan bala
A trustor wishes to transfer the property that he financed with a first deed of trust. He must:
A.receive the beneficiary's permission
B.sign and deliver the deed to the buyer
C.pay the beneficiary in full
D.pay a prepayment penalty
B.sign and deliver the deed to the buyer
There are no prohibitions against selling or otherwise transferring a property that is subject to a deed of trust. The trustor would be required to pay the beneficiary in full only if the deed of trust included an
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?
A.The seller remains primari
B.The buyer is primarily liable and the seller is secondarily liable as a surety
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 defau
If a buyer takes title subject to an existing deed of trust without assuming it, he:
A.becomes primarily liable for repayment of the loan
B.becomes secondarily liable for repayment of the loan
C.is not liable for repayment of the loan
D.will not receive t
C.is not liable for repayment of the loan
If a buyer takes title subject to an existing loan without assuming it, the seller will retain all liability for repaying the loan. The new buyer is not personally liable to the lender.
The buyer of a property would like to continue the payments on an existing loan secured by a deed of trust. The real estate agent would need to make sure that the loan does not contain which clause?
A.Acceleration clause
B.Subordination clause
C.Option cl
A.Acceleration clause
A buyer can assume a loan without the lender's consent only if the loan documents do not include an alienation (due-on-sale) clause, since that provision would enable the lender to demand immediate payment in full when the property w
A late payment charge may be permitted, under California law, on a mortgage payment on a house:
A.one day after the due date
B.five days after the due date
C.on the tenth day after the due date
D.more than ten days after the due date
D.more than ten days after the due date
In California, if the security property is an owner-occupied single-family home, a late payment charge can't be imposed until at least ten days have elapsed after the due date.
A prepayment penalty may be imposed in a real estate transaction. Who would pay the penalty?
A.Buyer
B.Seller
C.Buyer assuming a loan
D.Lender
B.Seller
A prepayment penalty would have to be paid by a seller who's paying off an existing loan, if the finance documents provided for such a penalty.
A mortgagee is most likely to waive a prepayment penalty when:
A.deflation is occurring and interest rates are dropping
B.inflation is occurring and interest rates are rising
C.the supply of money outstrips the demand
D.new home construction is decreasing
B.inflation is occurring and interest rates are rising
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
Which of the following is the best definition of a prepayment penalty?
A.A fee paid by a trustor when he pays some of the debt in advance
B.A fee paid by a trustor when he is late in paying his monthly payment
C.A fee paid by a trustor to lock in an inter
A.A fee paid by a trustor when he pays some of the debt in advance
A prepayment penalty is paid by a borrower (a trustor or mortgagor) who pays off all or part of his debt in advance, before payment is due, if the loan terms provide for such a penalty. Ca
In California, a note secured with a deed of trust can be prepaid without penalty:
A.when the prepayment is made more than five years after the original loan date
B.if a buyer is assuming the loan
C.if an alienation clause forces the payment of the entire
A.when the prepayment is made more than five years after the original loan date
For loans secured by owner-occupied residential properties with four units or less, California law prohibits lenders from charging a prepayment penalty more than five years fr
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:
A.alienation clause
B.release clause
C.submortgage clause
D.subordination clause
D.subordination clause
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 clause in a second deed of trust that permits the first deed of trust to be refinanced without sacrificing its lien position is a/an:
A.acceleration clause
B.lien waiver
C.subordination clause
D.alienation clause
C.subordination clause
A subordination clause in an earlier loan enables a loan recorded subsequently to take priority over the earlier loan. Refinancing is a new loan that takes the place of an existing loan, so without the subordination clause the secon
Which party to a deed of trust would benefit most from a subordination clause?
A.Beneficiary
B.Trustee
C.Trustor
D.None of the above
C.Trustor
The trustor (borrower) would benefit most from inclusion of a subordination clause, since this would help the trustor obtain subsequent loans using the same property as security. Construction loans, for instance, often require first lien positio
When a deed of trust is terminated, the trustee will prepare a:
A.gift deed
B.reconveyance deed
C.grant deed
D.quitclaim deed
B.reconveyance deed
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.
Which party to a deed of trust would execute a deed of reconveyance?
A.Mortgagor
B.Beneficiary
C.Trustee
D.Trustor
C.Trustee
When a deed of trust is paid off, the trustee will execute and record a deed of reconveyance, releasing the trustor's property from the beneficiary's security interest.
In a mortgage, the term "default" may mean:
A.failure to keep the property insured
B.failure to make timely mortgage payments
C.an unauthorized use of the property
D.Any of the above
D.Any of the above
Delinquent payments are the most common form of default on a mortgage loan, but any violation of the terms of the loan agreement may be considered a default. So the lender could foreclose if borrower used the property illegally, failed
A deed of trust places the power of sale with the:
A.beneficiary
B.sheriff
C.trustee
D.trustor
C.trustee
Under a deed of trust, the trustee holds the power of sale in the event of default.
Foreclosure by a trustee is called nonjudicial foreclosure.
The power of sale is an authorization to sell property securing a deed of trust in the event of default, given by the:
A.trustee to the trustor
B.trustor to the trustee
C.trustee to the beneficiary
D.beneficiary to the trustor
B.trustor to the trustee
In a deed of trust, the trustor gives the power of sale to the trustee. The power of sale authorizes the trustee to sell the property in the event of a default by the trustor.
If a trustor defaults on a deed of trust, the most expedient remedy available to the beneficiary is a/an:
A.judicial foreclosure
B.sheriff's sale
C.trustee's sale
D.unlawful detainer action
C.trustee's sale
Nonjudicial foreclosure through a trustee's sale is generally faster than judicial foreclosure.
Once a trustee issues a notice of default, the trustee must wait three months before:
A.the trustee's sale
B.publication of the notice of sale
C.taking possession
D.the end of the redemption period
B.publication of the notice of sale
Three months after the notice of default, the trustee issues a notice of sale. The notice of sale must be recorded, posted on the property, and published in a newspaper of general circulation.
During the process of foreclosure on a deed of trust, the trustor retains the right to cure the default and reinstate the loan. Who has the right of possession of the property during this period?
A.Beneficiary
B.Lender
C.Trustee
D.Trustor
D.Trustor
The trustor may stay in possession of the property during the reinstatement period. The trustor has no right of possession once the trustee's sale has occurred, though.
A deed of trust may be foreclosed:
A.by trustee's sale only
B.by judicial process only
C.by either trustee's sale or judicial process
D.by trustee's sale in conjunction with a deficiency judgment
C.by either trustee's sale or judicial process
A deed of trust is usually foreclosed in a trustee's sale. However, a deficiency judgment is prohibited in a nonjudicial foreclosure, so a lender who wants a deficiency judgment may choose judicial foreclosur
If a deed of trust is foreclosed through a judicial process:
A.there may be no deficiency judgment
B.the action will follow the steps used in a trustee's sale
C.there will be up to a one-year redemption period
D.the trustee must still give a notice of def
C.there will be up to a one-year redemption period
If a deed of trust beneficiary chooses judicial foreclosure instead of a trustee's sale, the court will apply the same rules that would apply in the judicial foreclosure of a mortgage. Just like a mortgag
A lender would most likely receive a deed in lieu of foreclosure from a:
A.trustee after the trustor reinstates a defaulted loan
B.trustor who has defaulted on a deed of trust and doesn't have the means to reinstate the loan
C.trustee if there is no purch
B.trustor who has defaulted on a deed of trust and doesn't have the means to reinstate the loan
A trustor who has defaulted on his loan and can't cure the default may choose to give a deed in lieu of foreclosure to the beneficiary in order to satisfy the
A lender who accepts a deed in lieu of foreclosure from a trustor will:
A.receive the property free and clear of other loans
B.take title subject to any junior liens
C.seek a deficiency judgment from the trustor
D.allow the trustor a reinstatement period
B.take title subject to any junior liens
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 jun
If a trustor facing default files bankruptcy:
A.any action on a pending foreclosure is stayed
B.foreclosure will occur automatically as part of the bankruptcy process
C.foreclosure will always be prevented
D.there will be no effect on a pending foreclosur
A.any action on a pending foreclosure is stayed
Filing bankruptcy temporarily stays a foreclosure action, or any other action by a creditor to recover debts. Bankruptcy does not necessarily prevent foreclosure, though.
Which of the following is the best definition of a purchase money mortgage?
A.A loan taken on all or part of the purchase price of a property
B.A loan taken on more than one parcel of property
C.A loan that includes personal property as well as real prope
A.A loan taken on all or part of the purchase price of a property
In its most general sense, "purchase money mortgage" refers to a loan that is secured by the same property that the loan funds are being used to buy. This includes both seller financing and
The mortgagor in a purchase money mortgage would be the party who:
A.holds the promissory note
B.signs the promissory note
C.lends the money
D.begins a foreclosure action
B.signs the promissory note
In any type of mortgage loan, the mortgagor is the borrower. And the borrower is the one who executes the promissory note and gives it to the lender as evidence of the debt.
A hard money second deed of trust would be:
A.carried back by the lender
B.given as a cash loan to a borrower
C.for a shorter term than the first deed of trust
D.obtained only from the seller of the property
B.given as a cash loan to a borrower
A hard money loan is a cash loan, as opposed to an extension of a credit by the property seller (sometimes called a soft money loan). The term "carried back" is used in connection with seller financing.
Which pair of loans is synonymous?
A.Interim loan/takeout loan
B.Takeout loan/standby loan
C.Construction loan/interim loan
D.Construction loan/progressive payment loan
C.Construction loan/interim loan
A construction loan is a temporary loan, so it's also known as an interim loan. A takeout loan is permanent financing obtained once construction is complete.
In construction financing, the final disbursement of funds will not be made until:
A.the notice of completion has been recorded
B.the statutory period for filing a mechanic's lien has expired
C.the project has been completed
D.all the materials have been
B.the statutory period for filing a mechanic's lien has expired
The final distribution of funds will not occur until after the period for filing mechanic's liens has expired.
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:
A.all-inclusive deed of trust
B.blanket deed of trust
C.construction deed of trust
D.subordinate deed of trust
B.blanket deed of trust
When a single loan is secured by several pieces of property, it's called a blanket loan.
Which instrument would be requested of the beneficiary by a borrower who had paid off a portion of a blanket mortgage?
A.Grant deed
B.Partial reconveyance deed
C.Quitclaim deed
D.Release deed
B.Partial reconveyance deed
Once a borrower has paid off a certain portion of a blanket deed of trust, one or more of the properties that secure the loan may be released from the deed of trust. This would be accomplished with a partial reconveyance deed.
What is the function of a release clause in a mortgage?
A.It releases an original borrower from primary liability when a loan is assigned
B.It releases a purchaser who takes title subject to an existing loan from having to pay a deficiency judgment in the
D.It allows removal of the lien from certain portions of property offered as security, once a specified act has been performed
Under a blanket mortgage, once a specified act has been performed (almost always the payment of a certain amount of money), some
Wong borrowed $150,000 to buy 10 lots with $20,000 down. He paid off $40,000 and got two lots released from the blanket lien. Which of the following is true?
A.His equity in the remaining lots increased
B.His equity in the remaining lots decreased
C.His e
A.His equity in the remaining lots increased
Once two lots have been released, there is a smaller number of lots remaining and a larger amount of the loan repaid. This means that the equity the difference between the loan amount and the value of the secur
A beneficiary under a blanket loan may set up a release schedule that requires a proportionately larger amount of money for the first lots to be released. Why would this occur?
A.The best and most valuable lots tend to sell first
B.More money paid up fron
D.All of the above
The disproportionately large amount of money required before the release of the first parcels in a blanket loan is partly because the best lots tend to sell first and partly because of the need for increased security as the number of re
If one property is inadequate security for a loan, but the borrower owns other property, the lender may offer a/an:
A.all-inclusive deed of trust
B.blanket mortgage
C.compound mortgage
D.package mortgage
B.blanket mortgage
A blanket mortgage is a loan secured by more than one property. While blanket mortgages are commonly used by subdivision developers, an owner of multiple properties may use a blanket mortgage if one property would not provide adequate c
An open-end provision in a mortgage would be beneficial to a borrower who wants to:
A.allow a subsequent buyer to assume the loan
B.prepay the loan
C.secure the loan with multiple parcels of land
D.borrow additional funds
D.borrow additional funds
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.
A homebuyer financed her purchase through a mortgage loan. She now wants to refinance the loan. What would be the most likely reason for her wanting to do so?
A.There is very little equity in the house
B.The lender sold the first loan at a discount to an
C.The first loan was only a short-term loan
Refinancing, when a borrower pays off an existing mortgage loan with a new loan, is often necessary because the first loan was only for a short period of time and requires a balloon payment at the end of the ter
A land contract may be described as a substitute for a note and a deed of trust. In this way, a land contract is:
A.an option agreement
B.a three-party instrument
C.a security device
D.identical to a mortgage
C.a security device
When a seller finances a buyer's purchase with a land contract, the contract is a security device, serving essentially the same purpose as a promissory note and a deed of trust. Under a land contract, the vendor continues to hold legal
One significant result of deregulation of the nation's financial institutions is:
A.government control of financial institutions has been eliminated
B.there is no maximum limit on the interest rates financial institutions may pay depositors
C.financial in
B.there is no maximum limit on the interest rates financial institutions may pay depositors
The differences between various lending institutions have diminished since deregulation in the 1980s removed restrictions on the maximum interest rates payable to
Which of the following types of lenders is most likely to have the greatest percentage of its assets invested in real estate loans?
A.Life insurance companies
B.Savings and loan associations
C.Commercial banks
D.Pension plans
B.Savings and loan associations
Savings and loans have a traditional emphasis on home mortgage loans.
A group of developers needs a long-term loan of $30 million to build a shopping mall. The most likely source of a loan would be a:
A.national bank
B.life insurance company
C.mutual fund
D.savings and loan association
B.life insurance company
Life insurance companies usually don't make small real estate loans. Instead, they prefer investing in large, long-term commercial loans.
Which of the following types of lenders prefers to make loans on commercial properties rather than construction loans, seeks to avoid administering loans, and prefers long-term loans?
A.Savings and loan associations
B.Commercial banks
C.Insurance companie
C.Insurance companies
An insurance company tends to prefer large, long-term commercial loans, and typically uses a loan correspondent (such as a mortgage company) to originate and service its loans, instead of administering them itself.
Rather than originating and servicing real estate loans directly, life insurance companies prefer to deal with their investment loans indirectly through:
A.savings and loan associations
B.mortgage bankers
C.the FHA and VA
D.All of the above
B.mortgage bankers
Life insurance companies generally aren't equipped to operate in local real estate markets, so they tend to use loan correspondents to invest in real estate. Mortgage companies (or mortgage bankers) often act as loan correspondents, ori
Most junior loans for the purchase of real property are secured through:
A.commercial banks
B.individual lenders
C.insurance companies
D.mortgage companies
B.individual lenders
Lenders will often charge a fee for document preparation and other services in issuing a new loan, which is expressed as a percentage of the face amount of the loan. This fee is known as:
A.discount points
B.a prepayment fee
C.a lock-in fee
D.an originati
D.an origination fee
A fee charged by a lender to cover administrative costs involved in processing the loan is an origination fee. It may also be called a loan fee, a service fee, or an administrative charge.
One discount point is equal to:
A.1% of the loan amount
B.1% of the selling price
C.$1
D.$100
A.1% of the loan amount
"Point" is short for "percentage point," so one discount point paid on a loan would be equal to one percentage point of the loan amount.
A lender makes a loan for $100,000, and charges three discount points. This will be a charge of:
A.$100
B.$300
C.$1,000
D.$3,000
D.$3,000
One discount point is equal to one percentage point of the loan amount, so three discount points would be the same as three percent of the loan amount ($100,000 x .03 = $3,000).
