Administration of the Real Estate Law
California's Real Estate Law (also known as the license law) is contained in sections 10000 to 10580 of the Business and Professions Code.
The purpose of the law is to regulate the real estate profession and protect the public from incompetent, unethical,
Real Estate Law
(California's real estate license law)
(License law)
The law that requires real estate agents to be licensed and that regulates their activities.
A California statute that governs the licensing and business practices of real estate agents.
Contained in se
Department of Real Estate
(DRE)
California's real estate license law is administered by the Department of Real Estate, under the supervision of the Real Estate Commissioner.
The state agency that administers the Real Estate Law.
The Real Estate Law is administered by the Departmen
Real Estate Commissioner
The Commissioner grants or denies licenses, issues rules governing licenses, and enforces the license law.
The Real Estate Commissioner is appointed by the Governor.
The Commissioner may not engage in real estate activities or have any interest in a real
Real Estate Licenses
A common way of regulating an industry or profession is to require its members to be licensed.
The state can try to ensure a licensed person's competence and exercise control over his professional activities by requiring education, testing, and recordkeep
When a License is Required
The Real Estate Law requires anyone who is acting, advertising, or appearing to act as a real estate broker or as a real estate salesperson to have a real estate license.
Real Estate Broker
A broker under the license law is one who engages in certain activities for another person, for compensation.
Those activities include selling, listing, or negotiating the sale of real property or business opportunities.
Set forth in the license law is th
Sales, purchases, and exchanges
Selling, buying, or exchanging real property or a business opportunity.
Leases
Leasing or collecting rents from real property or a business opportunity; or buying, selling, or exchanging leases on real property or a business opportunity.
Advertising and listings
Soliciting prospective sellers, buyers, or tenants, or listing real property or a business opportunity for sale or lease.
Government lands
Locating or filing an application for the purchase or lease of lands owned by the state or federal government.
Advance fees
Charging or collecting an advance fee to promote the sale or lease of real property or a business opportunity (by advertising or listing it, by obtaining financing, or in some other way).
Are also considered trust funds.
These are fees that a client may p
Mortgage loan brokerage
Soliciting borrowers or lenders for or negotiating loans secured by liens on real property or business opportunities, or collecting payments or performing other services in connection with such loans.
Selling, buying, or exchanging loans or securities
Selling, buying, or exchanging real property securities, land contracts, or promissory notes secured by liens on real property or business opportunities, and performing services for the holders of contracts or notes.
MLO Endorsement
Real estate brokers may not engage in the activities listed in (Mortgage loan brokerage.
Soliciting borrowers or lenders for or negotiating loans secured by liens on real property or business opportunities, or collecting payments or performing other servi
Mortgage loan originator endorsement
A special endorsement to a real estate license that authorizes the licensee to engage in mortgage loan brokerage and origination activities for compensation.
The requirements for obtaining an MLO endorsement include obtaining a license through the Nationw
Making or Selling Loans as a Principal
As we said, the broker definition generally applies to acts performed on behalf of another.
(Ex. Someone who is helping to sell another person's property is acting as a real estate broker, but someone selling her own property is not.)
The broker definitio
Real estate Salesperson
For a salesperson's license, the applicant must be at least 18, be honest and trustworthy, complete the required education, and pass the salesperson's exam.
A salesperson is one who works for a broker and performs these same activities under the broker's
Types of licensees
BROKER:
-Individual, corporation, or partnership
-Authorized to operate brokerage and represent clients
-Authorizes the licensee to engage in real estate activities on behalf of another person for compensation.
-It also authorizes the licensee to operate
Associate Brokers
(Broker-salesperson)
A person licensed as a broker may choose to work for another broker instead of operating her own brokerage.
Such a broker is subject to essentially the same limitations as a salesperson.
The associate brokers and salespersons who work
Affiliated licensees
The associate brokers and salespersons who work for a particular broker
Business Entities
A real estate license can be issued to a corporation.
At least one corporate officer must be designated to act as the broker under the corporate brokerage license.
That officer must also be individually licensed as a broker, and can only act as a broker w
Penalties for Unlicensed Activities
For any act that requires a real estate license, the penalty for acting without a license is a fine of up to $20,000 and/or six months' imprisonment for an individual, or a fine of up to $60,000 for a corporation.
