1) Mini-Course Flashcards

Question

``` [OMIT MATH] Mr. Able bought a lot for $6,500. He then listed it with an agent for 30% more than he paid. He accepted an offer, which was 25% less than the listing price. The commission was 6% of the selling price. How much did he gain or lose? lost more than $500 less than $550 gained more than $25 less than $100 lost more than $550 less than $1000 lost 1% of purchase price ```

Answer 1

25. a. STEPS: $6,500 Purchase Price, property listed 30% Higher $6,500 x 30% =$1,950 Higher or listing price is $6,500 + $1,950 = $8,450 LISTING PRICE Offer is for 25% Less than the Listing Price $8,450 x 25% = $2112.50 Less $8450 minus $2,112.50 = $6337.50 SELLING PRICE Commission is 6% of the selling Price $6337.50 x 6% = $380.25 Net Amount to the Seller $6337.50 - $380.25 = $5,957.25 NET AMOUNT TO THE SELLER Determining the Loss $6,500 (Purchase Price) minimum $5,957.25 (Net from Sale) = $542.75 LOSS

Answer 2

26. d. STEPS: Determining Total Gross Income from Rents $250 per month x 10 units = $2,500 Gross Income per month $2,500 per month x 12 months = $30,000 Gross Income per year Determining Lost Income 10% reduction in rents $30,000 annual gross x 10% reduction = $3,000 Reduction $30,000 annual gross - minus $3,000 =$27,000 ANNUAL GROSS Determining Value Capitalized value before reduction…$30,000 divided by 10% Cap Rate = $300,000 Value Capitalized value after reduction……$27,000 divided by 10% Cap Rate = $270,000 Value $30,000 LOSS IN VALUE

Answer 3

27. b. The Department of Real Estate gives a person who has successfully passed the qualification examination ONE YEAR from the date of TAKING THEIR STATE EXAM to apply for the license.

Answer 4

28. d. According to the Real Estate Commissioner's Regulations a real estate broker must have a written agreement with each salesperson. The broker and salesperson both must sign the agreement and each is required to retain a copy for a minimum of 3-Years from the date the agreement terminates between them.

Answer 5

29. c. Upon a real estate license expiring the person holding the expired license cannot do anything for which a license is required. However the State allows up to two years additional time for the late renewal of a license before the holder would forfeit all rights to the license. The late penalty for renewing is not double the normal fee, but currently a 50% penalty.

Answer 6

30. d. There are no legal nor regulatory requirements that a real estate broker maintain a trust account. Although a broker's records may be audited there is no requirement that they must be. The broker does not have to open a separate account for each client's funds, but would make a separate entry in the trust account ledger for each transaction of funds.

Answer 7

31. a. Quoting of prices and terms for a fee or compensation or in the expectation of a fee or compensation requires a real estate license. Therefore the hostess is in violation by doing so and the broker has also violated the law by compensating an unlicensed person.

Answer 8

32. d. More than likely a subdivision final public report would be necessary, but not a permit. Answers "a," "b" and "c" are all considered securities under Article 6 of the Real Estate Law. In order to offer a security for sale in California one must first acquire a PERMIT to do so from the real estate commissioner.

Answer 9

33. a. An exchange agreement involves two exchangers (sellers) both normally willing to pay a fee to an agent to set -up the exchange. Generally only the lessor or owner of a business pays the agent a compensation not the lessee or buyer of the business also.

Answer 10

34. d. Misrepresentation could be grounds for a criminal action, a civil suit for recovery of damages and possible suspension or revocation of a license by the Real Estate Commissioner.

Answer 11

35. d. This answer identifies the purpose of the Recovery Fund and of the four is the most complete. The current protections are $20,000 per claim and $100,000 coverage per licensee. The claimant must have filed an action against the licensee, have been rendered a judgment, had attempted to collect and then had proven the judgment was uncollectable due to insolvency of the licensee. Then the claimant must have filed a proper claim with the proper department.

Answer 12

36. b. A LEASE (an estate for years) is a type of LESS-THAN-FREEHOLD ESTATE. An EASEMENT is a RIGHT in real property. A TRUST DEED creates a lien interest not an estate. A BILL OF SALE evidences the conveyance of personal property.

Answer 13

37. b. The question is looking for an alternate name to describe a FEE SIMPLE ESTATE. Should the question have read…”A fee simple estate is?” The answer would have been an “Estate of Inheritance” (an estate capable of being passed by will).

Answer 14

38. c. Logically follow the situation described…. “A” receives a LIFE ESTATE for the life of “X” (the estate exists until “X” dies). As “X” did not die, the estate still vests in “A” or “A’s” heirs. Answer (a) is incorrect as “X” was granted no property rights. “X’s” only purpose is to determine the length of time the life estate will exist. Answers (b) and (d) are incorrect due to the fact that the estate has not terminated therefore there could be no REVERSION (the estate going or reverting back to the original grantor) and there could for the same reason be no REMAINDER (the estate vesting in someone named to receive it other than the original grantor or the original grantors heirs).

Answer 15

39. c. An “Estate of Inheritance’ is another way of identifying a FEE ESTATE, which is a type of FREEHOLD ESTATE. One of the characteristics of a Freehold Estate is “Indefinite Duration.” Answers (a), (b) and (d) all describe LESS-THAN-FREEHOLD ESTATES.

Answer 16

40. c. “X” receives the estate (is the holder of the estate) for as long as “C” is alive. If “X” (the holder of the estate) dies and not “C,” then the estate goes on existing.

Answer 17

41. a. A Lessor is the only party required to sign a written lease agreement. Should the lessee not sign the agreement it is presumed that the lessee has accepted the terms of the lease if they either “Pay the Rent” or “Take Possession of the Premises.” Leases do not have to be recorded to be valid or enforceable. If the lease is recorded, prior to the recording, the Lessors signature would have to be acknowledged.

Answer 18

42. c. QUIET ENJOYMENT AND POSSESSION is an implied (existing even though not written or spoken) covenant (promise) granted by State Law to anyone who leases or rents property from another, which would relate to a “Leasehold” also known as a “Less Than Freehold Estate.”

Answer 19

43. c. A SUBLEASE is created, which is a form of “Less-Than-Freehold Estate.” FEE SIMPLE is a type of “Freehold Estate.”

Answer 20

44. a. Although one would commonly associate the word “Demise” with a deceased party, which is one of the defined meanings of this word, the word itself is very seldom found in a will. One of it’s most common uses is in lease agreements where it may state: “I, the Lessor, hereby let and DEMISE (pass on these rights) the following described property to the following described person.

Answer 21

45. b. In analyzing the question, the seller (GRANTOR) sells the property to a buyer (GRANTEE). Then the seller (grantor) leases it back thus becoming a LESSEE and the buyer (grantee) becomes the LESSOR/LANDLORD. What has then transacted is described as a “SALE-LEASEBACK.” (c) is incorrect, as it would vest a “FEE SIMPLE TITLE” in the Grantee, not the Grantor as stated in the answer. (d) is incorrect, as it would create a “LESS-THAN-FREEHOLD ESTATE” interest in the Lessee, not the Lessor as stated in the answer.

Answer 22

46. b. A “PERCENTAGE LEASE,” bases the rent to be paid on GROSS SALES. (a) A “NET LEASE” is where the landlord receives a NET SUM and the tenant pays all the expenses. (c) GROSS LEASE is another way of describing a “Straight,” “Fixed” or “Flat” Lease. (d) A “STRAIGHT, FIXED or FLAT LEASE is where the tenant pays a fixed amount for rent and the landlord pays all the expenses.

Answer 23

47. d. This is the definition of a SURRENDER. A Surrender describes where each party to the agreement gives up (surrenders) their rights. This action is accomplished through a mutual rescission.

Answer 24

48. b. The key to this answer is the word “ASSIGN” - An ASSIGNMENT is the transferring of the “entire rights, obligations and duties to another party.” A SUBLEASE is the “passing on to another party of anything less than the entire rights, obligation s and duties.” Therefore we can eliminate answers (a), (c) and (d).

Answer 25

49. c. An EASEMENT is not an ESTATE in real property, it is a “RIGHT” held in real property. LEASEHOLDS, OIL in the ground (unextracted) and TREES attached by roots identify Estates held in REAL PROPERTY.

Answer 26

50. d. It is possible to have, for example, an ESTATE FOR YEARS (leasehold estate) in a property owned by another that holds a FEE ESTATE interest. (a) is incorrect as leases and periodic tenancies do not run on in to perpetuity (indefinitely). (b) i s incorrect as leases are not created by a grant and (c) is incorrect as immediate possession is not necessary to create an estate in real property. Estates in real property can be either FREEHOLD (Fee Estates or Life Estates, which are deeded interests) or LESSTHAN- FREEHOLD ESTATES (leasehold interests).

Answer 27

51. d. STOCK IN A MUTUAL WATER COMPANY refers to the “RIGHT to the water and water rights are considered REAL PROPERTY. The STOCK CERTIFICATE (a piece of paper) in the Mutual Water Company would itself be considered PERSONAL PROPERTY but the rights it would convey would be that of Real Property.

Answer 28

52. d. This is the best description of the four answers. None are complete. Prior to the invention of the airplane, the definition included indefinite ownership of the airspace into infinity. The airways are now a public domain. Therefore today’s ownership of airspace has limited the use to “A Reasonable and Enjoyable Height.” Also owned as part of the real property is the surface of the earth and the material beneath the surface to the center of the earth.

Answer 29

53. d. LEASES are PERSONAL PROPERTY. Property is either PERSONAL or REAL. Therefore, if it is not PERSONAL it must be REAL. FIXTURES were property that had been personal but that have become so attached to the real property as to now become a part of that real property. FIXTURES ARE REAL PROPERTY.

Answer 30