A lender will charge discount points when issuing a new loan in order to:
A.increase the effective yield on the loan
B.close the gap between market interest rates and the rate being charged on the loan
C.pay for administrative costs in originating the loa
D.Both A and B
When discount points are paid at closing, the upfront payment increases the effective yield (essentially, the lender's profit) on the loan. And a lender offering a below-market interest rate in order to attract borrowers will typically char
Which of the following is the purpose of the Truth in Lending Act?
A.Regulation of fees charged by lenders
B.Establishment of maximum interest rates charged by creditors
C.Limiting the cost of consumer credit
D.Requiring disclosures to consumers regarding
D.Requiring disclosures to consumers regarding the terms and total costs of credit
The Truth in Lending Act is a consumer protection law designed to ensure that prospective borrowers are given enough information so that they can accurately compare the cos
Which of the following loans would be exempt from the Truth in Lending Act?
A.A personal loan of $20,000 from a commercial bank
B.A household loan of $20,000 from a credit union
C.An agricultural loan from a commercial bank
D.A VA-guaranteed home mortgage
C.An agricultural loan from a commercial bank
The Truth in Lending Act applies only to consumer loans; loans for business, commercial, or agricultural purposes are exempt from the law. Consumer loans are also exempt if they are for more than $25,000 and a
Under the terms of the Truth in Lending Act, borrowers in consumer loans must be informed of credit terms by the:
A.loan broker
B.lender
C.seller
D.escrow company
B.lender
TILA requires a lender making a consumer loan to fully disclose the terms and total cost of the loan to the prospective borrower.
Which of the following will not be included as part of the total finance charge in a Truth in Lending Act disclosure statement for a mortgage loan?
A.Discount points paid by the buyer
B.Mortgage insurance premiums
C.Finder's fees
D.Appraisal and credit re
D.Appraisal and credit report fees
In mortgage loan transactions subject to TILA, the fees for the appraisal and credit reports are not included in the total finance charge.
The Truth in Lending Act defines the annual percentage rate charged on a real estate loan as:
A.total cost of credit expressed as a dollar amount
B.direct loan costs only
C.all loan costs expressed as a percentage rate
D.what percentage of the loan amount
C.all loan costs expressed as a percentage rate
A loan's annual percentage rate is the cost of the loan, including the interest and all other finance charges, stated as a percentage of the amount financed.
What is the difference between the nominal interest rate and effective interest rate?
A.The effective rate is the prevailing market rate and the nominal rate is the rate the borrower will actually pay
B.The effective rate is the rate stated on the promiss
C.The effective rate is the rate actually paid by the borrower and the nominal rate is the rate stated on the promissory note
The effective rate is the annual percentage rate: the rate the borrower will actually pay, taking all of the finance charges (not
The nominal interest rate of a loan is:
A.the maximum rate that may be charged by law
B.the rate the borrower will actually pay, reflecting the total finance charge
C.the amount of projected interest on an annualized rate
D.the interest rate stated on the
D.the interest rate stated on the promissory note
The nominal interest rate is the rate stated on the promissory note. This is in contrast to the effective rate (also called the annual percentage rate), the rate that the borrower will actually pay, taking
A federal notice of the right of rescission must be given to a borrower if:
A.the loan is secured by the borrower's existing residence
B.the loan is secured by commercial property
C.the loan is an unsecured loan of more than $25,000
D.the loan is to purch
A.the loan is secured by the borrower's existing residence
Under the Truth in Lending Act, the borrower has a right of rescission when the loan will be secured by the borrower's existing residence, the home she already owns (as in the case of a home equit
If an advertisement in a newspaper for real property discloses only the annual percentage rate:
A.no further disclosures are required
B.the required downpayment must be disclosed
C.the total number of payments to repay the loan must be disclosed
D.points
A.no further disclosures are required
Under the Truth in Lending Act, an ad may list the property's cash price or the loan's APR without triggering the full disclosure requirement.
If an advertisement for a graduated payment mortgage required full disclosure under the Truth in Lending Act, which of the following would be included in that disclosure?
A.The location of the property
B.The name and address of the lender
C.The amount of
C.The amount of the different monthly payments
If TILA requires full disclosure in an advertisement, the ad must include the annual percentage rate, the required downpayment, the payment amounts, the number of payments, and the repayment period.
A broker who negotiates a loan for a client must give the disclosure statement required by the Mortgage Loan Broker Law at what point?
A.Before the borrower signs the loan papers
B.Within 24 hours of the borrower's signature of loan papers
C.When the tran
A.Before the borrower signs the loan papers
Under California's Mortgage Loan Broker Law, the broker must give a disclosure statement to the borrower before he signs the loan papers or within three days of the receipt of a completed loan application, which
How long must a broker retain a copy of a mortgage loan broker disclosure statement?
A.Two years
B.Three years
C.Four years
D.Seven years
B.Three years
Under California's Mortgage Loan Broker Law, a broker who arranges a loan for a client must retain a copy of the disclosure statement for three years.
A man owns a house and has a first deed of trust executed against the home. He has a substantial amount of equity in the home. He needs a loan of $9,600 for college tuition for his son. A real estate broker arranges the loan, which is secured by the home.
A.Real property security statement
California's Mortgage Loan Broker Law requires a real estate broker who provides loan services to give the borrower a disclosure statement. It must list all of the costs involved in obtaining the loan and state the net a
A buyer had her broker arrange a second deed of trust for her. The loan was for $3,000, for a term of two years. What would be the maximum amount for commission and loan costs that the broker could charge?
A.$450
B.$600
C.$690
D.$840
C.$690
Under the Mortgage Loan Broker Law, the maximum commission rate that may be charged on a junior loan with a term that is at least two years but less than three years is 10%. Ten percent of $3,000 is $300 ($3,000 � .10 = $300). Loan costs may be 5%
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?
A.$900
B.$1,800
C.$2,700
D.$3,090
C.$2,700
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 � .15 = $2,700). Note that this question asks only about the maximum commission, not th
When a lender decides whether or not to make a real estate loan, which of the following would it be most concerned with?
A.Availability of mortgage funds
B.Degree of risk involved
C.Key interest rates
D.Federal and state regulations
B.Degree of risk involved
Because each loan is an investment that may prove profitable or result in a loss, a lender's primary concern in deciding whether to make a loan is the degree of risk it would involve.
When deciding whether or not to make a loan, a lender seeks to minimize:
A.the effective interest rate
B.any difficulties that may arise for the borrower as a result of death or divorce
C.the number of substandard loans in its portfolio
D.the lender's yie
C.the number of substandard loans in its portfolio
The lender's primary concern in making lending decisions is to avoid investment losses by keeping substandard loans (loans that present too much risk) out of its portfolio.
A borrower tried to purchase a home but had his application denied because of a negative credit report. If the borrower's request for a copy of his credit report is denied, the borrower may sue for:
A.actual damages
B.punitive damages
C.attorney's fees an
D.All of the above
California law requires credit reporting agencies to give consumers copies of their credit reports upon request. If the agency fails to do so, the consumer may sue for actual damages, punitive damages up to $5,000, and attorney's fees a
The most basic protection for a lender of funds secured with a residential property is:
A.the good credit history of the borrower
B.the value of the property itself
C.the borrower's other assets
D.the stability of key interest rates
B.the value of the property itself
The lender's ultimate line of defense against losing money on a mortgage loan is the value of the property. If the borrower defaults, the lender will foreclose on the property in order to recover its funds. So before app
A longer loan term will result in:
A.a greater amount of interest paid
B.a higher monthly payment
C.a lower amount of interest paid over the loan's lifetime
D.the loan being considered as subprime
A.a greater amount of interest paid
A longer loan term will enable a borrower to make smaller monthly payments, but the downside is that the borrower will pay more total interest over the life of the loan.
Liquidation of a financial obligation through installment payments is known as:
A.acceleration
B.alienation
C.amortization
D.conveyance
C.amortization
Amortization is an arrangement for paying off a debt in installments, where the amount applied to the principal increases as the amount applied toward interest decreases.
In originating a new loan, an amortization table can be used to determine the:
A.downpayment
B.interest rate
C.length of the loan term
D.monthly payment amount
D.monthly payment amount
An amortization table lists the different monthly payment amounts that would be needed to amortize a specified loan amount at various rates of interest and with various repayment periods. (The term is also sometimes used to refer
A balloon payment in a first deed of trust is:
A.the first payment made after the origination of the loan
B.the payment required when the property is sold pursuant to an alienation clause
C.the final payment made on the balance due at the end of a loan te
C.the final payment made on the balance due at the end of a loan term
A balloon payment is characteristic of a loan that isn't fully amortized. The regular payments aren't sufficient to cover the full amount owed, so the borrower will have to make a large
With a partially amortized loan, the larger-than-usual payment made at the end of the loan's term is known as a:
A.balloon payment
B.escrow payment
C.reserve payment
D.secondary payment
A.balloon payment
A balloon payment is a payment of any principal balance remaining at the end of a loan's term, if it is a partially amortized or interest-only loan.
A lower loan-to-value ratio indicates a higher:
A.degree of risk
B.interest rate
C.equity in the property
D.loan amount
C.equity in the property
A lower loan-to-value ratio indicates that the borrower has a greater equity interest in the property. For instance, with an 80% loan on a $100,000 property, the borrower's equity is $20,000; with a 70% loan on the same property,
What is the result of appreciation of a mortgaged property?
A.Primary benefit for the trustor
B.Primary benefit for the trustee
C.Primary benefit for the beneficiary
D.Disadvantage for trustor
A.Primary benefit for the trustor
The borrower (the trustor) is the party who benefits most when a mortgaged property appreciates, since appreciation can rapidly increase the borrower's equity. For instance, if a buyer puts down $10,000 to purchase a $100
If a borrower obtained a loan for the purchase of property without making a downpayment, the lender's best protection in the event of default would be:
A.a low interest rate
B.low monthly payments
C.appreciation of the property
D.an economic slowdown
C.appreciation of the property
If a lender makes a 100% loan and the borrower later defaults, the lender is unlikely to recapture its entire investment from the foreclosure sale unless the property has appreciated (increased in value) significantly.
Loan-to-value ratios are used by lenders to determine:
A.eligibility for VA loans
B.the amount of money to lend
C.the size of the monthly payment
D.the value of the property
B.the amount of money to lend
A lender will use the loan-to-value ratio to set maximum loan amounts. For instance, a lender might allow loans of no more than 80% of the property's sales price or appraised value, whichever is less.
A home is listed at $212,000 and appraised at $205,000. The lender is willing to lend 80% of the property's appraised value. If the buyers want to make a full-price offer, how much will they need to put down?
A.20% of $205,000
B.20% of $212,000
C.20% of $
C.20% of $205,000 plus $7,000
To make a full-price offer, the buyers will need to make up the difference between the appraised value and the listing price. The lender will lend them up to 80% of $205,000 (which is $164,000), meaning they will need to come
The buyers want to purchase a property but can't obtain sufficient financing. They are interested in having the seller carry back a second loan, but the seller declines. At this point, the buyers' agent tells the buyers to make a full-price offer and then
B.legitimate business practice
Secondary financing may come from a private third party (such as a real estate agent), in addition to coming from an institutional lender or the seller, so it is a legitimate business practice. A real estate agent is usually
If the monthly payments on an adjustable-rate mortgage are insufficient to cover the interest due, the result is:
A.a lengthened loan term
B.additional principal payments
C.negative amortization
D.a lower loan-to-value ratio
C.negative amortization
Negative amortization occurs when the monthly payment isn't sufficient to pay all the interest due on a loan and the unpaid interest is added to the principal balance, causing the balance to go up instead of down.
The creation of the Federal Housing Administration in 1934 had a number of secondary benefits. Which of the following is not one of those benefits?
A.Creation of a nationwide mortgage market
B.Establishment of maximum construction standards
C.Mortgage ins
B.Establishment of maximum construction standards
The FHA pioneered mortgage insurance, helped create a nationwide mortgage market, and promoted home construction and subdivision development. It also helped establish minimum construction standards, not ma
An important characteristic of FHA loans is that:
A.a land contract is used to secure the subject property
B.no downpayment is required
C.the FHA is an insurer, not a lender
D.the interest rates on FHA loans is usually 1-3% lower than on other loans
C.the FHA is an insurer, not a lender
The Federal Housing Administration does not originate loans. Instead, it insures loans, some of which might not be available under conventional underwriting standards.
The primary reason for the creation of the FHA was to provide:
A.a secondary market for home mortgages
B.origination of loans at below-market rates
C.insurance for bank depositors
D.insurance for home loans made by institutional lenders
D.insurance for home loans made by institutional lenders
The principal of a mortgage loan may be insured by:
A.the VA or the FNMA
B.the lender
C.the FHA or a private mortgage insurer
D.the FHLMC and the GNMA
C.the FHA or a private mortgage insurer
A prospective borrower seeking an FHA loan would apply to:
A.the FHA
B.a real estate broker
C.an arranger of credit
D.a mortgagee
D.a mortgagee
A borrower does not apply to the FHA in order to obtain an FHA loan; instead, she applies directly to a lender. If the loan is approved, the lender would become the mortgagee or beneficiary, holding a security interest in the borrower's prop
Who pays the origination fee or service fee on an FHA loan?
A.Seller
B.Borrower
C.Primary lender
D.Secondary lender
B.Borrower
With an FHA loan (as with most mortgage loans), the lender usually charges an origination fee (sometimes called a service fee), and the fee is ordinarily paid by the borrower.
One difference between an FHA loan and a typical conventional loan is that the FHA loan:
A.probably has a higher loan-to-value ratio
B.requires a larger downpayment
C.is issued by the government instead of a commercial lender
D.probably has a shorter loan
A.probably has a higher loan-to-value ratio
The required downpayment for an FHA loan is smaller, not larger, than the downpayment 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%
Which of the following would be used in an FHA loan?
A.Prepayment penalty
B.Mortgage repayment schedule
C.Secondary financing for the downpayment
D.Certificate of eligibility
B.Mortgage repayment schedule
As with most mortgage loans, a lender will give an FHA borrower a schedule of payments, indicating how the loan amount is to be repaid. FHA loans cannot have prepayment penalties, and secondary financing generally can't be us
A buyer assumes a loan with the lender's approval, by paying the seller's equity in cash and paying a $300 fee to the lender. What is this fee called?
A.An origination fee
B.Discount points
C.An assumption fee
D.A lock-in fee
C.An assumption fee
In order to assume any type of mortgage loan, the buyer will typically have to pay an assumption fee.
Which of the following will not limit the amount of a VA-guaranteed loan?
A.Buyer's income
B.Certificate of Reasonable Value
C.Certificate of Eligibility
D.Maximum guaranty amount
C.Certificate of Eligibility
A Certificate of Eligibility does not limit a VA borrower's loan amount; it is simply a document stating that the borrower is eligible for a VA loan. The Certificate of Reasonable Value (or Notice of Value) can limit the loan
Which of the following is a special feature of VA-guaranteed loans?
A.The downpayment is determined by the Certificate of Reasonable Value
B.The downpayment does not have to be more than 3% of the sales price
C.Interest rates on VA-guaranteed loans are se
D.VA-guaranteed loans usually do not require a downpayment
One advantage of VA-guaranteed loans is that they usually do not require a downpayment. (A downpayment is required in some transactions because the loan amount is large or the sales price exceeds
If a home sells for $290,000 and has been appraised at $286,000, what is the minimum amount of cash that a buyer with a VA loan will need in order to close the transaction?
A.$0
B.$50
C.$1,500
D.$4,000
D.$4,000
A VA loan can't exceed the appraised value of the property as set forth in the Notice of Value. Therefore, if a property is appraised for $4,000 less than the sales price, a VA borrower will need at least $4,000 in cash to complete the sale. (The
Who holds legal title when a property is being purchased through the Cal-Vet program?