Note that it's unlawful for a broker to e
When a License Is Not Required
There are numerous exemptions from the real estate licensing requirements.
The exemptions generally cover those who are acting on their own behalf, those who are regulated by another agency (such as securities brokers), and those who are performing functi
Unlicensed Real Estate Assistants
Real estate brokers and salespersons sometimes hire a real estate assistant to help them with their work.
It's not necessary for a real estate assistant to have a real estate license, as long as the assistant's duties fall within the exemption for a perso
Unlicensed Property Management Assistants
In addition to performing clerical functions, property management company employees supervised by a licensee are allowed to
-show property to prospective tenants,
-provide information about rental rates and lease provisions,
-handle rental applications,
-
License Qualifications
Applicants for real estate licenses in California must meet several qualifications.
By imposing these requirements, particularly the education requirements, the state tries to ensure at least a minimum level of competence for all real estate professionals
Salesperson's Qualifications
For a salesperson's license, the applicant must be at least 18, be honest and trustworthy, complete the required education, and pass the salesperson's exam.
To obtain a salesperson's license, an applicant must:
1. be at least eighteen years old;
2. be hon
Broker's Qualifications
For a broker's license, the applicant must be at least 18, be honest and trustworthy, pass the broker's exam, have two years' experience, and complete all the required education.
To obtain a broker's license, an applicant must:
1. have two years of full-t
License Application and Term
License applicants must apply for their licenses within one year of the date they pass the exam (not the date they receive notice that they passed).
Brokers' and salespersons' licenses must be renewed every four years.
A mortgage loan originator endorseme
License Renewals
Real estate licenses must be renewed every four years.
There is a 45-hour continuing education requirement for renewal.
Once an applicant has met all the license qualifications, including passing the exam, the next step is to apply for the license.
Licens
Late Renewal
A license that has expired within the previous two years may be renewed without retaking the licensing examination.
The licensee must file a renewal application and pay a late renewal fee.
If the license isn't renewed within the two-year grace period, all
Continuing Education
In addition to paying the renewal fee, licensees must submit proof that they have satisfied the continuing education requirements.
All licensees (salespersons and brokers) are generally required to have completed 45 hours of DRE-approved continuing educat
Initial Renewal
When a salesperson or broker renews her license for the first time after it was issued, the 45 hours of continuing education must include:
1. five separate three-hour courses (15 hours total) on these mandatory subjects:
-ethics,
-agency,
-trust fund hand
Subsequent Renewals
Each of a licensee's subsequent renewals (after the initial renewal) will also require 45 hours of continuing education within the previous four years.
As with the initial renewal, the 45 hours must include at least 18 hours in consumer protection courses
70/30 Continuing Education Exemption
A licensee 70 years old or older isn't required to fulfill the continuing education requirement if he's been a real estate licensee in good standing in California for at least 30 years.
(Any period during which the license was expired doesn't count toward
Continuing Education for MLO Endorsement
For the annual renewal of a real estate licensee's mortgage loan originator endorsement, the licensee is required to complete at least eight hours of continuing education every year.
The eight hours must include
-at least three hours on federal laws,
-two
Miscellaneous License Provisions
-Brokerage Offices
-Location of Licenses
-Termination of Affiliation
-Transfer of Salesperson's License
-Discharge for Disciplinary Cause
-Termination of Broker's License
-Address Changes
-Fictitious Names
-Child Support Delinquency
Brokerage Offices
A real estate broker licensed in California is required to have a place of business in the state.
A broker may also have one or more branch offices.
A separate license must be issued for each branch office.
The broker can add or cancel a branch office by
Location of Licenses
Real estate licenses must be held by the broker and kept in the broker's main office.
The Department of Real Estate must be notified of any changes in affiliation, name, or location.
A broker is required to hold the licenses of all of her affiliated licen
Termination of Affiliation
A salesperson is allowed to work only under the supervision of a broker.
A salesperson's license is issued for a particular broker, and the broker has custody of the license while that person is affiliated with him or her.
An affiliation may be terminated
Transfer of Salesperson's License
The Commissioner must also be notified when a salesperson transfers affiliation from one broker to another.