54. d. A child that is a ward of the court will have appointed by the court a Guardian or Trustee to act for, and to sign contract agreements on the minors behalf (the minor child would not sign). A FELON if not incarcerated (imprisoned) may sign binding contract agreements. An ALIEN can sign a binding agreement as long as they are considered an adult according to California Law. An EMANCIPATED MINOR is treated as an adult for the purpose of contracting.

Answer 31

55. b. APPROPRIATION – A right granted through governmental action allowing the taking or diversion of water from the public domain for personal and private use. PERCOLATION – The ability of water to enter the ground. ACCRETION – The depositing or build-up of soil. ALLUVIUM – The name for the soil built-up or deposited through accretion.

Answer 32

56. a. RIPARIAN RIGHTS refer to rights of persons or entities that own property on non-navigable RIVERS and/or STREAMS. Littoral relates to rights on lakes or ocean shorelines.

Answer 33

57. d. AVULSION is the sudden ripping or tearing away of the land. EROSION is the gradual wearing away of the land. ACCRETION is the process of depositing or building-up of soil that has been moved through erosion, and ALLUVIUM is the name of the soil that is deposited or built-up during the process of accretion.

Answer 34

58. c. This is the definition of a FIXTURE. An ATTACHMENT relates to a type of “Lien.” An APPURTENCE is a real property right (such as an easement or water rights). A TRADE FIXURE is always considered to be personal property.

Answer 35

59. b. METES (measurements) around the outside BOUNDS (boundaries) of the property. It is not essential that the area of the parcel be shown for it to be considered a legal description.

Answer 36

60. b. The question is looking for the “Incorrect Answer.” All of the answers are true except (b), which is INCORRECT.

Answer 37

61. a. Minutes, degrees and seconds are measure either EAST or WEST from a North/South Line.

Answer 38

62. a. BASE LINES run EAST and WEST. Meridian lines run NORTH and SOUTH.

Answer 39

63. c. METES and BOUNDS is a method of describing land as opposed to SQUARE FOOT, ACRE and FRONT FOOT, which are methods of measuring land.

Answer 40

64. b. COMMUNITY PROPERTY may be willed by either spouse (their 1/2 interest only). However, if no will is left their half interest, as a result of intestate succession (dying leaving no will), based now on the State’s will, which would then prevail, will automatically go to the surviving spouse.

Answer 41

65. b. This answer is a statement of fact. Answers (a), (c) and (d) all describe separate property.

Answer 42

66. d. This is the most accurate answer of the four. (a) is incorrect as half would go to the surviving spouse, but the heirs are entitled to the other half. (b) is incorrect as if there were more than one child it would be divided 1/3 of the estate to the surviving spouse and 2/3 to the children. (c) is incorrect as the spouse is entitled to either ½ or 2/3 of the estate depending on how many children there are. DEPOSITION OF SEPARATE PROPERTY, IF NO WILL: (if no children) 1/2 to the spouse, 1/2 to the heirs…(if one child) 1/2 to the spouse-1/2 to the child…(if two or more children) 1/3 to the spouse , 2/3 to the children.

Answer 43

67. c. Initially “A,” “B” and “C” hold 1/3 interests as Joint Tenants. After “B” sells to “W,” “A” and “C” still hold 1/3 interests as Joint Tenants between each other, as the four unities of Joint Tenancy still exist between them and “W” becomes a Tenant in Common between themselves and “A” and “C.” (as “W” took title on a different deed at a different time). When “A” dies their 1/3 interest goes to the surviving Joint Tenant “C” who now holds a 2/3 interest. Therefore “W” holds a 1/3 interest and “C” holds a 2/3 interest, and as the interests are unequal, and taken on different deeds at different dates they would hold title between each other as TENANTS IN COMMON.

Answer 44

68. c. Due to the fact that a corporation is a LEGAL PERSON and not a real or natural person (living/breathing) it CANNOT DIE. As Joint Tenancy ownership carries with it the “Right of Survivorship,” there could be no survivor if one cannot die. Corporations also would not be capable of holding title as Community Property.

Answer 45

69. d. The brother and sister originally shared a ½ interest each as Joint Tenants. The sister deeded half of her ½ interest (a ¼ interest in the property) to her husband. Therefore she retained a ¼ interest in the property. The division of the interest s after this took place would be: The Brother ½ interest, the sister ¼ interest and the sister’s husband ¼ interest all holding title as TENANTS IN COMMON. The Tenancy in Common was created due to the fact that all parties did not appear on the SAME DEED, drawn on the SAME DATE and they do not all hold EQUAL INTERESTS. (a) Is incorrect as they all do not hold equal interests and therefore a Joint Tenancy could not exist between ALL tenants. (b) Is incorrect as a Joint Tenancy is a co-tenancy, which means there must be at least two persons holding as Joint Tenants in order for it to exist. (c) Is incorrect as this is not an example of a PARTITION ACTION (a court action instituted to sever the tenancy of disputing cotenants).

Answer 46

70. a. Equal rights of POSSESSION is necessary in a Tenancy in Common. However (b) EQUAL INTERESTS are not necessary to create a Tenancy in Common, nor is (c) Taking title at the same time (UNITY OF TIME) nor (d) Being shown on the same document (UNITY OF TITLE).

Answer 47

71. d. All are considered MECHANICS for the purpose of being able to file a MECHANIC’S LIEN.

Answer 48

72. c. The type of lien created would be a Mechanic’s Lien, which is also considered to be a “SPECIFIC LIEN.”

Answer 49

73. c. Obviously the lenders feel it is more important to wait until all lien rights of mechanics have passed on the project prior to releasing the final payment. (a), (b) and (d) would still allow the mechanics time to file their liens as they have 30 DAYS FOR SUBCONTRACTORS and 60 DAYS FOR GENERAL CONTRACTORS if a NOTICE OF COMPLETION were filed and 90 DAYS for ALL CONTRACTORS AND SUPPLY PERSONS if no Notice of Completion were filed.

Answer 50

74. b. A MECHANIC’S LIEN would be filed, which is a type of “SPECIFIC LIEN” not a General Lien.

Answer 51

75. d. ATTACHMENT LIEN – Holds property for a pending judgment. LIS PENDENS - Is recorded to notify the public of a pending litigation against the property regarding an ownership interest. SUBPEONA - Calls for an appearance at a court hearing All of the above occur before a final judgment is rendered.

Answer 52

76. a. ABSTRACTS OF JUDGMENT rendered in personal injury suits give the Plaintiff a “GENERAL LIEN” not a specific lien. Obviously the lien created would be an “INVOLUNTARY LIEN” not a voluntary lien.

Answer 53

77. b. Statement of Fact. A CERTIFICATE OF SALE is issued to the highest bidder at a Mortgage Foreclosure. A WRIT OF POSSESSION is issued to the landlord after successfully obtaining judgment through an Unlawful Detainer Action. A TRUSTEE’S SALE is an out-of-court foreclosure.

Answer 54

78. c. The least likely action would be to simply forget the whole thing, which would describe a “UNILATERAL RESCISSION.” The most likely actions would be through court for relief, which would require a suit for either “Specific Performance” or for “Actual Damages.”

Answer 55

79. b. A property when subjected to an easement (SERVIENT TENEMENT) is ENCUMBERED. The easement is APPURTENANT to the property that benefits from the use of the easement (DOMINENT TENEMENT). EASEMENTS are not liens (encumbered for money) nor are they considered to be ENCROACHMENTS (a trespass on the property of another).

Answer 56

80. b. (a), (c) and (d) are all correct statements regarding easements. The question is looking for the incorrect answer. (b) is incorrect as parcels do not necessarily have to actually touch or adjoin to create an APPURTENANT EASEMENT. As shown in this example “A” has An APPURTENANT EASEMENT across Parcels “B” and “C.” However, parcel “A” does not touch nor adjoin parcel “C” Street 81.

Answer 57

81. b. An easement is an ENCUMBRANCE. But because it was not created to lien real property do to the owing of money, it is considered a NON-MONEY ENCUMBRANCE. (a), (c) and (d) are all MONEY ENCUMBRANCES known as LIENS.

Answer 58

82. a. A LICENSE grants PERMISSION to the licensee to do certain things. As an example; A License grants permission to cross another’s land. A license that grants permissive use may be REVOKED by the person granting it. An EASEMENT grants a PERMENENT RIGHT to use or cross the land of another and is IRREVOCABLE. (b), (c) and (d) are incorrect, as if permission had been granted, then ADVERSE POSSESSION could not be acquired. One of the elements to acquire Adverse Possession is “Hostile to the true owner.” There is no hostility if permission has been granted.

Answer 59

83. b. PRESCRIPTION relates to an EASEMENT (a real property right) acquired through court action providing for the RIGHT TO USE the land of another, not to OWN the land of another. Because there is no actual ownership of the land itself and there is no agreement to acquire future ownership, there would be no LEGAL TITLE and no EQUITABLE TITLE (contract of sale). Remember that PRESCRIPTION provides one with a RIGHT and not an ESTATE in real property and as a result there would be no GRANT.

Answer 60

84. c. An EASEMENT is not an ESTATE in real property, but a real property RIGHT. Answers (a), (b) and (d) are all FREEHOLD and LESS-THAN-FREEHOLD ESTATES in real property.

Answer 61

85. c. It is not necessary that parcels adjoin to create an APPURTENANT EASEMENT. (a), (b) and (d) are all true statements. See explanation to question 80.

Answer 62

86. a. An EASEMENT (created by other than prescription) is an APPURTENANT RIGHT, which exists indefinitely until the DOMINANT TENEMENT terminates it. Once an easement is created it is not necessary that it be specifically mentioned in the deed that is used to transfer the title. A deed by its nature conveys all real property within the boundaries of the described parcel, which includes the REAL PROPERTY, ALL IMPROVEMENTS THEREON and ALL APPURTENANCES THERETO. The easement being an APPURTENANCE automatically transfers even though it is not specifically mentioned in the deed. Therefore, in the situation presented in this problem, “A” was the DOMINENT TENEMENT and when “C” purchases “A,” “C” takes over the same DOMINENT position that “A” held and “B” remains SERVIENT as before.

Answer 63

87. b. In regards to RESTRICTIONS relating to real property…The RULE is: WHEN IN CONFLICT, THE MOST STRINGENT RESTRICTION PREVAILS! Therefore the DEED RESTRICTION, which prohibited the use would be the most stringent.

Answer 64

88. a. This is the correct answer. Age 65 or older and disabled persons are granted a $175,000 homestead exemption.