A.The buyer
B.The lending institution
C.The federal Department of Veterans Affairs
D.The state Department of Veterans Affairs
D.The state Department of Veterans Affairs
In the Cal-Vet program, the state Department of Veterans Affairs buys property chosen by a veteran and then sells it to the veteran under a land contract. The state holds legal title to the property until the lan
Which of the following documents would be used when a veteran purchases a home through the California Veterans Farm and Home Purchase Plan?
A.Deed of trust
B.Mortgage
C.Special warranty deed
D.Land contract of sale
D.Land contract of sale
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.
An appraisal is:
A.an objective determination of a property's value
B.an opinion of value of a property
C.the market value of a property
D.the sales price of a property
B.an opinion of value of a property
An appraisal is an opinion or estimate of a property's value as of a given date. Reasonable appraisers may disagree on what the value of a property is.
The term "fee appraiser" refers to:
A.an appraiser employed by the state government
B.a self-employed appraiser who charges a fee for appraisal services
C.an appraiser employed full-time by a broker
D.an appraiser employed full-time by a lender
B.a self-employed appraiser who charges a fee for appraisal services
A fee appraiser is a self-employed appraiser who appraises properties for a fee.
Which of the following would be considered ethical behavior for an appraiser?
A.Setting her compensation as a percentage of a property's appraised value
B.Paying referral fees or kickbacks
C.Accepting a job that is contingent on reporting a minimum proper
D.Appraising a property in which the appraiser has an interest but disclosing that interest to the principal before beginning work
It is ethical for an appraiser to appraise a property in which she has an interest, as long as she first discloses this inte
Which of the following can a home inspector NOT do?
A.Assess whether an added room conforms with building codes
B.Estimate the life span of the roof
C.Provide a report detailing necessary repairs
D.Provide an estimate of the property's value as of the ins
D.Provide an estimate of the property's value as of the inspection date
A home inspector may provide a detailed description of a property's condition. However, only an appraiser may estimate a property's value as of a given date--in other words, perform a
In an attempt to influence an FDIC-insured lender, Appraiser Alison does not adhere to generally accepted appraisal standards. She could be guilty of:
A.a misdemeanor
B.a felony
C.violating the Bureau of Real Estate's (formerly Department of Real Estate)
B.a felony
In federally related loan transactions, appraisers are required to follow the Uniform Standards of Professional Appraisal Practice (USPAP). Failure to fulfill that requirement in order to improperly influence or defraud a federally insured lend
What type of appraiser is qualified to appraise a commercial development valued at over $500,000?
A.Certified general appraiser
B.Master appraiser
C.Residential appraiser
D.Trainee appraiser
A.Certified general appraiser
A certified general appraiser may appraise any category of property. Residential appraisers may appraise nonresidential properties of up to $250,000 in value. "Master appraiser" is not a level of licensure.
To an appraiser, the present worth of future benefits is equivalent to:
A.price
B.cost
C.value
D.utility
C.value
One definition of value is the present cost of all future benefits of ownership.
Of the following characteristics, which is not an essential element of value?
A.Scarcity
B.Expectation
C.Utility
D.Demand
B.Expectation
The four essential elements of value are utility, scarcity, demand, and transferability (not expectation).
Which of the following characteristics are referred to as the essential elements of value?
A.Scarcity, cost, transferability, and demand
B.Utility, demand, scarcity, and cost
C.Transferability, scarcity, demand, and utility
D.Cost, utility, demand, and tr
C.Transferability, scarcity, demand, and utility
The essential elements of value are transferability, scarcity, demand, and utility.
When appraising residential property, an appraiser's primary concern(s) is/are:
A.total and living square footage
B.assessed value
C.marketability and acceptability
D.functional utility
C.marketability and acceptability
Marketability and acceptability are considered to be the fundamental basis of a residential property's value.
Which of the following statements is correct?
A.Value in use is subjective; value in exchange is objective
B.Value in use is objective, value in exchange is subjective
C.Value in use and value in exchange are both objective
D.Value in use and value in exc
Value in use is subjective; value in exchange is objective
Value in use, or utility value, is a measure of how useful something is to its user. This is a subjective measure of value. Value in exchange, or market value, is a measure of what a property's pr
Market price is defined as:
A.the listing price of a property
B.the price offered for a property
C.the price actually paid for a property
D.the price that a property might bring on the open market
C.the price actually paid for a property
Market price is the amount of money actually paid for a property.
When performing an appraisal, an appraiser takes into account:
A.the bundle of rights associated with the property
B.the land and its improvements
C.utility
D. All of the above
D. All of the above
In estimating the value of real property, an appraiser considers the physical components (the land and improvements), the utility of the property, and all of the ownership rights associated with the property.
An increase in property value due to an increase in population is referred to as:
A.depreciation
B.economic obsolescence
C.an unearned increment
D.a capital improvement
C.an unearned increment
An increase in a property's value through no effort of the property owner (as a result of a population increase, for example) is referred to as an unearned increment.
Which of the following terms is included in the definition of "highest and best use"?
A.Gross income
B.Community interest
C.Net return
D.None of the above
C.Net return
A property's highest and best use is the use that produces the greatest net return on the investment over a period of time.
An appraisal is considered accurate:
A.for the year in which it was prepared
B.for the date for which it was prepared
C.until a newer appraisal is completed
D.until the beginning of the next tax year
B.for the date for which it was prepared
An appraisal is considered accurate only for the effective date of the appraisal.
In-fill development" is a term for:
A.cleaning up old industrial sites and converting them to recreational areas
B.new commercial growth in suburban fringes
C.replacing low-density residences with higher-density properties
D.replacing vacant or dilapidat
C.replacing low-density residences with higher-density properties
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 m
Which is usually longer, a property's economic life or physical life?
A.Economic life
B.Physical life
C.They are usually the same
D.It depends on the type of property
B.Physical life
The physical life of a property is usually longer than the economic life. A building will continue to exist even after it is no longer profitable.
Which is most likely to have an impact on the economic life of a property?
A.Its age and condition at the time of acquisition
B.The owner's maintenance of the property
C.Changes in the character of the surrounding neighborhood
D.The quality of the buildin
C.Changes in the character of the surrounding neighborhood
Economic life is most likely to be affected by changes in neighborhood composition, rather than changes to the property itself. For instance, if a neighborhood changes so that the intended use of
When interest rates increase, property values will most likely:
A.decrease
B.increase
C.fluctuate unpredictably
D.not experience an immediate short-term effect
D.not experience an immediate short-term effect
Property values, for the most part, respond to supply of and demand for properties within a particular market. Significantly higher interest rates, as happened in the early 1980s, can reduce potential buyers
Under normal market conditions, an apartment building's vacancy rate is determined by:
A.the building's operation costs
B.building size and total number of units
C.rent schedule
D.the area's housing availability
D.the area's housing availability
The supply of and demand for housing in that particular area will have a significant effect on the apartment building's vacancy rate.
What principle states that a prudent buyer will not pay more for a property than the price of a reasonably close alternative?
A.Substitution
B.Supply and demand
C.Conformity
D.Competition
A.Substitution
According to the principle of substitution, if two reasonably similar properties are available, a prudent buyer will choose the less expensive one.
The principle of substitution applies to what property characteristics?
A.Use
B.Income
C.Structural design
D.All of the above
D.All of the above
The principle of substitution refers to substituting one property for another that is equivalent in terms of use, income, or structural design.
The basic principle underlying the market data approach to appraisal is:
A.anticipation
B.conformity
C.supply and demand
D.substitution
D.substitution
According to the principle of substitution, a property's value is equivalent to the cost of obtaining an equally desirable property. This principle is the basis for all three of the main methods of real property appraisal, including the mar
What principle states that homogeneity in a neighborhood increases the value of an individual house?
A.Conformity
B.Substitution
C.Regression
D.Progression
A.Conformity
According to the principle of conformity, a reasonable degree of homogeneity within a neighborhood has a positive effect on property values.
What principle states that the value of the best property in a neighborhood will be lowered by the existence of less expensive homes?
A.Substitution
B.Competition
C.Progression
D.Regression
D.Regression
The principle of regression states that a property's value is lowered if it is surrounded by less valuable homes.
An apartment building owner is contemplating adding a swimming pool to the property. He consults an appraiser. The appraiser's opinion should be based on what principle?
A.Substitution
B.Contribution
C.Integration
D.Progression
B.Contribution
The appraiser will apply the principle of contribution and consider whether the value the swimming pool would add to the property is greater than the cost of construction.
In real estate appraisal, "improved value" refers to:
A.the value of a property in its highest and best use
B.the reproduction cost of the property minus any depreciation
C.the market value of a property and its improvements
D.the difference between econo
C.the market value of a property and its improvements
Improved value is the combined value of the land and its improvements.
When appraising a property, the first step is to:
A.draft an appraisal plan
B.define the appraisal problem
C.organize the appraisal data
D.conduct a preliminary survey
B.define the appraisal problem
The first step in the appraisal process is to define the appraisal problem, which includes identifying the subject property and determining what function the appraisal will serve.
In appraising which of the following properties would an appraiser least need to consider the general state of the economy?
A.Shopping center
B.Large electronics factory
C.Multiple-tenant office building
D.Industrial park
B.Large electronics factory
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
Which of the following would not contribute to the stability of neighborhood property values?
A.Similarity in residents' socioeconomic levels
B.Homogeneity in building uses
C.Increased density and high turnover in residents
D.Location in the direction of
C.Increased density and high turnover in residents
It helps stabilize and maximize property values if the residents of a neighborhood have similar socioeconomic status, if all of the properties are put to the same type of use, and if the neighborhood is i
City X has unusually high property taxes. To an appraiser, this is important because:
A.new construction may shift away from this city
B.this city probably provides more services and thus will attract more investors
C.this city likely has a good location
A.new construction may shift away from this city
High tax burdens may discourage people from settling in a particular area. As a result, real estate values fall and new construction slows.
A site analysis is employed primarily to find out the:
A.land's topography
B.type of soil
C.private and public land use restrictions
D.highest and best use
D.highest and best use
An appraiser uses a site analysis to determine a property's highest and best use.
The value of warehouse space and other industrial space for rent is generally expressed using which unit of measurement?
A.Cubic foot
B.Square foot
C.Front foot
D.Square yard
B.Square foot
Industrial space is generally measured in square feet, although larger industrial properties are sometimes measured in acres. By contrast, retail property is often valued by the front foot.
A commercial acre is:
A.the portion of an acre remaining after the streets and sidewalks have been deducted
B.an acre located in a commercial use zone
C.any 43,560 square foot parcel
D.None of the above
A.the portion of an acre remaining after the streets and sidewalks have been deducted
A commercial acre is an acre minus the land used for streets, alleys, sidewalks, and curbs. It represents the buildable area of a particular acre of land.
Two properties, each worth $50,000, are combined into one larger parcel that has a value of $120,000. This increase in value is called:
A.blockage
B.appurtenance
C.plottage
D.appreciation
C.plottage
An increase in value that results when two or more contiguous properties are combined into one parcel under single ownership is called plottage. The extra value is due to improved usability. This often occurs where larger parcels are needed for
Four parties own a parcel of real estate as tenants in common. Two parties want to sell their interests. To find out what their interests are worth, they hire an appraiser who takes the fair market value of the parcel and divides it by four. What's wrong
C.The value of a quarter-interest of a tenancy in common is likely to be less than one-quarter of the fair market value of the property
A one-quarter interest in a property, co-owned by strangers, is not likely to be appealing to potential buyers; the low
What is the best way to determine the age of an older building?
A.Age of surrounding structures
B.Examination of condition of wood framing elements
C.Recorded subdivision plat
D.Tax assessor's records
D.Tax assessor's records
The local tax assessor's records are probably the best place to look for information about when an improvement was constructed. The plat map will be helpful for finding information about the site, but won't necessarily give inform
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.An earthquake insurance policy
B.A soil engin
B.A soil engineer's report
Foundation cracks and shifting in the house indicate movement in the soil.
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:
A.plottage
B.highest and best use
C.orientation
D.topography
C.orientation
Orientation, the positioning of the home on the land, requires the developer to consider sun, wind, noise, and other factors.
The appraisal method that is the most readily adaptable for real estate brokers and salespersons is the:
A.market approach
B.income approach
C.cost approach
D.capitalization approach
A.market approach
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.
For market data appraisal purposes, what date is most important to the appraiser?
A.When escrow closed
B.When the purchase agreement was signed
C.When financing was obtained
D.When the deed was signed
B.When the purchase agreement was signed
The date the purchase agreement was signed is the date that the sales price was determined. For market data (sales comparison) appraisal purposes, this is the most important date.
What factor would most limit the accuracy of the market data appraisal method?
A.Variations between the subject property and the comparables
B.Rapidly changing economic conditions
C.New financing regulations
D.Frequent turnover in ownership
B.Rapidly changing economic conditions
For an appraiser, the most difficult step in the market data approach is:
A.locating comparables
B.establishing the unit of comparison
C.averaging the data
D.adjusting the comparables to the subject
D.adjusting the comparables to the subject
The most difficult step in the market data approach (the sales comparison approach) is adjusting for the differences between the comparable properties and the subject property.
When using the market data approach, appraisers typically make numerous adjustments to the comparables' prices. This is because:
A.the subject property will eventually depreciate
B.the subject property's value will increase due to inflation
C.no two prope
C.no two properties are exactly alike
When using the market data approach (sales comparison approach), an appraiser must adjust the comparables' prices to reflect the differences between the comparables and the subject property. No two properties are exac
A comparable property has a feature that the subject property lacks. Under the market data approach, how will an appraiser treat this feature?
A.The feature is identified in the appraisal report but disregarded in the valuation
B.The feature's value is ad
C.The feature's value is subtracted from the value of the comparable
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 comp
Which of the following is of least importance to an appraiser?
A.Assessed value
B.Property identification
C.Highest and best use of property
D.Selling prices of comparables
A.Assessed value
A property's assessed value might have been calculated a long time ago, and thus have no relationship to the property's current value.
The cost approach to value is best suited for appraising:
A.new homes
B.middle-aged homes
C.old homes
D.multifamily structures
A.new homes
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.
Which approach to value typically sets the ceiling on value?
A.Income
B.Market data
C.Sales comparison
D.Cost
D.Cost
Because buyers are generally unwilling to pay more for a used property than it would cost to replace it with a new one that's essentially just like it, the cost approach tends to establish the upper limit for the property's value.
Which of the four appraisal terms below does not relate to the other terms?
A.Comparative
B.Sales
C.Summation
D.Comparable
C.Summation
"Sales," "comparative," and "comparable" are terms relating to the sales comparison approach (market data method). The summation approach is another name for the cost approach.
Which of the following is based on the cost of creating an exact replica of a building?
A.Depreciated cost
B.Quantity survey cost
C.Replacement cost
D.Reproduction cost
D.Reproduction cost
Reproduction cost is the cost of constructing an exact duplicate of the subject property. Replacement cost, by contrast, is the cost of constructing a building with the same utility.
Replacement cost, as opposed to reproduction cost, is:
A.the present cost of replacing a building with another of the same utility
B.the present cost of replacing a building with an exact replica
C.the cost of a building when originally built
D.the presen
A.the present cost of replacing a building with another of the same utility
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 an appraiser, the easiest way to determine the present value of an improvement is to use:
A.the comparative unit/square foot approach
B.a quantity survey
C.the unit-in-place method
D.the land residual method
A.the comparative unit/square foot approach
The comparative unit method (also called the square foot method) is the simplest technique for estimating the replacement cost of an improvement. The appraiser considers the cost per square foot of comparable pr
Which of the following is not a true statement regarding the cost approach to appraisal?