The new broker is required to submit a notification form to the DRE within 5 days after the salesperson begins working for her.
Before giving his l
Discharge for Disciplinary Cause
If a salesperson is discharged for conduct that is grounds for disciplinary action, her broker must file a certified written statement of facts with the Commissioner.
If the broker fails to do so, his own license could be suspended or revoked.
Termination of Broker's License
If a brokers license is suspended or revoked, the licenses of all of the brokers salespersons are automatically canceled.
They may transfer their licenses to other brokers.
If a brokers license expires, the licenses of his salespersons are immediately pla
Address Changes
Licensees are required to maintain current addresses on file with the Department of Real Estate.
A broker must provide a mailing address, the address of her principal place of business, and the addresses of any branch offices.
A salesperson must provide a
Fictitious Names
A real estate broker can conduct business under a fictitious business name, as long as it is the name he is licensed under.
However, the Commissioner may refuse to issue a license under a fictitious business name if the name is confusing, misleading, or f
Affidavit
A written statement sworn before a notary public
Child Support Delinquency
An applicant who has not complied with a court order regarding child support payments cannot obtain a full-term real estate license.
The California Department of Child Support Services (DCSS) maintains a list of individuals who are delinquent on child sup
Special Activities
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Prepaid Rental Listing Services
Someone who is looking for rental housing will sometimes enter into a prepaid rental listing service agreement.
The prospective tenant pays a fee and in return gets a list of housing that is availabe for rent.
The listing service only provides information
Mineral, Oil, and Gas Transactions
At one time, the Department of Real Estate issued special mineral, oil, and gas (MOG) licenses.
Someone who had an MOG license could act as an agent in transactions concerning mineral, oil, or gas rights, even if he didn't have a real estate license.
Whil
Real Property Securities
One way of financing a real estate purchase or project is to form an investment syndicate, such as a limited partnership.
When investors provide capital for a real estate investment but aren't actively involved in management of the property or its develop
Out-of-State Subdivisions
A special permit from the DRE is required in order to sell shares in an out-of-state timeshare project.
In addition, before a licensee may sell lots in any out-of-state subdivision, the subdivision must be registered with the DRE.
Lots that are located in
Business Opportunities
The sale or lease of a business, including inventory, fixtures, and goodwill, is referred to as a business opportunity.
An agent involved in a business opportunity transaction generally must have a real estate license, but no special permit is required.
A
Franchise agreement
One common type of business opportunity is a franchise agreement, where the purchaser (franchisee) buys the right to sell goods under a brand name and marketing system offered by the franchisor in exchange for a franchise fee.
A franchise may be sold by a
Sales Tax
The transfer of personal property in a business opportunity transaction is subject to sales tax.
As in an ordinary purchase at a store, the buyer usually pays the sales tax to the seller, and the seller in turn pays the Board of Equalization.
There's an a
Successor's liability
The buyer may have successors liability for the sellers unpaid sales tax and be required to pay it
Bulk Sales
A bulk sale is a sale, not in the ordinary course of the seller's business, of more than half of the seller's inventory.
Business opportunity buyers must comply with the Uniform Commercial Code, which imposes certain requirements on bulk sales.
A bulk sal
Uniform Commercial Code
Business opportunity buyers must comply with the Uniform Commercial Code, which imposes certain requirements on bulk sales.
-The sale of a business opportunity must also comply with the provisions of the Uniform Commercial Code.
This law has special rules
Transfer of Liquor License
The sale of a business opportunity may include the transfer of an alcoholic beverage license, or liquor license.
Before a license is transferred, the Department of Alcoholic Beverage Control must investigate and approve the applicant and the proposed busi
ABC
Department of Alcoholic Beverage Control
Disciplinary Action
The Real Estate Commissioner can begin disciplinary proceedings against a licensee who violates the license law.
The licensee must be served with an accusation, ordinarily within 3 years of the unlawful act.
The hearing is held before an administrative la
Disciplinary Procedures
Since disciplinary action under the real estate license law can have serious consequences for a licensee, the constitutional right to due process of law applies.
The license law's disciplinary procedures give the licensee an opportunity to present a defen
Accusation and Hearing
If it appears that a violation of the law has occurred, an accusation is filed.