Answer 65

89. c. Either spouse may file a homestead on a property as a MARRIED PERSON and it is not essential that they have their spouses CONSENT nor SIGNATURE to do so. If there were an existing homestead that had already been filed on another property, then answer ( c) would have been incorrect.

Answer 66

90. c. The value of the property being homesteaded is only necessary when establishing the value at the time a foreclosure is pending by an unpaid creditor. There is no need to establish this in advance, as it makes no difference what the property is worth when it is homesteaded. It is important to establish when a creditor is asking for an execution sale of the property to determine whether or not there is sufficient equity to force the sale.

Answer 67

91. b. The first five words are the key to this answer…”A man sells his home” Sale of a property automatically terminates a homestead created on that property. (a) would be incorrect as you can have MORE THAN ONE HOMESTEAD, but ONLY ONE AT A TIME. (c) is incorrect as the first homestead automatically terminated, which allowed for recording on the new property to be valid. (d) is incorrect as the old homestead would not have to be formerly cleared by a recorded DECLARATION OF ABANDONMENT as the recording of the deed in the name of the new owner or other evidence of title transfer would AUTOMATICALLY TERMINATE the first homestead.

Answer 68

92. b. It is not necessary to have your spouse’s signature nor consent to record a valid homestead as a married person. Therefore, the homestead is VALID. However a homestead, although valid, will not protect a property against a SECURED LIEN such as a MECHANIC’S LIEN.

Answer 69

93. d. Only one property at a time can be homesteaded! A prior homestead would invalidate a second one recorded, unless the first one should be released prior through a DECLARATION OF ABANDONMENT. Moving from the property does not terminate a homestead as long as you have the intention of returning to the property to use it some time in the future. Destruction of the improvements also does not terminate a homestead. However, selling (transfer of ownership) DOES TERMINATE THE HOMESTEAD.

Answer 70

94. a. Once a property has a valid homestead properly recorded in the county where the property is located, the claimant may move from the premises and as long as they have the intention of returning in the future the homestead would remain effective.

Answer 71

95. c. ALL OFFERS must be SUBMITTED to the agent’s principal (Seller) IMMEDIATELY. The Seller must also be advised if other offers have been made or are being drawn-up. The agent MUST DISCLOSE ALL INFORMATION regarding the transaction to their principal.

Answer 72

96. c. An agent must disclose all information, other than information that would be considered “discriminatory” in nature (a violation of the law) to the principal. The agent is also charged with a responsibility to disclose to third parties (on the exam the buyer or prospective buyers) ALL KNOWN MATERIAL FACTS regarding the property being purchased.

Answer 73

97. c. The authority from the owner that allows the broker to accept a deposit simply establishes if the owner is willing to take th e liability for the money taken. If the seller authorizes the acceptance of a deposit the deposit is then tied to the contract performance. At that point the money cannot be released without the mutual consent of both the buyer and the seller. Therefore if the broker receives the authority to accept the deposit by the seller, when taking the deposit, the broker would be holding the buyer’s money under the authority of the seller. As such, the broker and the seller would have the liability if anything should happen to the money. If the authority is not granted to the broker to accept a deposit, then the broker may still take a deposit, but would then be holding the buyer’s money for and on behalf of the buyer and the seller would then have no liability for any mishandling of those funds by the broker.

Answer 74

98. c. An agent is not liable for representations accepted from the principal in good faith and passed on to the buyer as long as the defect is not one that would be obvious to the broker upon making a due diligent “visual inspection” of the principal’s property.

Answer 75

99. d. State of Fact. (c) is incorrect as an agent must disclose all information that would affect the buyer’s decision to purchase, even if not questioned or asked about that information by the buyer. (a) is a good answer, but not as complete as answer (d).

Answer 76

100. c. Due to the fact that the broker and the seller were not aware of the encroachment, there would be no apparent case for non-disclosure or misrepresentation. The buyer should sue the neighbor who is currently trespassing on their property (encroaching).

Answer 77

101. c. The action of employing an agent creates an “Agency Relationship.” Within the agency relationship that has been created the agent owes the principal a FIDUCIARY RESPONSIBILITY (Trust). Therefore, both relationships are created as a result of this employment agreement.

Answer 78

102. d. This action would be considered a ETHICAL VIOLATION by the broker in accordance with the Department of Real Estate and the National Association of Realtors. It would also be a violation of the agent’s Fiduciary Responsibilities in accordance with the Laws of Agency.

Answer 79

103. c. Should the buyer who is a party to an accepted contract to purchase, which was presented through a broker, DEFAULT on their obligation to carry-out the purchase, then in accordance with the stated LISING AGREEMENT the broker would not be entitled to a commission. Generally it is stated in the Deposit Receipt that in the event of a buyer default that “The broke r would be entitled to half of any forfeited deposit or damages received by the seller, but not to exceed the amount of the commission contracted for. However, it stated that this agreement had no such stipulation.

Answer 80

104. c. The broker is acting as an agent of the seller, and as regards the deposit could not release it without the mutual consent of the buyer and seller. As a result of the buyer and seller mutually agreeing to RESCIND THE CONTRACT (return it to the point that the contract never existed), the broker would have to return the deposit in full back to the buyer. However, the broker would still be entitled to the commission as the broker had still lived-up to the terms of the agreement with the seller and had procured a “Ready, Willing and Able Buyer,” and after a binding agreement was made, acted voluntarily to released the buyer from that agreement. (a) is incorrect as the buyer did not breach (there was a mutual rescission) and therefore there would be no deposit forfeiture to be split. (b) is incorrect as the deposit does not belong to the broker, it was the buyer’s money and as a result must have been returned to the buyer. (d) is incorrect for the same reason as (b).

Answer 81

105. a. Both the broker and the owner would be liable due to the lack of disclosure of material facts to the buyer. The law regarding “Caveat Emptor” (Let the Buyer Beware) where the seller would not be liable for undisclosed defects if the property were sold in an “AS IS” condition is no longer legally applicable in California. Even if the property is today sold in an “AS IS” condition, the seller or their agent must disclose all known “material facts.” If not, they are held liable for those not disclosed.

Answer 82

106. c. Although an offer is signed by both the buyer and seller, the acceptance of the offer MUST BE COMMUNICATED back to the party that made the offer in order to create a “Binding Agreement.” In this question it would have to be communicated to the buyer. Because the buyer died prior to the communication, the contract was VOID as it lacked the essential of “Mutual Consent.” Should the acceptance have been communicated in the stipulated manner and then the buyer had died, the contract would have been binding and the buyer’s estate could be petitioned requesting full performance of the contract.

Answer 83

107. c. The buyer has the legal right to withdraw an offer ANYTIME BEFORE THE ACCEPTANCE IS MADE AND COMMUNICATED to them. Although the contract stated the buyer’s offer was IRREVOCABLE FOR 5 DAYS, which would lead you to believe that they could not withdraw for the 5 day period, the 5 day clause means “nothing (is unenforceable) due to the fact that a contract where there is an agreement to hold an offer open is known as an OPTION. The 5-day right of the seller to be able to accept the buyer’s offer would then constitute an “Option.” The key to this answer is that in order for an option right to be binding and enforceable it is required that a CONSIDERATION be paid for that right and must have passed to the OPTIONOR, which in this question was the buyer. As the seller did not pay the buyer to hold the offer open, there was no option right created and therefore the buyer had the right to withdraw anytime before the acceptance had been made and properly communicated to them.

Answer 84

108. d. Conditions or contingencies should be as complete as possible and should have time limitations for performance. Without a limitation the seller may have to wait an undetermined period of time, which could be short or unreasonably long. With the 20-Day stipulation, the seller will be released from their obligation to sell and would have the options of extending or granting additional time to the buyers Mr. and Mrs. “A” or to find another buyer. (a), (b) and (c) are not satisfactory as they do not show a time limitation.

Answer 85

109. b. Representing both parties in a transaction without any violation of the law is known as a DUAL AGENCY, which is perfectly legal as long as the agent had the FULL CONSENT AND KNOWLEDGE OF ALL PARTIES TO THE AGENCY. Should the full consent and knowledge not be present then the broker is “Representing More Than One Party” in the agency without full consent and knowledge and this is a violation of the law and is known as a DIVIDED AGENCY. Even in an exchange agreement, where it is common for an agent to represent both parties, the agent must be careful to see that both parties are aware of the dual agency. (d) is incorrect as it was the seller that would have to be informed of the broker representing the buyer. The buyer is charged with the responsibility of knowing that the broker represents the seller as an agent, which is apparent, as they (the buyer) are not buying the property from the broker, but from the seller.

Answer 86