A.It requires extensive knowledge of economic factors
B.It is appropriate for new construction
C.It is appropriate for special-use properties
D.It tends to set the lo
D.It tends to set the lower limit for property values
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 th
The quantity survey method, the comparative unit method, and the unit-in-place method are all used in what appraisal method?
A.The market data approach
B.The sales comparison approach
C.The income approach
D.The cost approach
D.The cost approach
These three methods of estimating replacement cost are all used in the cost approach.
To an appraiser, the broadest definition of depreciation is:
A.loss in utility and value from any cause
B.loss in land value
C.physical deterioration of the property
D.functional obsolescence
A.loss in utility and value from any cause
Depreciation is a loss in property utility and value from any cause. Physical deterioration and functional obsolescence are two causes of depreciation.
Two homes were built at the same time on adjoining lots of equal size and value. The construction and maintenance costs associated with each were the same. One home is worth substantially more than the other. This is likely due to:
A.economic obsolescence
B.functional obsolescence in one property
Since the properties are in the same location, are the same age, cost the same amount to build, and have been maintained equally well, it is unlikely that the value difference is due to physical deterioration or e
In appraisal, considerations such as economy of use and floor plan apply to:
A.economic obsolescence
B.functional utility
C.overall capitalization rate
D.physical deterioration
B.functional utility
Functional obsolescence occurs when a building lacks functional utility, which is the ability to fulfill the desires of its occupants and users. A building with a poor floor plan, for instance, would lack functional utility.
What is the ultimate test of a property's functional utility?
A.Marketability
B.Layout
C.Adequacy
D.Maintenance costs
A.Marketability
A property's functional utility is best shown by its marketability. If a property suffers from functional obsolescence to such an extent that it is unable to fulfill the desires of its users, it won't be marketable.
Which of the following would be an example of functional obsolescence?
A.A one-car garage
B.Adverse rezoning
C.A deteriorated driveway
D.Nearby land uses that are incompatible with local uses
A.A one-car garage
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
Which of the following would not contribute to functional obsolescence?
A.Eccentric floor plan
B.Outdated fixtures
C.Nearby nuisances
D.Insufficient number of bathrooms
C.Nearby nuisances
Nuisances external to the property are causes of external (economic) obsolescence. Problems caused by design inadequacies or outmoded appliances are causes of functional obsolescence.
A rental property is located on a street that the city decides to widen. As a result of the street construction, the property's rental income is lowered by 10%. What type of depreciation has occurred?
A.Physical deterioration
B.Deferred maintenance
C.Func
D.External obsolescence
External obsolescence is caused by factors external to the property, such as city action. Functional obsolescence and physical deterioration (including deferred maintenance) are problems specific to the property.
Which of the following would not be a cause of economic obsolescence?
A.Location in the flight path of planes from a nearby airport
B.Low fixed income of neighborhood residents
C.Broken air conditioning system
D.Departure of major retail stores and servic
C.Broken air conditioning system
A nonfunctioning air conditioning system is an example of physical deterioration. The other problems are all external to the property, and therefore are examples of economic (external) obsolescence.
A large, expensive home is constructed in an area consisting entirely of much smaller and less valuable homes. Even before the larger home is sold by the developer, it has probably suffered a loss in value due to:
A.deferred maintenance
B.physical deterio
D.economic (or external) obsolescence
The home's value is probably going to be lowered as a result of regression. This value loss, due to location, is an example of economic obsolescence (also called external obsolescence).
Which of the following would be an example of external obsolescence?
A.Unattractive floor plan
B.Outdated architectural style
C.Adverse rezoning
D.Lack of proper maintenance
C.Adverse rezoning
Adverse zoning changes would be an example of external obsolescence (also called economic obsolescence), which is caused by factors external to the property. An unattractive floor plan or an outdated architectural style would be functio
Which of the following issues would have the largest impact on economic obsolescence?
A.Whether the other tenants in the neighborhood are prospering
B.When the elevator was last serviced
C.Whether the rents that were being charged for individual units wer
A.Whether the other tenants in the neighborhood are prospering
Economic obsolescence (also called external obsolescence) reflects a loss in value because of changes that are external to the property itself. If the economic conditions of the surrounding ne
Which of the following causes the greatest loss of property value?
A.Wear and tear
B.Obsolescence
C.Lack of proper maintenance
D.Physical deterioration
B.Obsolescence
Functional and economic obsolescence cause much greater losses in property value than any type of physical deterioration.
Which of the three main causes of depreciation is associated with the saying "more buildings are torn down than fall down"?
A.Physical deterioration
B.Incurable functional obsolescence
C.Curable functional obsolescence
D.Economic obsolescence
D.Economic obsolescence
Over time, neighborhoods change, and structurally sound buildings are often torn down to make way for newer ones. This is an example of economic obsolescence, also called external obsolescence.
Of the following, which is an indirect method of estimating depreciation?
A.Straight-line
B.Engineering
C.Capitalized income
D.Breakdown
C.Capitalized income
Capitalized income is an indirect method of determining depreciation. The other choices refer to direct methods.
The replacement cost of a 14-year-old building is $89,000. The value of the improvements has depreciated 1.5% per year. The value of the land is $22,000. What is the property's current value?
A.$101,000
B.$94,027
C.$92,310
D.$67,000
B.$94,027
Start by subtracting 1.5% annual depreciation from $89,000 over 14 years. For the first year, subtract 1.5% of $89,000 from $89,000 to get $87,665. Then for the second year, subtract 1.5% of $87,665 from $87,665 to get $86,350. For the third yea
A 20-year-old residence has been well maintained. An appraiser determines its age to be nine years. This illustrates:
A.physical age
B.actual age
C.effective age
D.economic age
C.effective age
The effective age of a structure may be more or less than its actual age, depending on construction quality and maintenance.
The present worth of a property's future benefits is most important to what approach to value?
A.Income approach
B.Cost approach
C.Market data approach
D.Sales comparison approach
A.Income approach
The income approach (capitalization approach) bases the present market value of a property on the future benefits of ownership.
Economic rent is best defined as the rent:
A.currently received under a lease
B.currently being paid for comparable space
C.that would be negotiated in a perfect market
D.necessary to make a profit
B.currently being paid for comparable space
Economic rent is the rent that could be expected if the property was available on the open market.
An appraiser adjusts a rental property's gross income by deducting a vacancy factor. The resulting figure is the property's:
A.net income
B.taxable income
C.gross income
D.effective gross income
D.effective gross income
Effective gross income is calculated by making a deduction from the property's gross income for vacancies and collection losses.
The calculation of effective gross income reflects:
A.depreciation
B.vacancies and collection losses
C.repairs and operating costs
D.taxes
B.vacancies and collection losses
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 fully rented and all rents owed will
When determining value using the income approach, when would the management expenses of the property be deducted from the gross income?
A.When the owner is managing the property
B.When a tenant is managing the property
C.When a tenant living in another bu
D.All of the above
It doesn't matter whether the owner, a tenant, or a third party is managing a property; management expenses will always be deducted from effective gross income in order to calculate net income.
All of the following would be taken into account in calculating net income, EXCEPT:
A.personal income taxes
B.reserves for replacement
C.maintenance expenses
D.administrative expenses
A.personal income taxes
Personal income taxes for the owner of the property are not deducted from effective gross income to calculate net income. Operating expenses (including reserves for replacement, maintenance expenses, and administrative expenses) ar
In determining the net income of a large income property, what item(s) should be deducted from the effective gross income?
A.Cleaning and landscaping expenses
B.Depreciation
C.Mortgage payments
D.Interest payments
A.Cleaning and landscaping expenses
Cleaning and landscaping expenses are operating expenses that should be deducted from the effective gross income to determine the net income.
Of the following, which would not be deducted when determining net operating income?
A.Maintenance expenses
B.Mortgage interest
C.Uncollected rents
D.Replacement reserves
B.Mortgage interest
Deducting mortgage principal and interest payments and other financing costs is not one of the steps involved in calculating net income. Uncollected rents are taken into account when a bad debt and vacancy factor is deducted from the p
Capitalization" refers to a process used by an appraiser to:
A.find the market value
B.determine the appropriate interest rate
C.convert income into value
D.establish tax rates
C.convert income into value
Capitalization is a process used to translate a property's income into an estimate of its value.
An appraiser using the income method is calculating an overall capitalization rate. He will:
A.add the cost-of-funds rate to the depreciation rate
B.add the "going" interest rate to the cost-of-funds rate
C.add the "going" interest rate to the depreciatio
D.divide the net operating income by the sales price
An overall capitalization rate is one that accounts for both return on the investment and recapture of the purchase price for the investment. The simplest way to arrive at a capitalization rate for a pa
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 as a hardware store. Both parcels have recently started long-term leases. The capitalization rate of t
B.lower
The post office will use a lower capitalization rate because it is a 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
When using the income approach appraisal method, any capital invested in improvements is recaptured through:
A.deducting the cost of replacement from the estimated value at the time of appraisal
B.the cost to cure method
C.accruals for depreciation
D.the
C.accruals for depreciation
"Accruals for depreciation" refers to the accumulated depreciation of the improvements. In anticipation of future depreciation, recapture is factored into the overall capitalization rate.
The method used by an appraiser to select a capitalization rate is called:
A.summation
B.market data
C.band of investment
D.Any of the above
D.Any of the above
Summation, market data (comparison), and band of investment are three methods used to determine a capitalization rate.
The most difficult step in the capitalization process is:
A.determining net income
B.determining effective gross income
C.selecting a capitalization rate
D.calculating operating expenses
A.determining net income
To calculate a property's net income, an appraiser must project numerous future variables, including rental rates, vacancy rates, and operating expenses. Because of this, establishing the net income is typically the most difficult
The land residual technique is used to determine:
A.land value
B.capitalization rate
C.return on investment
D.None of the above
A.land value
Appraisers use the land residual technique to determine land value.
When a property's income remains constant and property taxes rise, what happens to the property's capitalized value?
A.It increases less than the amount of the tax increase
B.It decreases by the amount of the tax increase
C.It decreases less than the amou
D.It decreases more than the amount of the tax increase
An increase in property taxes means a decrease in the property's net income. Because the capitalization rate is a multiplier, the decrease in property value is much more than the amount of the tax in
The method used to convert gross income into value in one operation is called:
A.cost
B.market data
C.rent multiplier
D.fixed factor
C.rent multiplier
The gross rent multiplier (or gross income multiplier) method converts gross income into value in a one-step operation.
For older residential properties, estimates obtained through the gross income multiplier method reflect:
A.net income
B.capitalization value
C.the relationship between market value and rental income
D.capitalization rate
C.the relationship between market value and rental income
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?
A.$201,500
A.$201,500
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 � $1,300 = $2
Laura's house has a fair market value of $330,000 and rents for $2,200 per month. Micah's house is across the street and rents for $2,400 per month. Assuming the same rate of return, what is the value of Micah's property?
A.$360,000
B.$368,000
C.$371,000
A.$360,000
The fair market value divided by the monthly rent provides a monthly multiplier. Here, $330,000 � $2,200 = 150. Multiplying Micah's monthly rent by the monthly multiplier gives the value of Micah's property (150 � $2,400 = $360,000).
If a property contains a building of no value, an appraiser should:
A.appraise for highest and best use and subtract the building's demolition cost
B.appraise for highest and best use but ignore the building's demolition cost
C.include the salvage value o
A.appraise for highest and best use and subtract the building's demolition cost
In conducting a site valuation, an appraiser should appraise for the highest and best use. If there are any structures with no value, the appraiser should deduct the cost of t
What method of site valuation is used most frequently?
A.Development
B.Comparison
C.Distribution
D.Land residual
B.Comparison
The sales comparison method is used most frequently by appraisers to appraise vacant land, as it reflects current marketplace activity.
An appraiser uses the three approaches to value to obtain three value indicators for a property. To determine the final estimate of value, she should:
A.reconcile the indicators and give her reasoning in the appraisal report
B.average the indicators
C.ass
A.reconcile the indicators and give her reasoning in the appraisal report
In the reconciliation step, the appraiser compares the value indicators, considers their relative reliability under the circumstances, and weights them accordingly. She does not use
Which of the following items is generally not found in a narrative appraisal report?
A.Qualifications of the appraiser
B.Site analysis
C.Property's legal description
D.Available financing
D.Available financing
An appraisal report does not contain information about the financing options available to buyers.
Which type of appraisal report is typically the most comprehensive?
A.Letter
B.Form
C.Gross multiplier
D.Narrative
D.Narrative
Appraisers prepare either a form report or a narrative report. A narrative report contains much more detailed information and explanations than a form report.
What type of appraisal report usually contains the paragraphs entitled: Introduction, Factual Description of Neighborhood and Site, Appraiser's Conclusions, and Final Value Estimate?
A.Form report
B.Narrative report
C.Value report
D.All of the above
B.Narrative report
These paragraphs are typically contained in a narrative appraisal report, which includes detailed information to support the appraiser's stated opinions and conclusions.
Where would the property value be stated in a narrative appraisal report?
A.Neighborhood description
B.Introduction
C.Description of use
D.Purpose of appraisal
D.Purpose of appraisal
A narrative appraisal report typically begins with a section stating the purpose of the appraisal and giving the appraiser's final estimate of the property's value.
An escrow holder is a/an:
A.arbitrator
B.mediator
C.negotiator
D.neutral depository
D.neutral depository
Escrow is a situation where a neutral party will hold funds or other valuables on behalf of two parties to a transaction, and not release them until escrow instructions tell him to do so.
A deed, note, bond, or money being held by a third party until certain conditions are satisfied is known as:
A.escrow
B.surety
C.security
D.bailment
A.escrow
Escrow is an arrangement in which the parties to a transaction have a neutral third party hold funds and documents until certain conditions in the transaction are satisfied.
A clause that states how a broker will be compensated for acting as a real estate agent may be found in all of the following documents, except:
A.buyer representation agreement
B.escrow instructions
C.listing agreement
D.purchase and sale agreement
B.escrow instructions
An escrow agent will be responsible for issuing a commission check to a real estate brokerage as part of the closing process, but the escrow instructions do not lay out the specifics of how the broker will be compensated. That may be
If discrepancies exist between the purchase agreement and the escrow instructions:
A.the escrow agent arbitrates the conflict
B.the escrow instructions must be rewritten to agree with the purchase agreement
C.as the most recent document, the escrow instru
C.as the most recent document, the escrow instructions prevail
Where there is a conflict, the later document prevails over the earlier document. The escrow instructions are prepared later than the purchase agreement.
An escrow agent is generally authorized to:
A.advise buyers as to financing
B.amend the broker's commission amount
C.call for funding of the buyer's loan
D.order a structural pest control inspection and any necessary corrective repairs
C.call for funding of the buyer's loan
The escrow agent usually requests funding of the buyer's loan after preparing the escrow instructions, ordering the title search, and accepting the pest control reports. The other activities listed are outside the sc
In a sale of real property, the primary reason for using an escrow is to:
A.ensure that the sale's conditions and terms are met before the transaction is closed
B.provide a witness to the transaction
C.keep proper records of the transaction
D.settle any d
A.ensure that the sale's conditions and terms are met before the transaction is closed
The purpose of escrow is to ensure that all the details and conditions of the purchase agreement are fulfilled before the transaction closes.
Which of the following may terminate an escrow?
A.Mutual consent of the parties
B.Death or incapacity of either party
C.Revocation by the broker
D.Any of the above
A.Mutual consent of the parties
Only the parties, by mutual consent, may terminate an escrow. If one party dies or becomes incapacitated, the escrow is binding on that party's heirs.
Which of the following is not exempt from the escrow agent licensing requirement?