An accusation is a written statement of the charges against the licensee.
The accusation must be filed within 3 years of the allegedly unlawful act, unless the act involved fr
Accusation
An accusation is a written statement of the charges against the licensee.
The accusation must be filed within 3 years of the allegedly unlawful act, unless the act involved fraud, misrepresentation, or a false promise.
In that case, an accusation must be
Administrative hearing
Which an administrative law judge will consider the case
-The hearing is ordinarily conducted by an administrative law judge.
The licensee can be represented by an attorney in the hearing.
After hearing testimony, the administrative law judge submits a pr
Possible Penalties
If the evidence at the hearing substantiates the charges against the licensee, her license may be suspended or revoked.
A suspension lasts for a specified number of days.
A revocation lasts indefinitely, unless the license is reinstated; the licensee may
Suspension - Temporary
Lasts for a specified number of days
A hearing is usually required before sanctions can be imposed.
However, under certain circumstances, such as when a license was obtained through fraud or deceit, the Commissioner can suspend a license even before a hea
Revocation
Lasts indefinitely, unless the license is reinstated; the licensee may not apply for reinstatement for one year
Debarment
In especially serious cases, the Commissioner can impose a special sanction called debarment.
A debarred licensee is prohibited from:
-acting as a real estate broker or salesperson;
-engaging in real estate related business activities on the premises of a
Restricted Licenses
(Probationary license)
The Commissioner may issue a restricted license to replace a license that was suspended or revoked.
The restricted license is, in effect, a probationary license.
It may have a limited term, restrict the licensee to certain types of
Desist and Refrain Orders
The Commissioner has the power to issue a desist and refrain order, ordering a licensee who is engaged in activities that violate the Real Estate Law to stop the violation.
The licensee must stop immediately, but then may request a hearing on the matter.
Suspension Without a Hearing
If a person obtains a license through fraud, misrepresentation, deceit, or material misstatements of fact, the license can be suspended without a hearing.
The Commissioners power to do this expires 90 days after the license is issued, and the suspension i
Grounds for Disciplinary Action
The grounds for suspending, revoking, or denying a license are set forth in the Real Estate Law; the main list can be found in Sections 10176 and 10177 of the Business and Professions Code.
While licensing and license renewal requirements attempt to ensur
Examples of Unlawful Conduct
The Department of Real Estates Reference Book lists examples of unlawful conduct that would be grounds for disciplinary action.
It's divided into two parts:
1. unlawful conduct in sale, lease, and exchange transactions, and
2. unlawful conduct in loan tra
Examples of Unlawful Conduct � Sale, Lease, or Exchange
In a sale, lease, or exchange transaction, conduct such as the following may result in license discipline under Sections 10176 or 10177 of the Business and Professions Code:
1. Knowingly making a substantial misrepresentation of the likely value of real p
Examples of Unlawful Conduct � Loan Transactions
When soliciting, negotiating or arranging a loan secured by real property or the sale of a promissory note secured by real property, conduct such as the following may result in license discipline:
1. Knowingly misrepresenting to a prospective borrower of
The Real Estate Fund
All license fees go to the state treasury and are then credited to a fund called the Real Estate Fund.
Some of the money in the Real Estate Fund is then disbursed to other accounts.
Up to 8% of the money is credited to the Education and Research Account a
Education and Research Account
Used to advance real estate education and research projects. Up to 12% of the money in the Real Estate Fund is credited to the Recovery Account.
(Monetary penalties collected by the Commissioner also go into the Recovery Account.)
Recovery Account
The Recovery Account is used to compensate people injured by the actions of a real estate licensee who can't collect a judgment against the licensee.
If funds are paid out of the Recovery Account because of a licensee, his license is suspended until he ca
Trust Funds
One of the most common causes of disciplinary action is the mishandling of trust funds.
Real estate agents routinely handle trust funds on behalf of their clients.
Trust funds include good faith deposits, tenant security deposits, and collected rents.
Adv
Definition of Trust Funds
The first step toward properly handling trust funds is learning to recognize them.
Simply stated, trust funds are money or other valuables a licensee is holding on behalf of someone else.