110. c. In the event the broker had no authority granted to them by the owner to accept a deposit, should the broker receive a deposit from the buyer they would be holding the buyer’s deposit money for the buyer as an AGENT OF THE BUYER, but only for handling the buyer’s money, not an agent for the buyer for the entire transaction. However, should the broker have a written authority from the owner to accept a deposit, then if a deposit were taken, the deposit would be held by the broker as an AGENT OF THE SELLER. In the event of any loss of the deposit money, in the first case, only the broker would be liable to the buyer for the loss as they (the broker) were acting outside the authority granted them by the owner, as the Principal/owner is only liable for actions they authorize or ratify. In the second case both the owner and the broker could be held liable as the broker was then acting within the authority granted by the owner. The check would not (in the example presented in the question) have to be placed in a trust account as it would have been perfectly alright to hold per the buyer’s written instructions.

Answer 87

111. a. LISTINGS are EMPLOYMENT CONTRACTS and are regarded as PERSONAL SERVICE AGREEMENTS. The death or incompetency of a natural person (living/breathing) would automatically terminate the contract due to “Impossibility of Performance” and as a result, in order to continue to work on them, it would be necessary for the agreements to be rewritten employing, in this case, Mary’s daughter. Should Mary Jones have been the Broker/Officer (natural broker responsible for the activities of the brokerage) of a real estate corporation, which was not the case in this question, but if so, then as corporations are not living/breathing persons, but legal persons and as a result cannot die, then the listings would not have terminated and the corporation could have continued to work on the listings for the balance of the contract terms.

Answer 88

112. d. A “Valid” Listing Agreement for the “Sale,” “Purchase” or “Exchange of Real Property, according to the Statute of Frauds, is ENFORCEABLE if in writing…UNENFORCEABLE if verbal/oral. Answer (a) is incorrect as there is nothing illegal about a verbal listing if it is valid and the fee has been paid. If the fee has not yet been paid the court would be unable to render a judgment for enforcement of the payment. Answer (b) is incorrect as it is not lacking any of the four essentials that are necessary to create a valid contract, therefore it is not Void. Answer (c) is incorrect as there are no weaknesses in any of the four essentials that would give either party the option to cancel if proven, therefore it is not Voidable. 112a a. This would be the correct answer if the question had read as above and the commission had been paid. b. This would be the correct answer if the question had stated that the commission was not paid.

Answer 89

113. c. According to the Statute of Frauds, not only must the contract be VALID (contain all four essential elements to create it) but to be ENFORCEABLE (the court able to act on the agreement) it must be in WRITING.

Answer 90

114. a. The appraisal verified the value at $200 per acre, thusly relieving the broker of any possible accusation of taking unfair advantage of the seller.

Answer 91

115. c. A property described as a “Personal Residence” is considered adequate even if other properties are owned on the same street. However, this would not also be true if it were described as the owner’s “Residential Property.” RESIDENCE – Zoned for residential use and owner-occupied. RESIDENTIAL – Property zoned for, and located in a residential area.

Answer 92

116. c. A broker may accept a commission in any manner they choose as long as it is legal in nature.

Answer 93

117. b. The key words are “SHOULD THE CONTRACT LATER BE DEFAULTED!” Meaning it had been accepted. In the Standard Deposit Receipt Form it specifies; “If the buyer defaults, the broker is entitled to half the forfeited deposit, but not to exceed the amount of commission contracted for and only after the owner deducts any expenses of collecting the damages.” Although the owner only authorized acceptance of “NO LESS THAN A $1,000 DEPOSIT,” acceptance of the offer by the owner ratified the procuring of the $500 deposit by the broker. Therefore in the event of a legal action by the owner to dispute any liability for the deposit should it be lost by the broker, the owner would be ESTOPPED (legally blocked) from using non-authorization as a defense as the act of acceptance of the offer served to ratify the procuring of the smaller deposit. NOTE: Occasionally on the exam a Deposit Receipt is shown and under the acceptance clause, the clause indicating “The broker would be entitled to half of the forfeited deposit,” is not shown. In this event the answer to the question would be broker would then receive “Nothing!” The Deposit Receipt is an agreement between the buyer and the seller. Should there be a forfeiture of the deposit, the seller only would be entitled to it unless there were a stipulation that it would be split with the broker (which there would not be in this instance). Regarding the LISTING AGREEMENT (Employment Contract). In neither situation above would it have entitled the broker to any commission if the buyer had defaulted, as the broker would not have procured a READY, WILLING AND ABLE BUYER.

Answer 94

118. b. EXCLUSIVE RIGHT TO SELL LISTING specify that the owner agrees not to REVOKE (withdraw). However, if owner does, which is an action they may elect to take, it would be considered a BREACH OF CONTRACT. The broker’s recourses would then be…UNITATERAL RESCISSION – Releasing them with no liability. SUIT FOR DAMAGES – Legal action requesting reimbursement for any costs sustained in performance of their duties or SPECIFIC PERFORMANCE. (a) is incorrect as liability for damages is a possible remedy. (c) is incorrect as anyone can breach a contract. (d) is incorrect as even though it specifies it is Irrevocable, that is only a promise not to revoke, the owner simply “Breaks their promise (revokes).”

Answer 95

119. d. “ALL OFFERS MUST BE SUBMITTD TO THE PRINCIPAL!” It would be up to the owner to accept or reject this offer. If owner rejects the broker would not be entitled to the commission, as it was not an offer under the “Exact terms of the listing agreement.” Should the owner accept the offer, and the buyer not default, the broker would be entitled to the commission. REGARDING THE LIABILITY FOR THE DEPOSIT Should the offer be rejected, only the broker would be responsible for any damages arising from the mishandling of the deposit, as the broker would have been acting outside of the authority granted them by the owner under the terms of the Listing Agreement. However, should the owner accept the offer, the acceptance is viewed a ratification of the owner by allowing the acceptance of the deposit in their behalf and in the event of any mishandling of the deposit BOTH the OWNER and the BROKER could be held liable.

Answer 96

120. b. A “BILATERAL AGREEMENT” is one in which a “Promise or promises are made in exchange for another person’s promise or promises.” In the Listing Agreement an owner promises to pay a commission….the broker doesn’t have to promise to make a diligent effort to procure a purchaser, but if they do, it creates a promise now also made by the broker, which would then create a BILATERAL AGREEMENT.

Answer 97

121. d. On longer term leases the agent is entitled to their compensation on the total or full amount of the lease, but the compensation is usually paid each month over the life of the lease on shorter term agreements and for the first few years on longer term leases.

Answer 98

122. b. The Statute of Frauds requires that any agreement to "Purchase," "Sell," "Transfer" or Sell real property MUST BE IN WRITING to be ENFORCEABLE. Leases for 1-YEAR OR LESS CAN BE VERBAL (Oral). Therefore according to the Statute of Frauds the agent’s authority can equally be verbal/oral. The authority to solicit a purchaser for personal property may be verbal/oral.

Answer 99

123. c. Both the Principals and Agent’s name must appear on an agreement signed under the provisions of a valid POWER OF ATTORNEY (an agreement authorizing another person to sign or act in one’s place). The Principal’s name would be written-in and the ATTORNEY-IN-FACT’S name (Agent named by the Principal to act as them) would be signed (signature necessary).

Answer 100

124. b. One who receives a written authority under the instrument known as a Power of Attorney is identified as an “ATTORNEY IN FACT.”

Answer 101

125. d. (Update) Answer (d) should be changed to read: Both (a) and (b) are correct. (c) has been changed by a recent law. A homesteaded property may now be transferred through use of a Power of Attorney, therefore (c) is now an incorrect statement instead of being correct.

Answer 102

126. a. A smaller or lower loan amount compared to the appraised value would indicate a larger down payment would be needed, thus a higher or larger equity! This also means a lesser degree of risk, a lower interest rate and a lower or smaller loan being made.

Answer 103

127. b. The terms “Construction Loan,” “Interim Loan” and “Short-term Loan” all have the same meaning. The terms “Long-Term Loan” and “Take-out Loan” have the same meanings. Words with the same meaning are described as being Synonymous (meaning the same).

Answer 104

128. c. Terms used in CONJUNCTION (used together) with each other would be INTERIM (Short -Term Loan) and TAKE-OUT LOAN (Long-Term Loan).

Answer 105

129. d. LOAN POINTS were originally created to allow for the equalizing of the return to the lenders on Government -Backed Loans where the interest rates were Fixed/Set by government agencies and which were slow to change, whereas Conventional rates, which were Non-fixed rates could change daily, if necessary, to reflect changes in the money markets. To allow for the adjustment “Loan Points” (an additional charge or cost) were created so that lenders could charge this additional fee (points) and although the government-backed interest rates were lower, the lenders could use this additional charge to make-up the difference in the returns between the Conventional Loans and the Government-Backed Loans.

Answer 106

130. b. A Statement of Fact. The vast majority of loans made by institutional lenders are on a SIMPLE INTEREST basis (interest paid on the declining loan balance).

Answer 107

131. b. The SECONDARY MORTGAGE (or Money Market) is described as “Where loans are bought and sold by lenders (Mortgagees)." Answer (a) leads you to believe they are discussing second priority mortgage loans. In answer (c) you would have to recognize that a “Mortgagor” is a borrower. Answer (d) is the definition of the Primary Money or Primary Mortgage Market ( the marketplace where loans are created/originated).