A.A broker in her own transaction who charges a separate escrow fee
B.A broker in her own transaction who does not charge a separate escrow fee
C.A broker handling escrow fo
C.A broker handling escrow for other brokers' transactions
An attorney at law or a real estate broker handling her own transaction is permitted to provide escrow services without being licensed as an escrow agent. However, a broker is not permitted to pro
Regarding escrow procedures, which of the following is true?
A.Once escrow conditions are fully met, the agency changes from dual agency to separate agency
B.An escrow officer arbitrates disputes between the buyer and seller
C.A broker who does not have a
A.Once escrow conditions are fully met, the agency changes from dual agency to separate agency
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 tran
On a buyer's closing statement, which of the following would appear as a debit?
A.Interest owed on an assumed loan
B.Unpaid property taxes
C.Documentary transfer tax
D.Purchase price
D.Purchase price
The purchase price will always be entered as a debit for the buyer.
A lender is often authorized to include in a monthly mortgage payment a charge equal to 1/12th of the yearly insurance and taxes. This money is deposited into a/an:
A.balloon payment account
B.blanket account
C.impound account
D.PMI account
C.impound account
In many loans, money that will be paid toward recurring costs (such as insurance and property taxes) will be held by the lender in an impound account. It may also be referred to as a reserve account or escrow account.
In a closing statement, the term "recurring costs" refers to:
A.title insurance
B.costs common to all escrows
C.deed transfer taxes
D.impound items
D.impound items
Recurring costs are the expenses that a property buyer will have to pay each year, such as property taxes, mortgage interest, and fire insurance. Lenders often require borrowers to place funds for these expenses in an impound account (a re
For which of the following loans are impound accounts required?
A.VA
B.FHA
C.Cal-Vet
D.All of the above
D.All of the above
An impound account (a reserve account for tax and insurance payments) is generally required for any of these types of loans.
In real estate finance, the term "impounds" refers to:
A.penalties
B.attachments
C.escrow fees
D.reserves
D.reserves
Impounds, or reserves, are funds collected by the lender for the purpose of paying recurring costs such as taxes and insurance.
Which of the following may not be prorated on a closing statement?
A.Delinquent interest on a non-secured loan
B.Property taxes
C.Insurance premiums
D.Mortgage interest
A.Delinquent interest on a non-secured loan
Taxes, insurance, and mortgage interest payments are typically prorated on a closing statement. But interest on a loan that is not secured by the property is entirely the seller's obligation and would not be inc
Of the following items, which would be least likely to appear on a closing statement as a debit to the buyer?
A.Interest on an assumed loan
B.Prorated taxes
C.Prorated insurance premiums
D.FHA discount points
A.Interest on an assumed loan
Because loan interest is paid in arrears, any interest due on an assumed loan is the seller's responsibility. Interest not paid by the seller would therefore be listed as a credit for the buyer on the closing statement.
On the closing statement, the buyer's and seller's final balances:
A.must be the same
B.must not be the same
C.must be different
D.might be different
D.might be different
On the closing statement, the balance due from buyer and the balance due to seller need not be the same and are usually different.
Who has the primary responsibility for reporting a real estate transaction to the IRS?
A.Lender
B.Broker
C.Escrow agent
D.Appraiser
C.Escrow agent
The primary responsibility for reporting real estate transactions to the IRS lies with the party responsible for closing the transaction, which is ordinarily the escrow agent. If there is no escrow agent and no other party responsible for c
The primary purpose of RESPA is to:
A.give buyers the chance to shop around for settlement services
B.give buyers the chance to shop around for brokerage services
C.standardize settlement procedures
D.standardize settlement costs
A.give buyers the chance to shop around for settlement services
RESPA requires lenders to provide prospective borrowers with a good faith estimate of closing costs. Borrowers (buyers) can use the information to comparison shop for settlement services.
RESPA's disclosure requirements apply to which of the following?
A.An office complex
B.A new room added to a duplex
C.Undeveloped land
D.An initial lien on a 4-unit apartment building
D.An initial lien on a 4-unit apartment building
RESPA applies only to transactions involving federally related mortgage loans secured by residential properties with up to four units.
RESPA requires lenders to give which of the following to loan applicants?
A.A good faith estimate of closing costs
B.A uniform disclosure statement
C.A mortgage insurance application
D.A bill of sale
A.A good faith estimate of closing costs
RESPA requires lenders 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 thre
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:
A.as a matter of practice
B.as long as the broker discloses this fact to both buyer and seller
C.as long
D.under no circumstances
Under RESPA, settlement service providers are forbidden from paying or accepting kickbacks or referral fees.
Under RESPA, a lender is permitted to charge for all but which of the following services?
A.Loan documents
B.Uniform Settlement/Disclosure Statements
C.Credit reports
D.Appraisals
B.Uniform Settlement/Disclosure Statements
RESPA prohibits lenders from charging a fee for preparing a uniform settlement statement or certain other disclosure statements.
RESPA requires that a lender charge no more than how much for a preparing a uniform settlement statement?
A.$10.00
B.$20.00
C..5% of the purchase price
D.Nothing
D.Nothing
RESPA prohibits lenders from charging anything for the preparation of a uniform settlement statement.
RESPA generally requires that a uniform settlement statement be mailed or delivered to the borrower:
A.no later than the day before closing
B.on or before the day of closing
C.within three days of closing
D.within ten days of closing
B.on or before the day of closing
Unless the borrower waives this right in writing, the closing agent must provide the borrower, the seller, and the lender with a copy of the uniform settlement statement either on or before the closing date. Upon request,
The marginal tax rate in income taxation is:
A.the amount of tax paid to the state and city governments
B.a tax on any property owned
C.the tax rate that applies to the last dollar of taxable income earned
D.a surcharge, or surtax, paid to the federal gov
C.the tax rate that applies to the last dollar of taxable income earned
The marginal tax rate is the rate applicable to the last dollar of taxable income that a taxpayer earned.
A "tax shelter" is a term often used in reference to:
A.mortgage relief
B.income taxes
C.property taxes
D.sales taxes
B.income taxes
A tax shelter is a financial arrangement used to reduce a taxpayer's income tax liability.
For income tax purposes, on which of the following might one take a capital gain or loss?
A.Receiving liquidated damages
B.Mortgaging a single-family residence
C.Sale of a property after a change in market value
D.Leasing properties at rates lower than ma
C.Sale of a property after a change in market value
When property is sold, if its market value has changed, the owner may take a capital gain or a capital loss. The other choices do not involve sale of a capital asset.
For federal income tax purposes, a property owner cannot deduct a loss on the sale of residential property unless the:
A.property was not used for personal purposes
B.loss exceeds 30% of the owner's taxable income
C.property was sold within the same tax y
A.property was not used for personal purposes
A loss on the sale of rental or investment property is deductible for federal income tax purposes. However, a loss on the sale of personal use property is not deductible.
An apartment complex owner suffers a $5,000 operational loss. For federal income tax purposes, she may:
A.deduct the loss only if she lives in the apartment building
B.deduct the full $5,000 from ordinary income
C.deduct only $3,000
D.offset the loss agai
B.deduct the full $5,000 from ordinary income
A loss of up to $25,000 on the operation of a rental property may be deducted from ordinary income (not just from passive income). Note that the rules concerning capital gains and losses are generally relevant
To its purchaser, the "basis" of real property is its:
A.fair market value
B.actual resale value
C.fair market value less any outstanding liens
D.cost
D.cost
The basis of real property is the amount of money the buyer paid for it, which typically includes both the purchase price and the closing costs.
Depreciation on real property means that:
A.the property becomes virtually worthless
B.the property's value increases
C.the basis decreases
D.the basis increases
C.the basis decreases
Depreciation has the effect of lowering the property's cost basis.
If the owner of a rental property decides to add a swimming pool and patio, the costs of these additions are:
A.depreciated with the land
B.tax-deductible only if the amount of rent charged does not increase
C.not tax-deductible unless they can be shown t
D.added to the property's cost basis
Capital expenditures are added to the cost basis of the property.
Which of the following items is something for which a homeowner could adjust his cost basis?
A.A new deck
B.Mortgage interest
C.Homeowner's insurance
D.Depreciation
A.A new deck
As a capital expenditure, the cost of a new deck would be added in calculating the adjusted cost basis. Note that depreciation is not taken into account when calculating the adjusted basis of a personal residence, since depreciation deduction
Amanda bought a ten-acre parcel of land for $50,000. A few years later, she subdivided the parcel into five lots and sold them for $20,000 each. What is her capital gain?
A.$20,000
B.$50,000
C.$100,000
D.None of the above
B.$50,000
The total sales price of the lots is $100,000 ($20,000 � 5 lots = $100,000). The cost basis is $50,000. The capital gain is the sales price minus the cost basis, or $50,000.
An apartment complex owner rents out a unit for a three-year term, beginning September 1, 2010. At move-in, the tenant prepays the final two months' rent. This prepaid rent will be reported as income for which tax year?
A.2010
B.2011
C.2012
D.2013
A.2010
Prepaid rents are reported (recognized) in the year they are collected.
An advantage of selling property through an installment sale is that:
A.the seller can choose what year to declare the gain from the sale
B.the gain is prorated and taxed over the term of the installment contract
C.the gain is not taxed until it is fully
B.the gain is prorated and taxed over the term of the installment contract
With an installment sale, in each tax year the seller is required to pay taxes only on the gain received during that year. Thus, the gain is prorated over the term of the installme
Regarding tax-free exchanges, which of the following is true?
A.An office building cannot be exchanged for an apartment complex
B.A personal residence may be exchanged for a house of similar worth
C.Property exchanged must be used in a trade or business o
C.Property exchanged must be used in a trade or business or held for income or investment
To be eligible for a tax-free exchange, a property must be used in a trade or business or held for income or investment. It must be exchanged for like-kind property,
In a tax-free exchange, "boot" could refer to:
A.net relief of a mortgage
B.an increase in cost basis
C.a decrease in cost basis
D.an increase in depreciation
A.net relief of a mortgage
Boot can be cash, property, or other consideration, including mortgage debt relief.
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.another apartment house with a lower mortgage balance
B.a single-family home with the same a
B.a single-family home with the same amount of equity, to be used as a rental property
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 (th
Mr. March owns a commercial property; it has an outstanding mortgage of $247,000. His adjusted basis in the property is $275,000. He exchanges the property for another commercial property that is worth $287,000; he assumes the outstanding mortgage, with a
B.$34,000 and $22,000
The first step is to calculate what Mr. March receives in the transaction. He receives a $287,000 property, $18,000 cash, and $4,000 in mortgage relief ($247,000 old mortgage - $243,000 new mortgage = $4,000). This adds up to $309,00
Arnold owns an unencumbered rental property valued at $400,000. It has a book value of $310,000. If he exchanges it for another unencumbered property worth $387,000, and receives no boot, what is the book value of his new property?
A.$387,000
B.$400,000
C
C.$310,000
No boot was paid in this exchange, so each owner's book value (cost basis) is transferred unchanged to his or her new property. Therefore, the book value of Arnold's new property is $310,000.
Kathy and John, a married couple, purchase a home for $250,000. After living in it for six years, they sell it for $282,000. On what amount will they have to pay capital gains taxes?
A.$32,000
B.$250,000
C.$282,000
D.Nothing
D.Nothing
Since Kathy and John lived in the house for over two years, they qualify for the exclusion of a gain from the sale of a principal residence. Married couples can exclude a gain of up to $500,000, so Kathy and John won't have to pay any taxes on t
To be depreciable under income tax law, a property must be:
A.a personal residence
B.unencumbered
C.improved
D.vacant
C.improved
Vacant land doesn't wear out, so it can't be depreciated. Therefore, depreciable real estate must have some sort of improvement or development.
Brown, a developer, bought a plot of vacant land for $20,000. To build an office complex worth $320,000, he paid $80,000 cash and obtained $240,000 in financing at 9% per annum. What amount may be depreciated for income tax purposes?
A.$20,000
B.$320,000
B.$320,000
Only the building, not the land, may be depreciated. The building's cost, $320,000, is the basis for depreciation, regardless of any financing.
An owner of an apartment complex reports income on a cash basis. Which of the following is not tax-deductible?
A.Mortgage interest
B.Lost income from vacancies
C.Cleaning and maintenance costs
D.Improvement and redecorating costs
B.Lost income from vacancies
Lost income from vacancies is simply not reported as income. The other expenses are tax-deductible.
On an income tax return, which of the following can be deducted in connection with a personal residence?
A.A capital loss
B.Depreciation
C.Mortgage interest and property taxes
D.Repair and maintenance expenses
C.Mortgage interest and property taxes
Two of the most commonly taken deductions for owners of principal residences are for mortgage interest and property taxes. Depreciation and repair expenses cannot be deducted for principal residences.
A condominium owner living in his condominium is permitted to deduct which of the following expenses on his federal income tax return?
A.Repair and upkeep of his individual unit
B.Interest paid on a loan secured by the common areas
C.Monthly payment towar
B.Interest paid on a loan secured by the common areas
He may deduct his share of the interest paid on a mortgage of the common areas. Individual unit maintenance and repair costs are not deductible, and neither are assessments for upkeep of common areas.
Which of the following personal residence expenses may be claimed as deductions on a federal income tax return?
A.Mortgage payments and property taxes
B.Mortgage payments, fire insurance, and broker's commission
C.Prepayment penalty and broker's commissio
D.Mortgage interest payments, prepayment penalty, and property taxes
Mortgage interest, a mortgage prepayment penalty, and property taxes are all deductible expenses for a personal residence. Note that only payments of mortgage interest, not mortgage prin
In what year did the U.S. Supreme Court prohibit racial discrimination in both public and private real property sales and rentals?
A.1960
B.1964
C.1968
D.1972
C.1968
In the 1968 case of Jones v. Mayer, the Supreme Court upheld the Civil Rights Act of 1866, which prohibits racial discrimination in all property transactions.
The federal Fair Housing Act was intended to:
A.provide opportunity for fair housing for all persons in the U.S.
B.guarantee separate but equal housing in the U.S.
C.eliminate prejudice in the U.S.
D.create housing for disadvantaged minority groups in the
A.provide opportunity for fair housing for all persons in the U.S.
The purpose of the Fair Housing Act is to provide equal housing opportunity for all persons by prohibiting discrimination in residential real estate transactions.
Under the Fair Housing Act, religious organizations may limit occupancy to their own members, provided membership isn't restricted on the basis of:
A.race
B.gender
C.national origin
D.Both A and C
D.Both A and C
Membership can't be restricted on the basis of race, color, or national origin. This exemption applies only to noncommercial transactions involving the organization's own property.
The Fair Housing Act contains which of the following provisions?
A.A "Golden Rule" provision
B.A provision guaranteeing all prospective buyers equal opportunity to purchase properties that fall within their price range
C.A provision requiring all real est
C.A provision requiring all real estate licensees to refrain from discriminating
The Fair Housing Act specifically prohibits discrimination in real estate brokerage.
A broker is approached by a seller with a home for sale. The seller tells the broker that he does not wish to sell to a minority buyer. What should the broker do?
A.Promise the seller not to show the property to minority buyers
B.Take the listing and sugg
D.Refuse the listing
A real estate licensee is not permitted to assist anyone in violating the Fair Housing Act. If a client instructs a licensee to discriminate, the licensee must refuse to cooperate.
A seller lists his home at a price about 10% above fair market value, requiring minority buyers to pay the listed price, but allowing his broker to negotiate with other buyers to pay lower amounts. This:
A.does not violate the Fair Housing Act because min
D.is unlawful and could make the broker liable for money damages
Requiring minorities to pay higher prices than others is unlawful discrimination under the Fair Housing Act. The broker may be liable for money damages.