Trust funds can be cash, a check, a promissory note, or any other i
Handling Trust Funds
When a real estate broker accepts trust funds from a client or customer, she must deposit them into:
1. a neutral escrow account,
2. the hands of the principal, or
3. a trust account maintained by the broker in a bank or other recognized depository
Which
Interpleader
If there is a dispute over who is the rightful owner of trust funds, the broker may file an interpleader action, which allows a court to decide who receives the funds.
Claimant can file for interpleader, asking judge to decide who is entitled to property
Broker Trust Accounts
In California, every broker must maintain one or more trust accounts, to keep trust funds separated from the broker's own money.
This makes it less likely that the broker will accidentally or intentionally use clients' funds for her own purposes. It also
Commingling
Brokers must keep their clients' trust funds separate from their own money.
Mixing personal or business funds with trust funds is called commingling, and it is a violation of the license law.
There's one exception to this rule against commingling: a broke
Conversion
The actual misappropriation of a party's funds for the broker's own purposes.
Conversion is a basis for theft charges under the California penal code, just as if the broker had stolen someone else's property, or defrauded someone out of money or property.
Rules for handling trust funds
-Must be deposited within 3 days following receipt.
-Salesperson must deliver funds to broker or deposit them in compliance with broker's instructions.
-Check for good faith deposit can be held uncashed before buyer's acceptance under certain circumstance
Shortages or Overages
Since a broker can't put his own funds into a trust account or use trust funds for his own purposes, the trust account balance must always equal the broker's total trust fund liability.
Either a shortage or an overage in a trust account is a violation of
Reconciliation
The process of comparing the trust fund balance to the sum of individual transactions
Trust fund shortage
When reconciled, the trust account balance must equal the total of the balances due to individual clients and customers.
If the trust account balance is less than the total liability, there is a trust fund shortage.
Such a shortage is a violation of the R
Trust fund overage
If the trust account balance is greater than the total liability, there is a trust fund overage.
This is also a violation of the regulations, since non-trust funds can't be commingled with trust funds.
Exceptions to Commingling Rule
There are two exceptions to the rule against commingling.
1. The broker must pay the service charges on the trust account out of her general funds.
The broker can have up to $200 of personal funds in a trust account for this purpose.
However, a better arr
Account Requirements
A trust account must be opened in the broker's name as it appears on the broker's license, in a recognized financial institution in California.
The account must be specifically designated as a trust account, with the broker as trustee.
The financial insti
Trust Account Withdrawals
Prior written notice cannot be required for withdrawals from a broker's trust account; the funds must be immediately available.
Withdrawals from a trust account generally require the signature of the broker (or in the case of a corporation licensed as a b
Trust Fund Records
A broker is required to keep detailed trust account records.
He should balance his trust account records against the bank balance on a monthly basis. This process is known as reconciliation.
Trust account records can take one of two forms: simple columnar
Columnar System
If a broker chooses to use the columnar recordkeeping system, there are three types of records she must keep:
1. A record of all trust funds received and disbursed.
This record is used to list all trust funds deposited to and disbursed from the trust acco
General Accounting Practices System
Instead of a columnar system, a broker may use an alternative system that complies with generally accepted accounting practices.
That system must include a journal, a cash ledger, and beneficiary records for each trust account.
1. Journal.
A journal is a
Documentation Requirements
Trust fund and transaction records must be kept for at least three years.
Mortgage loan disclosure statements and real property security statements must be kept for at least four years.
Broker-salesperson agreement:
The Real Estate Commissioner requires t
Document Copies
It is the agent's responsibility to provide each party signing a document with a copy of that document.
Copies for the parties:
When clients or customers sign any document, it's the licensee's responsibility to provide each party who signed with a copy.
M
Broker's Review of Documents
Broker's review:
Brokers are responsible for reviewing all documents prepared or signed by their affiliated licensees that may have a material effect on the rights or obligations of any party to a transaction.
Brokers are responsible for supervising their
Broker-Salesperson Agreements
All broker-salesperson agreements must be in writing and kept on file at the broker's office.
Broker-salesperson agreements must be retained for three years after the relationship terminates.