Answer 108

132. b. A “SEASONED LOAN” is defined as “A loan showing a past record of good or prompt payments.”

Answer 109

133. b. This is a clear example of a DISCOUNTED NOTE (a note sold for less than the amount currently owed). LEVERAGING is the act of “Borrowing other peoples money (OPM) to finance the purchase of property.” The MORE BORROWERED the GREATER THE LEVERAGE. Selling a note for less than owed (discounted note) is not Illegal, nor is it Usurious (charging more than the current legal rate of interest as there is no mention of the rate being changed.

Answer 110

134. d. (d) is correct as answers (a), (b) and (c) all relate to the alternatives the buyer’s would have if they should not acquire the 100% financing. The key to this problem is the CONTINGENCY CLAUSE that allows the buyer’s to be released from the contractual obligations if the contingency is not met within the time specified in the agreement. The question showed no time limit. However, the contract was based on the 100% financing, which could not be obtained by the buyers.

Answer 111

135. d. A “LOAN-TO-VALUE RATIO” describes the “Maximum Loan Amount” a lender will loan based on a percentage of the lender’s Appraised Value of the property. For example: Buyer has contracted to purchase a property for $50,000 and is looking to acquire 90% financing, meaning they are looking for a $45,000 loan. The lender however, arrives at an appraised value of $40,000 (also known as the loan value). Therefore the lender will loan, not 90% of the $50,000 price the borrower is willing to pay, but 90% of the $40,000 ($36,000), the value the lender feels the property is worth.

Answer 112

136. c. Buyers and borrowers almost without exception acquire for their own financial protection a CLTA Standard Coverage Policy of Title Insurance. This provides them the protection normally needed and is less costly than CLTA Extended or ALTA Lenders Policy or Homeowner’s Policy. CLTA Extended Coverage is used generally for special circumstances and ALTA Homeowners is basically the same as CLTA Extended. ALTA is used where a lender is involved in the purchase as a result of loaning money for the purchase and wants coverage for their loan in which case ALTA Lender’s Policy would provide them with the most complete coverage.

Answer 113

137. d. An “OPEN-END LOAN” is one in which the lender can under the terms of the note advance additional money at a later date. Without this clause, if the borrower wanted to borrower additional money, the borrower would have to pay-off the current loan and the lender would have to re-write a new loan (refinance). The benefit of advancing additional sums rather than a pay-off and writing a new loan is that on the advance the lender’s lien priority remains in the same position. On a re -write the old loan is paid-off and the lien is released (cleared from the record) and a new loan is recorded. If any additional loans existed on the property, then the re-write would become junior (of a lesser priority) to them and the lender would have lost the priority they previously had. EXAMPLE: Borrower wants to borrower an additional $10,000 CURRENT FINANCING If OPEN-END LOAN If REFINANCED (Re-write) Deed of Reconveyance clearing $40,000 Loan 1ST Priority Loan $40,000 $50,000 (after $10,000 advance) $ 5,000 (junior loan moves into 1st position) 2nd Priority Loan $ 5,000 $ 5,000 $50,000 (being a new loan takes 2nd position) An “Open-End Loan” is a benefit to the borrower by making it easier to acquire additional money. In most cases the lender will allow the borrower to borrow up to the original amount of the loan.

Answer 114

138. b. Transferring ownership of a "Negotiable Instrument" to a lender to be held as security for a loan, describes a PLEDGE!

Answer 115

139. a. A note is not security for a mortgage. A mortgage secures payment on the note. A “STRAIGHT NOTE” identifies a note where the terms require payments of interest only, not principal only

Answer 116

140. a. An ALIENATION CLAUSE (legal name of the clause) commonly known as a "Due on Sale Clause (not the legal name) has no effect on the negotiability of the note. Whoever holds the note has the right to collect under the terms of the note. The Alienation Clause calls the note due and payable on the transfer or conveyance of the title (ownership) of the property. Should this clause exist in the note, then the borrower would have to pay the lender the entire balance due on the note should they sell the property on which the loan is held. (c) is incorrect as an Alienation Clause is beneficial to the holder of the note, in that they would know the note would be due and payable if the borrower named in the note transferred the title It would be a disadvantage to the borrower as the property could not be sold by allowing the new purchaser to assume the existing loan balance. (d) is incorrect as the note becomes unassumable, NOT readily assumable.

Answer 117

141. d. All three (a), (b) and (c) are all different names to describe the same financing technique. EXAMPLE OF NORMAL METHOD OF SELLING AND FINANCING Selling Price $70,000 Buyer Assumes Existing First Loan $40,000 @ 8% Interest Seller carries back a Second Loan $30,000 @ 12% Interest EXAMPLE OF SAME SALE WITH A WRAPAROUND Selling Price $70,000 Seller carries a Second Loan for full price $70,000 @ 12% Seller keeps existing first loan of $40,000 in their name (buyer does not assume this loan) In the second example the seller has the buyer owe them the entire purchase price of $70,000, however the seller keeps the note and the lien for the $40,000 in their name still on the public record which continues to remain a lien against the property. After the sale, the seller then records the $70,000 carry-back loan given them by the buyer, which now takes a second position on the public record behind the $40,000 existing loan. As a result the seller continues to make the payments on the $40,000 loan at 8% interest, which costs them $3,200 in interest, yet they are charging the buyer 12% interest on the additional $40,000 they have carried-back. As result of carrying-back $70,000 rather than $30,000, this generates for the seller 12% interest on the additional $40,000 amount which is $4,800….If the seller is receiving $4,800 in interest from the buyer ($40,000@12%) and paying only $3,200 for the use of the money ($40,000@8%), the seller then earns the difference, which in this example is $1,600.

Answer 118

142. d. The "Request for Notice of Default" allows the holder of a JUNIOR LIEN (any lien other than a first lien) to be notified in the event a lien holder with a higher priority files a default notice. This allows junior lien holders to protect themselves by bringing the defaulted liens current through paying them personally and therefore stops the senior lien holder(s) from foreclosing. The junior lien holder then adds these amounts they've paid to bring the senior loans current to amount the borrower owes them, and if the borrower cannot bring that total amount current, the junior lien holder may file their own Notice of Default and proceed with a foreclosure. (explanation to the answer continued on the next page) 14 (a) is incorrect as a promissory note itself cannot be recorded on the public record unless it is recorded along with a recorded trust deed or mortgage that secures the payment on the note (as only documents that affect the title or ownership of real property may be accepted for recording). (b) is incorrect as the trust deed only creates a lien, but does not allow for notification in case of default automatically. (c) is incorrect as recording of both the trust deed and the note does nothing more than create a lien.

Answer 119

143. b. A complete Deed of Trust (a blank master copy) usually two pages or more, with the back page(s) containing the legal clauses and the front page with the agreement is recorded on the public record in selected counties. This is known as a FICTITIOUS DEED OF TRUST. To simplify the recording process…A SHORT FORM DEED OF TRUST is used. The Short Form contains all the pages, but only the front page (naming the parties) is then recorded to create the lien and it refers to where the FICTITIOUS DEED OF TRUST can be found which contains the remaining standard clauses.

Answer 120

144. c. The property held as collateral under the terms of the deed of trust secures the promissory note. A trust deed by itself has no value. It is the promissory note that is the negotiable instrument. A note cannot be recorded by itself, however a trust deed can be recorded, which perfects the lien. If the trust deed is recorded the note may be recorded along with it as the trust deed secures the payment on the note.

Answer 121

145. b. Lee will pay-off the existing loan, which is most likely secured by a deed of trust. Upon payment in full, a DEED OF RECONVEYANCE would be issued to Lee, which when recorded would release the lien. If Gary paid all cash there would be no trust deed as there would be no lien created. A BILL OF SALE is used to evidence the conveyance of personal property, therefore would not be involved in this situation.

Answer 122

146. b. The MORTGAGOR (buyer/borrower) would sign the NOTE (evidence of the debt) and MORTGAGE (instrument creating the lien) in favor of the lender. (a) The seller/owner/grantor SELLS A PROPERTY. (c) The TRUSTEE holds the title in trust, and (d) The MORTGAGEE (lender) takes the mortgage and holds the note.

Answer 123

147. c. In an inflationary economy the value of residential real property tends to increase. If the value increases the TURSTOR (owner/borrower) benefits from the increased equity growth. The BENEFICIARY (Lender) actually losses as they would probably be carrying a fixed interest rate note at a low interest rate (they are entitled to be paid on the note, but, not being the owner of the property, do not benefit from the equity growth). The TRUSTEE (party to whom the trustor has conveyed the legal title and power of sale) who acts for and on behalf of the lender, has no interest in the property whatsoever and therefore would have no equity interest

Answer 124

148. b. A trust deed's total purpose is to secure the payment on the note. It is used to place real property as security in the event of nonpayment on the note. The Note is the "incident" of the debt. A trust deed is not held by the Trustor (borrower) it is given by the Trustor and held by the lender (Beneficiary).

Answer 125

149. d. The MORTGAGOR is the borrower. The BORROWER signs the note. The MORTGAGEE is the LENDER. The lender as a result of lending the money, receives and holds the note.

Answer 126