A factory that will employ mostly women is moving into a town. The developer of a new subdivision in that town instructs the salespeople selling homes in the development to (1) create advertising that expresses a preference for single working mothers, and
C.Both 1 and 2
Instruction 1 is a violation of the Fair Housing Act because the advertising expresses a preference or limitation related to sex and familial status. (If an advertising plan were targeted toward single working mothers but did not express a
A licensee persuades several families to list their homes for sale by telling them that neighborhood values are declining due to a recent influx of minority residents. This tactic is called:
A.good business practices
B.racial steering
C.blockbusting
D.bli
C.blockbusting
This licensee is engaging in "blockbusting," also called "panic selling." This practice is unlawful under the Fair Housing Act.
A potential buyer asks about a neighborhood's elementary school. The agent should:
A.direct the buyer to the Chamber of Commerce for more information
B.give the buyer information about the school's demographic information
C.pass along comments from other
A.direct the buyer to the Chamber of Commerce for more information
While the agent may give the buyer truly factual information about the school (such as its demographics), it's usually best to refer a buyer to an objective source that has a variety of sc
A potential buyer asks about the demographics in a certain neighborhood. The agent should answer:
A."half Asian and half Hispanic"
B."I can't give you any help or resources for finding that information"
C."I can't tell you that information"
D."it would be
A."half Asian and half Hispanic"
It is acceptable for a real estate agent to give truthful answers to a buyer's questions about the demographic characteristics of a neighborhood, so long as the agent does not encourage or discourage the buyer from conside
An agent is showing a property. In the last few years, the demographics of the neighborhood have changed significantly. The agent should:
A.answer any questions honestly
B.recommend that the buyers look in other, more demographically stable neighborhoods
A.answer any questions honestly
An agent may truthfully answer buyer questions about a neighborhood's demographics, even if the buyer uses that information to decide not to look there because of the racial composition of the neighborhood or other characte
A real estate salesperson is often approached by home buyers of a particular ethnicity. His usual practice is to show them homes in neighborhoods with mostly other residents of their race. He avoids showing them properties in integrated areas. This is cal
C.steering
Steering involves guiding customers toward (or away from) particular neighborhoods based on their race or ethnicity.
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:
A.may assume that she is not interested in areas with other Asian residents
B.may assume that she is not intereste
C.should choose homes for showing as the broker would for any other customer
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 mus
Which of the following methods of advertising is legal?
A.Only advertising in an ethnic newspaper
B.Only asking current tenants, who are mostly white, to refer friends
C.Only asking current tenants to refer minority friends
D.Only asking current white ten
B.Only asking current tenants, who are mostly white, to refer friends
Asking current tenants to refer their friends is permissible. But asking only white tenants, or inquiring about only minority friends, would be illegal. Advertising in an ethnic newspap
A broker has a particular home listed for sale and an African-American buyer comes by and asks to see it. Under what circumstances may the broker refuse to show the buyer the home?
A.Under no circumstances
B.If the broker honestly believes that a sale to
D.If the seller is on vacation and has asked the broker not to show the house while he is gone
The broker is bound by the seller's instructions regarding when the house can be shown, as long as those instructions are not discriminatory. Under options B an
An agent called homeowners and tried to scare them into listing their homes by saying that minority buyers were moving into the neighborhood. This is an illegal practice known as:
A.steering
B.panic peddling
C.blockbusting
D.Both B and C
D.Both B and C
Obtaining listings illegally by predicting to homeowners that members of a minority group will be moving into a neighborhood is known as blockbusting, panic selling, or panic peddling.
When there has been a drastic change in the demographics of a neighborhood, an agent showing homes to buyers:
A.must not allude to the changing ethnic composition of the neighborhood
B.must disclose this change to buyers if it is affecting property values
A.must not allude to the changing ethnic composition of the neighborhood
An agent showing properties to buyers should avoid discussing a neighborhood's racial or ethnic composition, to avoid possible charges of steering. Steering is the practice of guidin
Which California state agency is responsible for receiving complaints of unlawful discrimination in housing?
A.Department of Real Estate
B.Department of Fair Employment and Housing
C.Department of Housing and Community Development
D.Real Estate Commission
B.Department of Fair Employment and Housing
Complaints involving violations of fair housing laws may be submitted to the California Department of Fair Employment and Housing.
If a plaintiff wins a lawsuit filed in federal court under the fair housing provisions of the 1866 or 1968 Civil Rights Acts, which of the following remedies is unavailable?
A.Money damages for emotional pain and suffering
B.Money damages for expenses and
D.Suspension or revocation of the license of the real estate agent involved in the transaction
A federal judge has no jurisdiction over the license of a California real estate agent; only the Bureau of Real Estate (formerly Department of Real Estate) can
The purpose of the Equal Credit Opportunity Act is to:
A.prevent lenders from discriminating against credit applicants
B.lower the cost of obtaining financing
C.standardize the requirements for obtaining credit
D.increase the amount of credit available to
A.prevent lenders from discriminating against credit applicants
The Equal Credit Opportunity Act was enacted to bar lenders from discriminating against credit applicants based on race, color, religion, national origin, sex, marital status, or age (provide
HUD's Section 8 program was created to:
A.ensure more affordable housing
B.fund efforts to better enforce prohibitions on housing discrimination
C.help create federal agencies related to housing
D.protect jobs during depressions
A.ensure more affordable housing
Section 8 is a program within the Department of Housing and Urban Development that authorizes payment of housing assistance vouchers to private landlords for low-income households, thus creating a larger pool of affordable
A salesperson presents a seller with a full-price cash offer from a qualified minority prospective buyer. The salesperson's broker then presents the seller with a less-than-full-price offer from a qualified non-minority prospective buyer. The seller, howe
D.Non-minority prospective buyer
The non-minority prospective buyer was making a legitimate offer, not for discriminatory purposes, and therefore has not violated fair housing laws. The seller, the neighbor, the salesperson, and by extension, the broker,
An apartment rental application contains a question about marital status. This question:
A.is unlawful
B.is permissible as long as the building is owned by a single party
C.is permissible as long as rental ads inform applicants that the owner prefers marr
A.is unlawful
In California, it is illegal for a rental property owner to ask applicants for information regarding marital status. However, the landlord can (and should) ask how many adult residents will live in the unit and require that all the adult res
Under fair housing laws, an apartment owner is permitted to do all but which of the following?
A.Check references from previous landlords
B.Run credit reports on applicants
C.Require security deposits
D.Require only single tenants to have a lease co-signo
D.Require only single tenants to have a lease co-signor
Requiring only single tenants to have co-signors constitutes discrimination on the basis of marital status, so it would violate the Fair Employment and Housing Act, and also the Unruh Act.
A broker brings his seller an offer from a potential buyer. If the seller inquires into the race of the potential buyer, the broker:
A.must disclose this information to the seller
B.may disclose this information as long as it will not affect the seller's
D.may not disclose this information because to do so would violate the Rumford Act
The Fair Employment and Housing Act is also known as the Rumford Act. It prohibits discrimination in the sale, rental, lease, or financing of housing, and that includes ask
Under the Fair Employment and Housing Act, a person who has suffered from discrimination in housing may receive:
A.an opportunity to buy or rent the property if it is still available
B.an opportunity to buy or rent a similar property
C.money damages
D.Any
D.Any of the above
The act authorizes all of these remedies for a person who has been discriminated against in the sale or rental of housing.
Amuezca is buying a house. The real estate broker recommends a lender. The lender's loan application asks the applicant's race and marital status. Amuezca may:
A.refuse to disclose his race and marital status
B.not refuse to disclose this information, bec
A.refuse to disclose his race and marital status
The federal Equal Credit Opportunity Act and the state Housing Financial Discrimination Act both prohibit lenders from discriminating on the basis of race or marital status. A loan applicant can't be requir
In the financing of owner-occupied residences, a lender charges what it calls an "immigration-status review fee" if English doesn't seem to be the borrower's native language. This fee is most likely:
A.permitted if disclosed to the borrower in the loan ap
D.in violation of the Housing Financial Discrimination Act of 1977
The Housing Financial Discrimination Act (also known as the Holden Act) prohibits lending institutions from discriminating in the provision of financial assistance for housing based on rac
A deed contains a restrictive covenant barring the sale of the land to persons of non-Caucasian descent. This covenant:
A.is enforceable only as long as the grantor remains living
B.may be enforced by the grantee
C.is unenforceable but does not invalidate
C.is unenforceable but does not invalidate the conveyance
The covenant is unenforceable, but the deed otherwise remains valid.
When a deed contains racial covenants, they can be removed:
A.if the language is offensive and/or restrictive
B.by recording a Restrictive Covenant Modification
C.only if the deed was executed prior to 1978
D.only if the title company deems the language o
B.by recording a Restrictive Covenant Modification
A racially restrictive covenant in a deed is void and unenforceable, although the conveyance is still valid. California law requires persons providing documents that contain racially restrictive covenants
The three phases of building a home are:
A.land acquisition, development, and construction
B.financing, building, and resale
C.subdivision planning, building, and brokerage
D.design, construction, and occupancy
A.land acquisition, development, and construction
The three phases in building a home are land acquisition, development, and construction.
A broker is trying to find out the size and location of concrete piers, footings, and other subfloor details. She should consult:
A.an elevation
B.the site plan
C.the floor plan
D.the foundation plan
D.the foundation plan
A foundation plan shows details of the foundation's construction, including all the details of the subfloor.
In residential construction, a footing is:
A.a beam running under the floor boards near the bearing wall
B.a board attached with bolts to the foundation wall
C.a concrete block located under a floor joist
D.the wider part of the base of the foundation wal
D.the wider part of the base of the foundation wall
The bottom, wider part of the foundation wall is called the footing.
The parallel members that support the weight of the floor and ceiling are called:
A.joists
B.rafters
C.studs
D.subflooring
A.joists
Joists are horizontal parallel timbers that support the ceiling and floor loads.
In the interior of a house, a load-bearing wall:
A.usually has stronger members than other walls
B.normally is not moved during any remodeling
C.may be constructed at any angle in relation to a doorway
D.All of the above
D.All of the above
Load-bearing walls (also called bearing walls) are typically constructed more sturdily than other walls and are left intact during remodeling. They may be built at any angle to a doorway.
The sheet metal used on a roof to prevent water seepage is called:
A.gutter
B.lath
C.insulation
D.flashing
D.flashing
Flashing is sheet metal (or other material) used to protect and deflect water from areas in a roof with joints and angles, such as around a chimney.
In a conventionally constructed house, the highest structural member in the frame is the:
A.top plate
B.ridge board
C.corner bracing
D.sill plate
B.ridge board
The ridge board is placed at the peak of the roof, where the rafters meet.
The term "potable" is used in reference to:
A.septic tanks
B.dirt fill
C.cement
D.water
D.water
Potable water is water suitable for drinking.
A soil pipe is typically used for:
A.water
B.gas
C.sewage
D.irrigation
C.sewage
A soil pipe is a heavy clay or iron pipe that carries sewer outflow from the house to the main sewer line.
With an air conditioning unit, the higher the energy-efficiency ratio (EER), the:
A.more efficient the unit
B.less efficient the unit
C.greater the cooling power
D.more energy used
A.more efficient the unit
The higher the EER, the more energy-efficient the unit will be.
Insulation's effectiveness is rated using an "R-value," with the "R" representing:
A.required level
B.room temperature
C.radiation flow
D.resistance to heat flow
D.resistance to heat flow
A material with a high R-value is more resistant to heat flow and transfer. Therefore, the higher the R-value is, the more effective the insulation.
During the winter, if the inside surface of an exterior wall feels the same temperature as the surface of an interior wall, then:
A.the exterior wall is inadequately insulated
B.the exterior wall is adequately insulated
C.the heating and ventilation syste
B.the exterior wall is adequately insulated
The exterior wall's insulation is working effectively if its inside surface feels as warm as the surface of interior walls in the house.
A termite inspection is generally required either by the buyer or by the buyer's lender when a house is sold. Ideally, the seller should order the termite report:
A.after determining the sales price
B.before listing the property
C.after the lender's appra
B.before listing the property
Ideally, the seller should obtain the termite report prior to listing the property or setting its listing price. The results of the report will help the seller determine the cost of any necessary corrective action, and that c
By law, pest control operators are required to:
A.charge no more than $200 for an inspection
B.provide a copy of a pest control report to the owner of the property within 10 days of the inspection
C.provide additional copies of a pest control report to an
B.provide a copy of a pest control report to the owner of the property within 10 days of the inspection
A copy of the report must be delivered to the property owner, or to her agent, within 10 business days of the inspection.
In real estate transactions, structural pest control reports are:
A.always paid for by the seller
B.negotiated by the parties
C.ordered after the purchase agreement has been signed
D.required by all lenders
B.negotiated by the parties
Typically, the seller will pay for correcting pest problems discovered by a structural pest control inspection, but that is not necessarily the case; the parties may negotiate any response to the report.
If a structural pest control report has been prepared for a property within the previous two years, a copy of the report can be requested from the Structural Pest Control Board by:
A.the buyer
B.the seller
C.any party involved in the transaction
D.any per
D.any person
Anyone may obtain a copy of a report by submitting a request to the Structural Pest Control Board.
Structural pest control reports are filed with the:
A.Bureau of Real Estate
B.Real Estate Commission
C.Department of Pesticide Regulation
D.Structural Pest Control Board
D.Structural Pest Control Board
After inspecting a property and preparing a structural pest control report, a pest control operator must file the property address with the Structural Pest Control Board. Anyone can obtain a copy of the report by requesting
When a property is sold, a copy of a required structural pest control report must be delivered to the:
A.buyer
B.real estate agent
C.escrow officer
D.title company
A.buyer
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.
Betty buys Sally's home. A condition of the sale is that Sally provide a structural pest control report. Sally hires a pest control company to perform an inspection and any needed corrective work. The company performs the work and is paid by Sally. Which
B.Sally must provide Betty with a copy of the pest control report as soon as practicable
If a pest control inspection is required by the purchase agreement or by the buyer's lender, the seller or the seller's agent must deliver a copy of the inspection re
f 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.An EPA review
B.A rezone
C.A soil engineer's report
D.A toxic waste report
C.A soil engineer's report
The appraiser will want to know whether any seepage from the gas station's underground tanks has contaminated the residential property.
Backfill is typically used for:
A.landscaping
B.filling in excavated areas
C.roadways
D.the driveway foundation
B.filling in excavated areas
Backfill is soil used to fill excavation holes and around foundation walls.
Which of the following terms does not refer to a type of soil or soil condition?
A.Expansive
B.Adobe
C.Alkaline
D.Deciduous
D.Deciduous
Deciduous is not a type of soil (the term refers to trees that lose their leaves each year). The other three terms all refer to soil types or conditions.
In portfolio risk management, which of the following needs to be considered?
A.Reserves
B.Liquidity
C.Diversification
D.All of the above
D.All of the above
To minimize risk, an investor wants her investments to be diversified and as liquid as possible. She should also maintain some cash reserves.
Compared to other investments, real property takes more time and effort to invest in, and must be purchased in more expensive units. Therefore, its return should be:
A.higher than the return on bonds or first trust deeds
B.higher than the return on bonds,
A.higher than the return on bonds or first trust deeds
Because real property is more expensive and less liquid, it is considered riskier than other types of investments. Therefore, investors expect a higher return (a higher yield) from real property than
The type of investment that will serve best as a hedge against inflation is a/an:
A.extremely liquid investment
B.income property that maintains its value
C.investment like an annuity
D.no-risk investment
B.income property that maintains its value
In real estate, equity is defined as:
A.the difference between the property's market value and the outstanding liens against it
B.the initial downpayment on the property
C.the difference between the loan amount and the property value
D.All of the above
D.All of the above
These are all definitions of equity.