Broker-salesperson agreement:
The Real Estate Commissioner requ
Advertising Regulations
Real estate licensees need to be aware of the laws that regulate advertising in California�not just those that pertain specifically to real estate and loans, but also more general rules, such as the prohibition against false advertising.
A violation of st
Licensee Designation in Advertising
Advertisements placed by a real estate licensee must include a licensee designation, some indication that the advertiser is a licensed real estate agent.
An advertisement that doesn't fulfill this requirement is sometimes called a blind ad.
This rule appl
Blind ad
An advertisement that doesn't fulfill this requirement
First Contact Solicitation Materials
Any solicitation materials intended to be a licensee's first point of contact with potential clients or customers must include his license identification number.
This requirement applies to business cards, stationery, advertising fliers, and other materia
Internet Advertising
The Commissioner's regulations include some rules for advertising or disseminating information about real estate services on the Internet.
A brokerage must make sure that if a prospective client inquires about real estate services online (on the firm's we
Advertising Loans and Notes
Real estate licensees' advertisements for mortgage loan products or the resale of promissory notes are also regulated by the Commissioner.
Any ad of this type must be approved by the Department of Real Estate before it can be used.
Potentially deceptive o
Inducements
A gift, prize, or rebate offered for purchasing property or attending a sales presentation is known as an inducement.
If receiving the gift, prize, or rebate depends on compliance with certain terms and conditions (such as attendance at a sales presentati
Do Not Call Registry
Licensees who solicit business by making "cold calls" to strangers must comply with the Federal Trade Commission's telemarketing rules.
It's against the law to make this type of call to someone whose name appears on the National "Do Not Call" Registry, so
Antitrust Laws and Real Estate Licensees
Antitrust laws prohibit any agreement that has the effect of an unreasonable restraint of trade.
The main federal antitrust law is the Sherman Act (1890).
The main state antitrust law in California is the Cartwright Act (1907).
Like the license law, feder
Unreasonable restraint of trade
A restraint of trade is any act that prevents an individual or a company from doing business in a certain area or with certain people.
Conspiracy
When two or more business entities participate in a common scheme which has the effect of a restraint of trade
Sherman Antitrust Act
Dates back to 1890
A federal law that committed the American government to opposing monopolies, it prohibits contracts, combinations and conspiracies in restraint of trade.
Cartwright Act
Passed in 1907
Types of violations - Antitrust Laws - Practices and Activities
Antitrust laws prohibit the following business practices and activities:
-price fixing,
-group boycotts,
-tie-in arrangements, and
-market allocation
Price Fixing
Price fixing is defined as the cooperative setting of prices or price ranges by competing firms.
To avoid the appearance of price fixing, real estate agents from different brokerages should never discuss their commission rates.
(It's a discussion between
Group Boycotts
A group boycott is an agreement between two or more business competitors (such as real estate brokers from different firms) to exclude another competitor from fair participation in business activities.
Ex. Becker and Jordan are brokers from competing real
Tie-in Arrangements
(Tying arrangement)
A tie-in arrangement is defined as "an agreement to sell one product, only on the condition that the buyer also purchases a different (or tied) product..."
Ex. Brown is a subdivision developer. Tyson, a builder, wants to buy a lot. Bro
Market Allocation
Occurs when businesses agree not to compete with each other in certain areas or segments of their market.
An agreement between competitors to divide up a market, in which the parties agree that one or both won't sell certain products or services in specif
Avoiding Antitrust Violations
There are several things real estate brokers can do or avoid doing in order to prevent antitrust violations.
Brokers should:
-always establish their fees and other listing policies independently, without consulting competing firms;
-never use listing form
Real Estate Fund
In the state treasury, a special account into which all license fees are placed.
Advance fee
Money a broker receives from a client before providing services, either to cover anticipated expenses or as upfront compensation, which must be treated as trust funds.
1. Someone applying to renew her real estate license usually must have completed ______ hours of approved courses within the four-year period preceding license renewal.