``` 150. b. All written instruments are personal property. Should they relate to an interest in real property they would be also known as CHATTELS REAL (instruments relating to title or ownership in real property). Although a Mortgage would be known as a Chattel Real not all lien instruments would be. As an example: A Security Agreement holds only personal property as security for a loan. Mortgages do not create an estate in real property, they create liens only. ```

Answer 127

151. c. This is the incorrect answer as an owner carried-back loan is a PURCHASE MONEY LOAN (a loan created for the purpose of purchasing real property). The laws specify that there shall be no DEFICIENCY JUDGMENTS (a judgment for the difference if a property when foreclosed brings in less than what is owed the lender at the time) on PURCHASE MONEY LOANS. (a), (b) and (d) are all correct statements. Foreclosing out of court through a Trustee's Sale also precludes the benefit of acquiring a Deficiency Judgment, as there are also no Deficiency Judgments if foreclosing out of court. However, the Beneficiary may decide not to have the Trustee take action in the event of a default, and may elect to bring their action instead through the court (a judicial foreclosure). In the event it is brought through court the borrower is allowed the ONEYEAR EQUITY OF REDEMPTION PERIOD in which to pay back the successful bidder at the foreclosure sale. In this instance as this is a Purchase Money Loan (no deficiency judgment allowed) this alternative of filing a court action would still not allow the lender the remedy of a "Deficiency."

Answer 128

152. b. The TRUSTEE receives from the Trustor the BARE/NAKED TITLE, which creates the lien when the Deed of Trust is recorded on the public record. When the loan is paid-in-full, the Trustee RECONVEYS the title back to the Trustor (borrower) through the issuance and subsequent recording of the Deed of Reconveyance. If instead of repayment there was a default on the loan, then after the publication period the Trustee would then acting under the "Power of Sale" Clause convey the title to the successful bidder using a TRUSTEE'S DEED (deed issued by a Trustee, from a resulting Trustee's Sale).

Answer 129

153. a. Smith's selling of the note secured by the mortgage to Jones makes Jones the owner of the note with all rights granted under the terms of the note and mortgage. The "QUALIFIED ENFORSEMENT (without recourse)" by Smith simply means if a foreclosure should take place and Jones had not received the full loan balance, that Smith would not be responsible for any loss. THE OBLIGATION OF THE BORROWER IS TO JONES (the new owner of the note and mortgage). In the event the note is defaulted on, which is secured by the mortgage, the ultimate recourse is FORECLOSURE under the terms of the mortgage contract JONES WOULD HAVE TO FORECLOSE TO COLLECT THE OUTSTANDING BALANCE. (a) is incorrect due to the "Qualified Endorsement." (b) Is incorrect as the significance of a purchase money mortgage is that it does not in any way affect the court foreclosure sale. It would prohibit the possibility of the holder of the note and mortgage from receiving a "Deficiency Judgment" should the sale of the property not bring in enough to satisfy the balance due on the note. (c) Is incorrect as Smith has no rights in the property once the note and mortgage were sold to Jones.