An investor wishing to apply the principle of leverage should invest using:
A.as much of his personal funds as possible
B.a mix of personal and borrowed funds
C.borrowed funds as much as possible
D.funds borrowed only from family and friends
C.borrowed funds as much as possible
An investor applying the principle of leverage would use as much borrowed money as possible and as little of his own money as possible.
A store owner sells his property in a sale-leaseback transaction. For income tax purposes, he may:
A.continue to depreciate the improvements
B.retain fee simple title to the property
C.deduct future rent payments in full
D.All of the above
C.deduct future rent payments in full
In a sale-leaseback, a property owner sells the property to an investor, then leases it back from the investor (the new owner) and continues to occupy it. After entering into his sale-leaseback arrangement, the store
Mary, a fee simple owner, enters into a transaction that converts her interest in her property into a less-than-freehold estate. This transaction is a:
A.grant of a life estate
B.sale of mineral rights
C.short-term lease of the property
D.sale-leaseback
D.sale-leaseback
In a sale-leaseback transaction, the owner sells the property and then leases it back from the buyer. In this way, she converts her fee simple interest into a leasehold interest.
The repair of broken appliances is categorized as:
A.corrective maintenance
B.preventive maintenance
C.housekeeping
D.functional maintenance
A.corrective maintenance
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 person would be responsible for performing periodic inspections of an investment property?
A.Property owner
B.Property manager
C.Leasing agent
D.Maintenance contractor
B.Property manager
Answer B makes more sense than A, because the owner has no statutory or contractual obligation: she can inspect her property or not as she chooses. Generally, an investment property owner who hires a property manager expects the manager
Who is in charge of creating an emergency evacuation plan in a multi-tenant office building?
A.City or county health department
B.Fire department
C.Owner
D.Property manager
D.Property manager
The property manager of a large commercial property would be responsible for building operations, such as security and safety procedures.
John owns an apartment building and does not live on-site. He is therefore required to have a resident manager or responsible person on the premises. The requirement exists because his building contains:
A.more than 2 units
B.more than 8 units
C.16 or mor
C.16 or more units
Under California law, if an apartment building has 16 or more units (in other words, more than 15 units), the owner, a resident property manager, or some other responsible party must reside on the premises.
The authority of the property manager to enter into leases of units in the managed property appears in the:
A.Real Estate Law
B.property management agreement
C.management proposal
D.marketing plan
B.property management agreement
A property management agreement, which is a contract between a property owner and a property manager, defines the property manager's duties and the scope of his authority.
A contract where one party makes regular installment payments and the other party makes payment conditioned on a specific event happening is known as:
A.an insurance policy
B.an option agreement
C.a sale-leaseback
D.a deed of trust
A.an insurance policy
Insurance requires the insured person to make regular premium payments, and 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.
Fire insurance is a contract of indemnity. This means that if the correct amount of coverage is maintained, the intended result of the policy is that the insured:
A.may profit, but will not suffer a loss
B.will neither profit nor suffer a loss
C.may lose,
B.will neither profit nor suffer a loss
An insurance policy is intended to put the insured person back in the position he was in, before the covered peril happened. The insurer will pay the insured the amount required to compensate for the loss (up to the
The term "equity financing" refers to:
A.an equity loan
B.borrowing against equity
C.purchasing using borrowed money
D.purchasing using the buyer's own money
D.purchasing using the buyer's own money
Equity financing refers to purchasing property using the buyer's own money, as opposed to money borrowed from a lender. (This is different from an equity loan, which refers to money that a property owner borrows us
Which of the following are frequently short-rated?
A.Interest rates
B.Property taxes
C.Leasing agent commissions
D.Insurance premiums
D.Insurance premiums
Prepaid insurance policy premiums are usually short-rated when a policy is canceled before its expiration date. This means that instead of being prorated, the premium refund amount is determined according to a schedule approved by the
In a sale-leaseback transaction, the purchaser should be least concerned with the:
A.condition of the building and improvements
B.credit history of the seller/lessee
C.property location
D.depreciated book value of the building
D.depreciated book value of the building
The depreciated book value of a building is the owner's adjusted cost basis in the property. When the property is sold, the new owner's book value or initial basis in the property will be established by the amount
A shopping center developer approaches a lender for a loan. In deciding whether to make the loan, the most important consideration for the lender is the:
A.length of the long-term leases
B.number of current tenants
C.anchor tenant
D.shopping center locati
C.anchor tenant
An anchor tenant is a major tenant in a shopping center. In a large shopping mall, an anchor tenant is usually a major department store. In a smaller shopping center, the anchor store might be a supermarket.
A change in which of the following would have a long-term impact on the real estate market?
A.The real estate industry
B.Land use controls
C.Consumerism
D.All of the above
D.All of the above
All of these are important to the real estate market, and changes in any of them would have a long-lasting impact.
If a commercial center is located in a single line along a major street, it is referred to as a/an:
A.outdoor shopping mall
B.commercial line
C.shopping line
D.strip commercial development
D.strip commercial development
A strip commercial development, or strip mall, is a retail development with storefronts in a straight line along a major arterial route.
Pedestrians prefer to walk in the shade, and sunlight can damage goods placed in store windows. Which sides of the street are least desirable as retail locations?
A.North and east
B.South and west
C.East and south
D.West and north
A.North and east
The north and east sides of the street receive the most sun during business hours. A retailer may therefore prefer not to locate on the north or east side of a street.
A "turnkey project" is:
A.a subdivision located in a rural area
B.a completed construction project ready for occupancy
C.a government-subsidized project
D.a divided parcel ready for construction
B.a completed construction project ready for occupancy
A construction project that is completed and ready for occupancy may be referred to as a turnkey project. The occupants need only "turn the key" and take possession.
An unlicensed person sold several properties for a commission and engaged in false advertising while selling the properties. Who would prosecute this person?
A.Real Estate Commissioner
B.State Attorney General
C.Local district attorney
D.Administrative he
C.Local district attorney
The district attorney of the county where the illegal acts occurred would be responsible for the prosecution.
A person who manages properties for the general public must be a:
A.responsible party over the age of 25
B.member of a local rental listing service
C.licensed real estate broker
D.certified property manager
C.licensed real estate broker
Property management involves leasing real property on behalf of another person and for compensation, so a person acting as a property manager in California is required to have a real estate broker's license.
When a real estate licensee employs a non-licensee, the licensee must be careful to make sure that:
A.activities requiring a real estate license are performed only by the licensee
B.the employee's activities are limited to those permitted by the Real Esta
A.activities requiring a real estate license are performed only by the licensee
An unlicensed employee of a real estate licensee may not perform or be compensated for activities for which a real estate license is required. The correct name of the guide is
A California broker closes a transaction that was initially referred to him by an out-of-state broker. The out-of-state broker asks for a portion of the commission received from the sale. This type of commission split is:
A.permissible
B.permissible only
A.permissible
A broker licensed in California may share a commission with an out-of-state broker.
A salesperson's contract states that she is an independent contractor. When she obtains a listing, she is:
A.an agent for the buyer
B.an agent for the owner
C.a dual agent for the owner and the buyer
D.None of the above
D.None of the above
The salesperson's broker is the agent of the owner. The salesperson, in turn, is an agent of the broker. The fact that the salesperson is an independent contractor does not affect these agency relationships.
The Bureau of Real Estate can issue all of the following licenses, except:
A.a corporate broker license
B.a mortgage loan originator endorsement
C.a partnership endorsement
D.a salesperson license
C.a partnership endorsement
The BRE can issue real estate licenses to corporations, and can offer MLO endorsements to brokers who engage in mortgage loan brokerage as well. While there is no partnership license, a partnership may perform acts for which a
Which of the following is exempt from the real estate licensing requirement when acting for compensation?
A.A duly authorized attorney in fact
B.A real estate assistant who helps negotiate sales terms
C.A person assisting a family member with a transactio
A.A duly authorized attorney in fact
An attorney of fact, operating under a properly executed power of attorney, is exempt from real estate licensing requirements.
If an unlicensed assistant is preparing advertising materials regarding loan programs, a broker:
A.should write all the materials herself
B.only needs to provide the correct information to the unlicensed assistant
C.needs to read the materials prepared by
D.needs to read and approve in writing the materials prepared by the unlicensed assistant prior to their publication
A real estate broker's unlicensed assistant may prepare advertising, but the broker must review the advertisements and give his written ap
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 documen
C.The duties performed by the son require him to have a real estate license
The son is quoting prices and discussing financing. These are acts of a real estate agent and require a license.
An unlicensed assistant arranges for a home inspection, at her broker's request. She provides assistance as needed to the inspector as part of the process. Which of the following duties must be performed by the broker, though, rather than the unlicensed a
B.Answering the inspector's questions about the property
A real estate license is required in order to answer specific questions about a property (which is true when interacting with third parties, such as inspectors, as well as with clients). An unlicens
An unlicensed real estate assistant could do all of the following tasks except:
A.advise the buyers to apply for additional financing if there is a problem or delay regarding their current application
B.maintain transaction records
C.order a home inspecti
A.advise the buyers to apply for additional financing if there is a problem or delay regarding their current application
An unlicensed real estate assistant is limited to clerical work, and other activities that do not involve discussing the price, terms,
At an open house, an unlicensed real estate assistant may:
A.discuss the condition of the property
B.discuss the financing options for the buyers
C.make appointments for interested buyers with the licensee
D.show the property
C.make appointments for interested buyers with the licensee
An unlicensed real estate assistant may not discuss the price, terms, or condition of the property, which limits what an assistant may do at an open house.
It is lawful under state law for a broker to pay a referral fee to an unlicensed person as long as:
A.the unlicensed person did nothing but bring the principal and licensee together
B.the referral fee was disclosed to all parties
C.the unlicensed person i
A.the unlicensed person did nothing but bring the principal and licensee together
An unlicensed person who introduces a buyer or a seller to a broker, but who does not perform any real estate activities requiring a license, may receive a finder's fee.
Wanda takes the real estate license exam and receives notice that she has passed. However, she doesn't submit her license application right away. To avoid having to pass the exam again, Wanda must apply for her license within:
A.one year from the date of
A.one year from the date of the exam
The exam results are valid for one year from the exam date.
What recourse does a licensee have if he fails to renew his license before it expires?
A.He must renew it within one year by paying all fees and penalties
B.He must renew it within two years by paying all fees and penalties
C.He must renew it within three
B.He must renew it within two years by paying all fees and penalties
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 en
A broker wants to conduct business under a name different from that on her license. She files a fictitious business name statement with the clerk of the county in which her brokerage is located. When must the statement be renewed?
A.Every year
B.Every two
C.Every five years from the date it was originally filed
A fictitious business name statement expires five years after it was filed.
A written statement sworn before a notary public is a/an:
A.authorization
B.ratification
C.verification
D.affidavit
D.affidavit
An affidavit is a written statement sworn (acknowledged) before a notary public or other official authorized to administer an oath.
How many real property securities may an unlicensed person sell, if the sale is on behalf of another person and for compensation?
A.7
B.6
C.5
D.None
D.None
Someone who sells real property securities for another person and for compensation must be licensed.
Doug is retiring and plans to sell his business to an associate. The sale will include the office building and the personal property associated with the business. Which of the following is true?
A.A single escrow must be used for the transaction
B.A singl
C.Two purchase agreements may be used
The transfer may be treated as two separate transactions. One purchase agreement is for the real property; the other is for the personal property.
Jack and Jill sign a contract in which Jill grants Jack the right to sell, exchange, or distribute goods or services using her particular marketing plan. This type of agreement is called a:
A.franchise agreement
B.market exchange agreement
C.financing agr
A.franchise agreement
Typically, the grantee pays a franchise fee to operate a business under the franchisor's (grantor's) brand name, logo, and/or marketing plan.
When a business is sold, the buyer must obtain a Certificate of Clearance from the:
A.Secretary of State
B.state Board of Equalization
C.Franchise Tax Board
D.Department of Finance
B.state Board of Equalization
The Certificate of Clearance, or clearance receipt, certifies that the seller's sales taxes have been paid. A Certificate of Clearance is obtained from the state Board of Equalization.
The buyer of a business obtains a Certificate of Clearance in order to protect herself from:
A."successor's liability" to the Franchise Tax Board
B."successor's liability" to the State Board of Equalization
C.unsecured creditors
D.secured creditors
B."successor's liability" to the State Board of Equalization
Without a Certificate of Clearance (also called a clearance receipt) from the state Board of Equalization, the buyer of a business will be liable for any sales tax the seller owed and failed to
The purpose of the Uniform Commercial Code's bulk transfer law is to protect primarily the interests of:
A.business creditors, but also the interests of the buyer
B.personal creditors
C.buyers
D.sellers
A.business creditors, but also the interests of the buyer
The bulk transfer law requires a notice to be recorded and published when there's a pending sale of more than half the inventory of a business. This primarily protects the creditors of the business
When a business is being sold, responsibility for publishing and recording a notice concerning the transaction lies with the:
A.buyer's creditors
B.transferor
C.transferee
D.seller
C.transferee
The sale of a business opportunity often involves a bulk transfer (a sale of more than half the seller's inventory, not in the ordinary course of business). Under the Uniform Commercial Code, in a bulk transfer, the transferee, or buyer, is r
A liquor license held by a business may not be sold:
A.under any circumstances
B.within the first two years after it is issued
C.within the first three years after it is issued
D.for more than the application fee unless five years have passed since it was
D.for more than the application fee unless five years have passed since it was issued
Certain types of liquor licenses can't be sold for more than the original fee paid to the state until at least five years have passed since the date the license was issu
A real estate salesperson defrauds a client. The Real Estate Commissioner may:
A.order compensatory damages up to the value of the client's losses
B.order punitive damages up to a reasonable amount
C.suspend or revoke the salesperson's license
D.All of th
C.suspend or revoke the salesperson's license
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 of damages to a victimized party. To obtain a damages award, the clie
A seller's agent misrepresents information about a property to a potential buyer. The agent is subject to:
A.civil action by the potential buyer
B.criminal prosecution
C.disciplinary action by the Real Estate Commission
D.All of the above
D.All of the above
All three of these actions may be appropriate when an agent has committed misrepresentation.
Broker Anna shows Jeff a rental property. After reviewing the financial analysis she has prepared for the property, he decides it is a good investment and proceeds to purchase it. Later, Jeff learns that Anna's analysis did not include management fees and
A.Misrepresentation
Because Anna's analysis left out certain cost factors and made the investment property look more valuable than it actually was, she effectively made a false statement of fact to Jeff. This is a misrepresentation, which is a violation o
A salesperson, eager to impress a potential buyer, says, "This house is a fantastic buy. I guarantee that two years from now, you'll be able to resell it for five times its price today." Based on this statement, the buyer purchases the house. Two years la
D.The salesperson is subject to disciplinary action for misrepresentation and may be liable to the buyer as well
"Puffing" refers to exaggerated statements that are plainly not meant to be taken literally and therefore are not grounds for legal action. He
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. Befo
B.unlawful
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
In a dual agency relationship, the agent owes fiduciary duties to both the buyer and the seller. Therefore, a dual agency is permissible:
A.under no circumstances
B.if the buyer consents
C.if the seller consents
D.if both the buyer and seller consent
D.if both the buyer and seller consent
A dual agency is lawful only if both the buyer and the seller have been informed of the situation and have consented to it.
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:
A.he is subject to disciplinary action for violation of the license law
B.he may not be able to enforce pa
D.All of the above
All of these remedies may be applied when a broker has failed to disclose his dual agency.
A person licensed as a real estate broker in California may always lawfully advertise himself as a:
A.real estate attorney
B.Realtor or Realtist
C.real estate broker
D.All of the above
C.real estate broker
A person licensed as a real estate broker in California is permitted to advertise himself as a real estate broker. He can advertise himself as a Realtor only if he is also a member of the National Association of Realtors. He can adver
Which of the following violates the broker's duty to exercise reasonable supervision over salespersons?