A. 15
B. 20
C. 45
D. 90
C. 45
2. A corporation may engage in the real estate brokerage business if the officer acting for the corporation:
A. is a licensed salesperson
B. is given the proper authority from the Commissioner of Corporations
C. is a licensed real estate broker
D. is the
C. is a licensed real estate broker
3. Commingling is:
A. the same as embezzlement
B. mixing personal funds with trust funds
C. any dishonest behavior related to trust funds
D. paying a commission to a unlicensed person
B. mixing personal funds with trust funds
4. Brokers must retain copies of all listings, purchase agreements, and trust account records for:
A. one year
B. two years
C. three years
D. four years
C. three years
5. All of the following can make a withdrawal from a broker's trust account except:
A. a salesperson in the broker's employ who has been authorized by the broker
B. the broker's secretary, who has been authorized by the broker and is covered by a fiduciar
D. the unlicensed, unbonded spouse of a broker who has been authorized by the broker
6. The Recovery Account will pay a maximum of ____________ per transaction.
A. $50,000
B. $100,000
C. $250,000
D. There is no limit
A. $50,000
7. The bill of sale used in a business opportunity transaction must contain all of the following, except:
A. names of transferor and transferee
B. description of the personal property
C. location of the business
D. names and addresses of any creditors
D. names and addresses of any creditors
8. A broker's trust account records:
A. can be kept by a columnar method
B. must be kept in a safe deposit box at a financial institution in California
C. can be kept by the principal
D. should be discarded one year after the transaction closes
A. can be kept by a columnar method
9. A broker may keep an earned commission in a trust account for no more than:
A. one day
B. seven days
C. 25 days
D. 60 days
C. 25 days
10. It's legal for a broker to place a good faith deposit:
A. in a trust account
B. in a neutral escrow
C. in the hands of the broker's principal
D. Any of the above
D. Any of the above
11. The maximum amount of a broker's own funds allowed in her trust account is:
A. none
B. $50
C. $200
D. $500
C. $200
12. The commission rate a listing broker can charge on a sale is determined by:
A. the Real Estate Commissioner
B. the seller and the broker
C. the multiple listing service
D. the buyer and the seller
B. the seller and the broker
13. A broker's license:
A. must be carried by the broker at all times
B. should be kept in a safe place, such as a home safe or a safe deposit box at a bank
C. must be kept in the broker's main office
D. is kept in the field office of the Department of Re
C. must be kept in the broker's main office
14. A salesperson's license is valid for:
A. two years
B. three years
C. four years
D. five years
C. four years
15. The funds that support the Recovery Account come from:
A. interest accruing on trust accounts
B. a surcharge on real estate developers
C. private donations
D. real estate license fees
D. real estate license fees
16. Trust funds must be deposited into a broker's trust account:
A. within three business days following receipt of the funds
B. within 30 days of receipt of the funds
C. by the broker's certified public accountant
D. within three days after the transacti
A. within three business days following receipt of the funds
17. Applicants for a broker's license must have:
A. six years of experience as a real estate licensee
B. 24 semester units of real estate education
C. a sponsoring broker willing to testify to the applicant's honesty
D. All of the above
B. 24 semester units of real estate education
18. A resident apartment manager who manages the apartment complex he lives in:
A. must have a real estate salesperson's license
B. need not have a real estate license
C. must be supervised by a real estate licensee
D. must register with the Department of
B. need not have a real estate license
19. All of the following are grounds for disciplinary action except:
A. commingling
B. failing to put a termination date in an exclusive listing
C. negotiating with a seller to establish the commission rate
D. failing to supervise a salesperson
C. negotiating with a seller to establish the commission rate
20. Trust funds:
A. are always money, never items of personal property
B. may be put into the broker's general account, as long as scrupulous records of the deposits and withdrawals are kept
C. can be given to the Real Estate Commissioner for deposit
D. m
D. must never be deposited into the broker's general account
Attorney general - Administration of the License Law
The Real Estate Commissioner receives legal advice concerning the real estate license law from the state Attorney General.
Each county's district attorney is charged with prosecuting those who violate the real estate license law within that county.
Making or selling loans as a principal - When a License is Required
The broker definition generally applies to acts performed on behalf of another person.
Ex. Someone who is helping to sell another person's property is acting as a real estate broker, but someone selling his own property is not.
The broker definition also
Penalties - When a License is Required
An unlicensed person who has performed acts that fall within the broker definition may be fined up to $20,000 and imprisoned for up to six months.