Answer 130

154. a. "SUBJECT TO: means that rather than assuming a loan by signing papers agreeing to be responsible for the payments, the property is bought and the deed received (now owning the property), however the loan is still in the previous owners name with a Mortgage holding the property as security for the loan in the event of non-payment on the note. As the loan has not been ASSUMED the property has been bought SUBJECT TO THE LOANS. Should the payments not be made and the property subsequently be foreclosed on, and should it be determined that the lender is entitled to a DEFICIENCY JUDGMENT -(if selling for less that owed), the judgment could only be rendered against the maker of the note. Therefore because the buyer had not ASSUMED the liability (assumed the loan), they would not be held responsible for the amount due on the judgment.

Answer 131

155. a The PREPAYMENT PENALTY BENEFITS THE LENDER (the beneficiary). Should the BORROWER (trustor) pay-off the note in advance of the due date, the lender would receive an additional amount of cash over and above the balance due on the loan as a penalty charge to the borrower. This clause also benefits the lender in the event they sell the note, in that the note is more desirable (more saleable) because of this clause.

Answer 132

156. b. FEDERALLY CHARTERED Savings and Loans are required to provide their depositors with deposit insurance (formerly FSLIC, not FDIC). State chartered Savings and Loan Associations are not required to acquire this insurance, however most do.

Answer 133

157. d. CONVENTIONAL and FHA Lenders may be paid their loan fees from anyone who agrees to pay for them. However, FHA being less risky would have less points charged. VA (GI Loan) limits the borrower to paying a maximum of a "One Point" Loan Origination Fee and a 3% Funding Fee. CAL-VET has no LOAN POINTS, although a fee is charged for processing the loan.

Answer 134

158. d. (a), (b) and (c) are all important factors a lender considers when granting a loan approval.

Answer 135

159. b. PARTNERS have personal liability in the partnership for the debts relating to the business incurred by themselves and or other partners. (a) only corporate assets are held accountable and (c) Limited Partners are limited in liability to their investment only. The GENERAL PARTNER(S) hold all of the personal liabilities for the debts of the Limited Partnership.

Answer 136

160. a. The vast majority of money loaned-out through banks and savings and loan associations is the depositor's money placed with their institutions. Therefore the source of the money is individual's savings.

Answer 137

161. a. The vast majority of JUNIOR MONEY (loans other than first loans) is procured from PRIVATE LENDERS and INVESTORS generally through the services of loan brokers (mortgage companies). (b) and (c) are both incorrect as banks and savings and loan associations generally make first priority loans and only a very small amount of junior loans. (d) is incorrect as credit unions can make both first and junior loans, but are not currently a major source of these funds.

Answer 138

162. b. An INSURANCE COMPANY is the only organization considered to be an INSTITUTIONAL LENDER of the four choices shown. PENSION FUNDS, UNIVERSITIES and MORTGAGE COMPANIES are classified as NON-INSTITUTIONAL LENDERS.

Answer 139

163. c. Insurance companies prefer to make large loans on commercial and/or industrial complexes. Banks, savings and loan associations and mortgage companies are the more common sources of home loans.

Answer 140

164. d. MORTGAGE COMPANIES are a service oriented business, which negotiates loans for client borrowers by soliciting funds for these loans from institutional or non-institutional lending sources. The loans that are made are most often those types that are readily saleable in the SECONDARY MORTGAGE MARKET also known as the SECONDARY MONEY MARKET. (a) Banks and savings and loan associations are thrift organizations where people are encouraged to deposit and save their money. (b) Banks generally make quick turnover business and construction loans. (c) Investment groups generally purchase second or junior loans.

Answer 141

165. a. The MORTGAGE INSURANCE PREMIUM is not a form of life insurance. It is a fund set up with money charged and collected from the borrower at the time the loan is made and paid to FHA. The money is then used to reimburse the lender in the event the borrower defaults on the loan.

Answer 142

166. b. This is the answer being looked for as neither type of loan allows for a DEFICIENCY JUDGMENT. FHA Insurance covers losses on those types of loans and almost all conventional loans in California use the Deed of Trust as collateral and Deeds of Trust do not allow for Deficiency Judgments as they are foreclosed out of court. Therefore, as neither allow for a Deficiency Judgment, the characteristics are the same and not different

Answer 143

167. b. MORTGAGE INSURANCE PREMIUM (MIP) is paid by the borrower (an expense). The purpose of the insurance is to reimburse the lender for losses in the event the borrower defaults on the loan. This insures the lender against loss. FHA does make a higher loan compared to the appraised value than on conventional financing. One of the purposes of FHA was to create long-term financing. As FHA compared to conventional loans generally has a LOWER INTEREST RATE and a LONGER PAY-OFF TERM, the monthly payments are lower than those on the same amount of money borrowed through the conventional sources.

Answer 144

168. a. Because of the lower interest rate and the longer loan pay-off term allowed on a GI loan as compared to the usual higher interest rate and shorter pay-off term on the conventional loan, the GI Loan would have smaller or lower payments compared to the conventional loan. (b) is incorrect as VA has a HIGHER Loan-to-value-ratio. (c) is incorrect as conventional loans have a LOWER loan-to-value-ratio, and (d) is incorrect as conventional loans would have a higher monthly payment.

Answer 145

169. a. Under the regulations of the Department of Veterans Affairs, the lender can loan up to 100% of the CERTIFICATE OF REASONABLE VALUE (CRV). Should the agreed upon purchase price exceed the CRV, then the veteran has the option of paying the cash difference and still be able to purchase the property.

Answer 146

170. c. The DEPARTMENT OF VETERAN AFFAIRS is the California State Agency that is in charge of operating the CAL-VET Program. Under this program money is procured through State approved bond issues. This money is then loaned to qualified California Veterans through the Department of Veterans Affairs. The legal title (the deeded interest) does not pass to the veteran, but to the Department of Veterans Affairs. The Department then creates between themselves and the veteran a LAND CONTRACT, which allows the veteran to use the property and guarantees the veteran that the Department will deed it over to them when they pay-back the borrowed money in-full. Therefore the Department of Veterans Affairs (vendor) holds the LEGAL TITLE and the veteran (vendee) holds the EQUITABLE TITLE.

Answer 147

171. b. Relating to the above answer #170, under the terms of the Contract

Answer 148

172. d. In accordance with the CAL-VET Program, the money that is loaned to the veteran is obtained from investors through a bond issue approved by the voters of the State of California. The monies obtained are then lent directly to the California Veteran (who must qualify for the loan) by the Department of Veterans Affairs. The Department charges NO LOAN POINTS when making the loan (although they do have associated fees that are charged).

Answer 149

173. d. (a), (b) and (c) are all correct statements regarding the REAL ESTATE SETTLEMENTS PROCEDURE ACT.

Answer 150

174. a. (Update)Under the terms of Article 7 of the Real Estate Law regarding junior loans of less than $20,000 (this is an updated figure). - The maximum commission allowed on loans with payoff terms of LESS THAN 2 YEARS is 5%….2 YEARS, BUT LESS THAN 3 YEARS is 10%…and…3 YEARS OF MORE is 15%. Therefore 15% of $4,000 is $600.

Answer 151

175. d. The one area that is not covered by any policy of title insurance (CLTA Standard, CLTA Extended or ALTA Lenders or owner's policies) are losses sustained as a result of governmental regulations.

Answer 152

176. d. CLTA STANDARD covers: Matters of public record, forgery and incompetency in the chain of title and court defense costs to defend the title for the coverage provided. EXTENDED COVERAGE would include physical aspects, which the standard does not cover. Neither policy will cover losses caused by governmental regulations.

Answer 153

177. c. A contract offer becomes binding and enforceable (if valid), only after the acceptance has been made and then COMMUNICATED to the person(s) who made the offer and then by the means specified in the contract agreement or , if no method is specified, then by whatever the usual method or mode would be. The signed acceptance alone is not enough to bind the parties to the contract agreement.