A.Broker rents space in the main office
B.Broker works for another broker
C.Salesperson licensed to broker, as long as there is a written employment ag
D.Salesperson is appointed as office manager
A salesperson must meet certain experience requirements in order to manage a branch office.
A broker receives a full-price offer on a property listing. Before she has a chance to submit the offer to the seller, she receives a lower, all-cash offer on the same property. Which of the following statements is true?
A.The two offers must be submitted
D.Both offers must be submitted as soon as possible
Unless an offer was patently frivolous or the seller specifically instructed the agent not to present certain types of offers, failure to submit an offer is a failure to disclose a material fact to the p
A broker learns that one of his salespersons has committed several violations of the license law. The broker fires the salesperson and takes steps to ensure that his other salespersons do not engage in the same behavior. Which of the following is true?
A.
C.Both the broker and salesperson are subject to disciplinary action by the Real Estate Commissioner
The salesperson has violated the license law; the broker failed to report the violations to the Real Estate Commissioner. They are both subject to discipl
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:
A.disclose to clien
C.give referrals to other providers of closing and loan services instead
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 a
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:
A.illegal under the Real Estate Law
B.legal as long as they were disclosed to all parties
C.legal as long as they
A.illegal under the Real Estate Law
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 Pr
A real estate agent misrepresented the characteristics of a property to the buyers, who then sued the agent and won. However, the agent is insolvent, meaning that the buyers are unable to recover anything from him. The next step for the buyers would be to
C.seek financial compensation from the states Recovery Account
An injured party who receives a civil judgment against a licensee for certain acts of misconduct may apply to the Recovery Account for payment of the judgment. The injured party must show that
The purpose of the Recovery Account is to:
A.compensate brokers who have been unable to collect earned commissions
B.furnish funds for real estate education
C.protect brokers from liability
D.provide partial compensation to members of the public harmed by
D.provide partial compensation to members of the public harmed by a real estate licensee under certain conditions
If an injured party receives a civil judgment against a licensee based on intentional fraud, misrepresentation, or deceit, and the licensee h
A licensee committed several violations which resulted in civil judgments against him. What is the maximum amount of payments that can be made from the Recovery Account on behalf of the licensee?
A.$100,000
B.$150,000
C.$200,000
D.$250,000
D.$250,000
The maximum amount the Recovery Account will pay for losses caused by one licensee is $250,000.
real estate agent had three lawsuits filed against him by unhappy clients and had three judgments entered against him. The first was for $10,000, the second was for $25,000, and the third was for $75,000. How much of the third judgment will be paid by the
C.$50,000
The Recovery Account will pay a maximum of $50,000 per transaction. It will pay a maximum of $250,000 per licensee, but the agent in this question has not exceeded that limit.
An insolvent broker has a judgment entered against him. His creditors apply for reimbursement and are paid from the Real Estate Recovery Account. As a result, the broker's license is automatically suspended. It will be reinstated only when he reimburses t
C.in full, plus interest
The broker's license cannot be reinstated until the Recovery Account has been completely repaid, with interest.
Hoping to sell her property quickly, an owner pays her agent a fee for special marketing and advertising. This "advance fee":
A.is illegal
B.is permitted as long as it does not exceed $500
C.may be deposited into the agent's general operating account
D.mu
D.must be deposited into a trust account
A broker may collect advance fees to cover unusual marketing and advertising expenses, or as an upfront fee for services not yet provided. Advance fees must be held in a trust account.
Trust accounts are used to:
A.facilitate the disbursement of funds and fees to the broker and escrow agent
B.maximize the amount of interest earned on client funds
C.keep broker funds and client funds separate
D.protect the broker from an attachment lien
C.keep broker funds and client funds separate
A trust account is used to keep client funds separate from the broker's own funds. This protects the client funds in the event of legal action against the broker, and it also makes accidental misappropriation
Trust funds received by a broker must be placed in a trust account:
A.as soon as practicable
B.at the broker's convenience, at some point before closing
C.by the next business day after receipt
D.by the third business day after receipt
D.by the third business day after receipt
Trust funds must be deposited no later than three business days following receipt of the funds, unless there are written instructions to hold a check uncashed until an offer is accepted.
When a buyer writes out a check and delivers it to an escrow company, what trust account records does the broker need to keep?
A.An entry in the beneficiary ledger for the transaction
B.An entry into the cash ledger with the amount paid and date received
D.No trust account record is necessary
Because the buyer delivered the check directly to the escrow company, the funds never passed through the hands of the broker. Therefore, the broker is not required to keep a record of the transaction.
According to the Real Estate Commissioner's regulations, every broker must:
A.maintain a trust account
B.maintain trust records, including receipt and disbursement journals
C.keep a trust ledger
D.hold client funds in the same account as broker funds
B.maintain trust records, including receipt and disbursement journals
A trust account and a trust ledger are not necessary if client funds are always passed on to the principal or an escrow agent within three business days. However, trust records must be
On June 1, a buyer made an offer on a property and gave the broker a good faith deposit check that was dated June 30. The buyer asked the broker to hold the check until June 30. The broker should:
A.hold the check and inform the seller about the date on t
A.hold the check and inform the seller about the date on the check when presenting the offer
A broker may hold a buyer's deposit check uncashed until the seller accepts the buyer's offer. After acceptance, the broker will need the seller's written authori
A broker negotiates the sale of a property. He is to receive a $500 commission from the seller at closing. A week before closing, he receives a $5,000 cash deposit. He is permitted to do which of the following?
A.Place the entire $5,000 in escrow, accompa
B.Place the entire $5,000 in escrow
The entire deposit must be placed in escrow (or in the broker's trust account). The broker is not entitled to be paid his commission until closing, and he should not separate the amount of the commission from the rest o
A buyer makes an offer accompanied by a good faith deposit. She later withdraws the offer before it is accepted by the seller. Which of the following statements is true?
A.The deposit funds now belong to the seller
B.The broker must refund the deposit to
B.The broker must refund the deposit to the buyer
The buyer is entitled to revoke an offer at any time before acceptance. The deposit, held in trust by the broker, is fully refundable to the buyer.
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
C.an interpleader action
An interpleader 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.
Can a broker who does property management as well as sales combine rents and good faith deposits in the same trust account?
A.Yes, as long as the broker keeps detailed records of all transactions
B.No, as this would be commingling
C.No, unless the broker
A.Yes, as long as the broker keeps detailed records of all transactions
A real estate broker who engages in both sales and property management activities may keep good faith deposits and rents in one trust account, as long as accounting procedures are in
Which law prohibits an agent from committing fraudulent acts against his principal?
A.Code of Civil Procedure
B.Business and Professions Code
C.Civil Code
D.Criminal Code
B.Business and Professions Code
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 Cr
A licensee is sanctioned for committing conversion, which means she:
A.failed to make a full disclosure of material facts
B.misrepresented information
C.commingled trust funds and broker funds
D.misappropriated client funds
D.misappropriated client funds
Conversion refers to the misappropriation of property or funds held in trust. This is not the same thing as commingling, which is a failure to keep trust funds separate from the broker's own funds.
A broker is required to perform a trust account reconciliation:
A.once a week
B.once a month
C.every six months
D.once a year
B.once a month
The Commissioner's regulations require a broker to reconcile her trust account records on a monthly basis.
Each month, a broker balances his trust account record with his monthly bank statement in a process called:
A.reconciliation
B.beneficiary accounting
C.trust balancing
D.account balancing
A.reconciliation
Balancing the trust account record against the bank statement is called reconciliation.
Regarding trust funds, the broker must keep columnar records of disbursements with the name of party, amount paid, date of check, check number, and:
A.address of subject property
B.daily balance of bank account
C.date check cleared
D.interest earned
B.daily balance of bank account
For trust funds received and disbursed, the trust fund record should include date funds were received, from whom they were received, amount received, date of deposit, party to whom funds were paid, amount paid out, check nu
How long do trust fund records need to be maintained?
A.One year
B.Two years
C.Three years
D.Five years
C.Three years
As with most other types of real estate transaction records, trust fund records need to be kept by a broker for three years.
Johns lists his ranch for sale with Broker Otis, who offers to market the ranch by placing ads in a catalog of similar properties, at a cost of $100. Johns agrees and gives Otis an advance fee of $100. Otis must:
A.account for the spending of the advance
C.keep the funds in a trust account and only disburse as needed to pay the marketing costs
Advance fees, which are typically used to pay for anticipated marketing expenses that are over and above the usual methods, are considered to be trust funds. They m
The Real Estate Law requires that brokers keep documents related to a real estate transaction, such as a purchase agreement or a listing agreement, for at least:
A.six months
B.one year
C.three years
D.five years
C.three years
Three years is the minimum amount of time that transaction records must be kept. (Note that real property security statements and disclosures given to noninstitutional lenders or deed of trust purchasers must be kept for at least four years.
A broker who has chosen to use an electronic recordkeeping system:
A.must back up the records on a monthly basis
B.must be able to provide a paper copy of the documents to the Bureau of Real Estate (formerly Department of Real Estate) at the broker's expe
B.must be able to provide a paper copy of the documents to the Bureau of Real Estate (formerly Department of Real Estate) at the broker's expense
A broker may store records in an electronic format, but one condition is that the broker must, upon request b
A written agreement setting out the relationship between a broker and her salesperson is required by:
A.the Code of Ethics and Professional Conduct
B.the Real Estate Board rules
C.the Real Estate Commissioner's regulations
D.the Employment Code
C.the Real Estate Commissioner's regulations
The Commissioner's regulations require a written agreement whenever a real estate broker hires a salesperson.
A broker must have a written contract with which of the following?
A.All of her clerical support staff
B.All janitorial or maintenance staff
C.All salespersons
D.All of the above
C.All salespersons
The Real Estate Commissioner's regulations require a broker to have a written agreement with each salesperson working for her.
After a salesperson's affiliation is terminated, for how long must the broker keep a copy of their written agreement?
A.Six months
B.One year
C.Two years
D.Three years
D.Three years
A broker-salesperson agreement should be kept by the broker for three years after termination of the salesperson's affiliation with the broker.
A blind ad is an advertisement that does not:
A.identify the broker
B.identify the property owner
C.include the property address
D.include the listing price
A.identify the broker
Advertisements placed by licensees on behalf of sellers or landlords must include some indication that the advertiser is a licensee, not the property owner. An ad that fails to identify the broker or provide some other type of licens
When a licensee advertises property on behalf of another person, which of the following should be included to prevent a violation of the Real Estate Law?
A.The broker's name as licensed
B.The broker's address
C.The property's address
D.All of the above
A.The broker's name as licensed
The Real Estate Law requires an advertisement placed by a licensee on behalf of a seller or landlord to provide an indication that the advertiser is an agent rather than the property owner. An ad that fails to do this is an
A real estate licensee places a "blind ad" in the newspaper, meaning that the ad does NOT:
A.include the location of the property
B.include the listing price
C.disclose that the property is being advertised by a licensee and not a private party
D.include
C.disclose that the property is being advertised by a licensee and not a private party
In the real estate context, a blind ad is one that doesn't include a licensee designation, in other words, some indication that the ad was placed by a licensee rather t
Broker Bill has been unable to locate a buyer for a particular house. He is aware that the house needs some major structural repairs and that its listing price is about 10% above its fair market value. He runs a newspaper ad that says "Lovely two-bedroom,
D.it is deceptive and misleading, because Bill knows the house needs major repairs
It is misleading to advertise a house needing major structural repairs as being in "excellent" and "move-in" condition.
A licensed real estate salesperson places this ad in the newspaper: "Beautiful four-bedroom, three-bath with amazing bay views. Only $380,000. Call 555-1111." Which of the following statements is true?
A.This is false advertising
B.This is a blind ad
C.Bo
B.This is a blind ad
If all of the statements in the ad are true, this is not false advertising. But because nothing in the ad indicates that it was placed by a licensee, it is a blind ad and therefore illegal.
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 contact and communications with persons responding to those ads are:
A.with properly licensed agent
A.with properly licensed agents
If a brokerage intends to advertise online, it must take steps to create barriers or procedures that ensure that responses to prospective clients are made only by licensees. All online real estate advertising must contain a
Which of the following mortgage loan advertisements is impermissible under the real estate regulations?
A."Loans up to 70% of market value based on our appraiser's report"
B."Call 1-800-GET-LOAN for approval today!"
C."Loans approved upon verification of
B."Call 1-800-GET-LOAN for approval today!"
The Commissioner's regulations prohibit advertisements representing or implying that loans may be approved over the phone.
Which of the following actions is considered evidence of deceptive or misleading advertising in the sale of real estate?
A.Guaranteeing a specific investment return or yield on a promissory note that differs from the rate specified on the note
B.Using a p
A.Guaranteeing a specific investment return or yield on a promissory note that differs from the rate specified on the note
The Real Estate Law prohibits advertising that indicates or implies any yield or return on a promissory note that is different from
When a licensee uses new materials to market, advertise, or negotiate an agreement involving an advance fee, the materials must be submitted to the Bureau of Real Estate within:
A.five days before the agreement is signed
B.ten days before the agreement is
B.ten days before the agreement is signed
According to the Bureau of Real Estate, the advance fee agreement, and any other materials used in advertising or negotiating an advance fee agreement, must be submitted not less than ten calendar days before publ
Broker Barb places a newspaper ad stating that any seller or buyer who lists or buys a property through her will receive a $100 credit towards the broker's commission or purchase price. This is:
A.illegal, because a broker is not permitted to offer a cred
D.legal
This offer does not violate the license law or regulations. Licensees are permitted to offer inducements to buyers or sellers, as long as the inducements are disclosed to all parties. (Selling one's own property and buying property on one's own be
Gordon wants to sell units in his condominium. He mails promotional brochures to 5,000 people, offering numerous valuable prizes. The brochure does not state that persons must attend a sales presentation to be eligible to win a prize, although attendance
D.Yes, because he failed to disclose that prize eligibility depends on attending the sales presentation
If a gift, prize, or other inducement offered by a licensee is contingent upon attendance at a sales presentation, the contingency must be clearly stat
A broker places an ad in the local paper stating that anyone who buys property through him will receive a new refrigerator, valued at $1,000. This offer is:
A.illegal, because the value of such a gift may not exceed $500
B.illegal, because such a gift is
D.legal, as long as all interested parties are informed of the gift
Any gift or inducement offered to the buyer must be disclosed to all parties.
A kiosk is:
A.an extension to a department store
B.a type of roof
C.a construction style
D.a small booth or building
D.a small booth or building
A kiosk is a small booth or building. Kiosks located in shopping malls are sometimes used by real estate agents for advertising and distributing information.
Regarding a real estate office, the term "company dollar" refers to:
A.net income
B.gross income minus commissions
C.operating expenses
D.set-up costs of a new branch location
B.gross income minus commissions
The money retained by a real estate brokerage after all commissions have been paid is known as the "company dollar.
Desk cost," a brokerage's operating cost for each salesperson, is calculated by:
A.dividing the firm's operating expenses by the number of salespeople
B.adding the total cost of furniture and office equipment and then dividing by the number of desks
C.di
A.dividing the firm's operating expenses by the number of salespeople
Desk cost is calculated by dividing the firm's operating expenses by the number of salespersons.
Which of the following would be the least useful expenditure of advertising money?
A.Membership fees for a multiple listing service
B.Newspaper display ads of open listings
C.Newspaper classified ads of exclusive listings
D."For sale" signs with the broke
B.Newspaper display ads of open listings
A particular broker's odds of earning a commission on an open listing are usually not very good, so brokers are typically unwilling to spend much effort or money on open listings. In addition, brokers rarely use di