A corporation that has engaged in real estate activities without a license may be fined up to $60,000.
And a
Corporations - Types of Licenses
A broker's license can be issued to an individual, or to a corporation.
A corporate license is issued in the name of the firm, and one officer of the corporation must be licensed as its designated broker.
(Note: There is no special license for partnership
Licensing Exemptions
As a general rule, anyone who acts as a real estate broker or salesperson must have a license.
However, certain people are exempt from the licensing requirement, even though they're engaged in activities that fall within the definition of real estate brok
Finder's fees - Licensing Exemptions
We should mention one other situation where an unlicensed person may receive compensation from a broker.
A person who is a "middleman" or "finder"�someone who introduces a prospective buyer or seller to a broker without performing any duties that require
Qualifications - Real Estate Licenses
In order to obtain a real estate license, it's necessary to pass an examination.
Before applying to take the exam, an individual must meet certain age and educational requirements.
For a broker's license, there are experience requirements as well.
Salesperson's License Qualifications
Here are the requirements an applicant for a salesperson's license has to meet:
1. The applicant must be at least 18 years old.
2. The applicant must be honest and truthful.
3. The applicant must pass the salesperson's examination.
4. Complete application
Resident aliens - Renewing a License
Note that resident aliens who do not have permanent status must submit proof of legal presence each time they renew their licenses.
Affiant
The person making the sworn statement is called the affiant
License Expiration
A real estate license is canceled if not renewed within two years after it expires.
Commissioner's investigation - Disciplinary Procedures
The first step in the process is an investigation by the Commissioner.
If someone files a verified written complaint against a licensee, the Commissioner is required to investigate.
The Commissioner is also authorized to start an investigation even in the
Sanctions
Available sanctions include suspension or revocation of the agent's license, a fine in lieu of suspension, or debarment.
Violation of the license law can also lead to criminal prosecution and civil court actions.
If the accusation is proved, the Commissio
Appeal
A licensee may ask the Real Estate Commissioner to reconsider a disciplinary sanction, or formally appeal to a superior court.
After the Commissioner issues a formal decision in a disciplinary proceeding, the licensee may ask the Commissioner to reconside
Prosecution & civil liability
Violation of the license law can lead to punishment beyond the Commissioner's disciplinary sanctions.
For instance, a violation of the license law may be prosecuted by the district attorney in the county where the violation occurred.
A criminal prosecutio
Grounds
Violating any provision of the license law�including the rules discussed so far in this lesson�is grounds for disciplinary action.
In addition, the license law sets forth a detailed list of specific conduct that is considered grounds for disciplinary acti
Deadline for deposit
Trust funds given to a broker or an affiliated licensee should generally take the form of a check made out to the broker, as licensed.
The funds have to be deposited in the appropriate trust account no later than the third business day after they were rec
Trust Funds Received by salesperson
If trust funds are given to a salesperson rather than a broker, the salesperson should promptly deliver the funds to the broker.
Alternatively, if so directed by the broker, the salesperson can deposit the trust funds into:
1) a neutral escrow account...
Good Faith Deposits - Trust Funds
There's an exception to the deadline for depositing trust funds.
When a broker receives a good faith deposit check from a buyer, usually that check can be held uncashed until the buyer's offer is accepted.
Once the offer is accepted, the check must be dep
Advance fee services
If a broker intends to collect advance fees for her services, any materials she's planning to use in advertising or promoting those services must first be submitted to the Department of Real Estate for approval, at least ten days before any agreement with
Trust account
All trust funds must be deposited into a trust account or neutral escrow within three business days after their receipt.
Good faith deposit check
A broker may usually hold a good faith deposit check uncashed until the seller has accepted the buyer's offer.
Penalties - Antitrust Laws
A real estate agent or company that violates antitrust laws may be subject to both civil and criminal penalties.
An individual guilty of violating the Sherman Act can be fined up to one million dollars and/or sentenced to ten years' imprisonment.
A corpor
Desk cost
The cost of each salesperson to the broker�is calculated by dividing the firm's operating expenses by the number of salespeople.
Kiosk
An information booth, such as the type in a shopping mall that real estate brokers sometimes use to gain exposure.
Miscellaneous information about the real estate business
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