Answer 154

178. c. VENDOR/VENDEE relationship (parties to a contract of sale) is not related to anything regarding TRUST DEEDS or MORTGAGES as the buyer/borrower actually receives a deeded title to the property and the Trust Deed or Mortgage, whichever happens to be used, simply holds the property as security for repayment of the loan debt. Whereas under the terms of the CONTRACT OF SALE the VENDEE merely has the right of possession and use of the property (not a deeded ownership), which is more closely related to a LANDLORD/TENANT RELATIONSHIP. NOTE: If the question asked what the financial relationship was most closely related to, the answer would be a BORROWER/LENDER Relationship.

Answer 155

179. c. ET UX is a Latin term that means "And Wife." Occasionally the term "ET AL" is also asked which means "And Others."

Answer 156

180. a. The first key area in this question is the recording of the Contract of Sale by the Vendee, which if not cleared CLOUDS THE TITLE for later title transfers. The second key area is that the new buyer is to receive a deeded interest, which means that they would want the Contract of Sale interest cleared in order to receive a clear title. The clearing of the recorded Contract of Sale can be accomplished either in or out of court. The out of court procedure is having the Vendee sign a QUIT CLAIM DEED, whereby releasing their contract interest in the property back to the owner (Vendor). Should they not do this, then the court procedure is known as a QUIET TITLE ACTION.

Answer 157

181. c. The answer that best describes the four essentials to create a VALID CONTRACT are more completely described in this answer. (a) could be eliminated as it states "two parties," but doesn't specify that they must be competent. (b) specifies two competent parties, however there can be more than "two parties." Therefore (c) best describes this essential specifying COMPETENT PARTIES. (c) is also a better answer than (d), as (d) specified consideration, and (c) specified a LEGAL CONSIDERATION. THE FOUR ESSENTIALS ARE…Mutual Consent, Consideration (legal), Legal Objective and Competent Parties.

Answer 158

182. a. Relating to the four essentials to create a valid contract. We need…Competent Parties (capacity), Mutual Consent, Legal Objective (lawful Object) and the fourth essential is CONSIDERATION, not Proper Writing.

Answer 159

183. d. An agreement to perform an act that cannot be fully performed within one-year from the date of the making of the agreement MUST BE IN WRITING TO BE ENFORCEABLE in a court of law. Stock (inventory), fixtures and goodwill are personal property and a verbal agreement may be used to employ the agent.

Answer 160

184. c. A minor signing a contract has no competency and therefore would make the contract VOID. However, if the question had shown that it was signed while a minor, but the person is now an adult (18 years of age or older) the contract would be VOIDABLE. A minor who signed a contract has a right to ratify or void the agreement when they obtain their majority age of 18 or older.

Answer 161

185. d. The contract would be signed "Mary Johnson" or it could also have read "Mary Johnson, a married woman" or "Mary Johnson as sole and separate property" depending on whether it is being purchased with community funds or separate money. The indication in the question is that it would be purchased as community property. A spouse buying in their name only indicates (implies) COMMUNITY PROPERTY should there be no indication of separate property. Either spouse can enter into a binding contractual agreement to purchase real property on behalf of the community (property mutually owned by the husband and wife equally). Should the contract be breached the spouse that signed could be sued and a judgment rendered against the community funds of both husband and wife. ADDITIONAL INFORMATION REGARDING COMMUNITY PROPERTY HOLDINGS. A contract could be entered into by either spouse to either BUY or LIST for Sale and would be binding as either spouse has co-management and control of the community property. Either signature then could bind the community funds of both in the event of a judgment as result of a breach of contract regarding listing or buying on behalf of the community. The spouse that signs could be sued, but the judgment rendered against the entire community funds.

Answer 162

186. c. Violation of a CONDITION carries a REMEDY of REVERSION OF TITLE to the GRANTOR who created the condition (or their heirs). Answers (a) and (b) both describe the alternate remedies available to property owners in a development where COVENANTS (promises made) have been violated.

Answer 163

187. c. Although the Executor (named in a will) or Administrator (court appointed) would solicit offers, generally through a real estate broker, the offers must be confirmed by the COURT and the COURT would SET THE BROKER'S COMMISSION.

Answer 164

188. b. As there was no will (intestate) to designate the disposition of the estate, the heirs would be allowed by California Law fiveyears to make their claims to the property. Should no heirs lay their claims within the designated time, the property would eventually ESCHEAT TO THE STATE OF CALIFORNIA.

Answer 165

189. c. ESSENTIALS TO ACQUIRE AN EASEMENT BY PRESCRIPTION: Continual "Use of the Property" for five years, which is: (1) Open and Notorious, (2) Hostile to the true owner (without owner's permission) and (3) Through a Claim of Right or Color of Title. NOTE: If one were attempting to acquire title through ADVERSE POSSESSION payment of property taxes would be additionally needed.

Answer 166

190. a. A judgment by the court which orders the forced sale of property is known as a WRIT OF EXECUTION. (b) An ATTACHMENT holds property for the outcome of a court judgment. (c) An ABSTRACT OF JUDGMENT is a written decision of the court and when recorded in the county where real property is owned would create a lien. (d) A SHERIFF'S DEED is issued to the holder of a CERTIFICATE OF SALE after the one-year redemption period has passed under the terms of the mortgage foreclosure proceeding.

Answer 167

191. b. Trust Deeds, contract commission rights and Sales Contracts may have their rights assigned. However, a deed not being a contract, but a conveyance instrument, is used to convey ownership from a Grantor to a Grantee, is used once only and therefore cannot be assigned.

Answer 168

192. a. The total purpose of a DEED is to CONVEY OWNERSHIP from the Grantor to the Grantee.

Answer 169

193. a. ACKNOWLEDGEMENT is only necessary if the deed is to be recorded. IN WRITING, SIGNED BY THE GRANTOR and a COMPETENT GRANTOR are all essentials elements to create a VALID DEED.

Answer 170

194. b. Recording of a deed simply PRESUMES A DELIVERY has occurred. As example: If a deed were not valid, yet recorded, on the public record, which is quite possible, it would (d) obviously not make it VALID, although recorded. (c) If the deed was not VALID, then it would not transfer the title. And (a), recording of the deed would do nothing more than make the document (deed) a matter of public record. Mere recording of the deed could not guarantee the grantee ownership. A Guarantee of Title or Title Insurance could not provide this type of assurance, as if the title were defective they would only financially compensate the policy holder for their losses.

Answer 171

195. b. A FICTITIOUS PERSON by definition "Does Not Exist." (a) Grantor does not have to sign their real name as they could have a fictitious name…i.e., California School of Real Estate. (c) Misspelling of the grantor's name may cloud the title regarding future transfer, but the conveyance to the grantee would be considered legally valid. (d) Grantee may be described as Mary and John Johnson's oldest living son (properly described, but not named).

Answer 172

196. a. Also identified as a "Land Patent, a "Sovereign Patent," an "Original Patent" or a "Government Patent."

Answer 173

197. a. Even if all requirements of creating a valid deed are met, the act that actually conveys the title is the DELIEVERY OF THE DEED. Recording only gives protection against conflicting claims of deeded ownership's as "FIRST TO RECORD IS FIRST IN RIGHT." The issuance of a TITLE POLICY cannot actually guarantee the title or assure the conveyance is valid, it simply agrees to pay you the losses suffered if the title is not good. A buyer in possession would be incidental if the buyer did not have a properly delivered deed.

Answer 174

198. b. A 'QUIT CLAIM DEED" warrants NOTHING! A Quit Claim Deed is used to transfer, convey, give-up, release and pass-on to another person or entity any right(s) or interest(s) held by the person signing the Quit Claim Deed. It does not warrant that they even have any interest or rights, only that if they do they are giving them up to the person named in the deed to receive them. Answer (c) is incorrect as the grantor is only giving up the rights and interests they hold at the time of signing the Quit Claim Deed. Should they acquire any interests in the property as a result of their previous interest in the propert y at a later date (after acquired title) this would be theirs and not a right passed on through the Quit Claim Deed.

Answer 175

199. c. She should have signed the deed as Mary Jones "a married woman" previously known as "Mary Dorr." This would have prevented the clouding of the title for future transfers.

Answer 176

200. a. The GRANTOR would appear before a Notary Public or other duly authorized party and would in their presence acknowledge (swear to the fact) that the signature that appears on the deed is, in fact, theirs (the grantor's). The authorized party would then sign verifying that the grantor is, in fact, the person(s) they acknowledged themselves to be.

Answer 177

201. d. These are the two implied warranties (legally a part of the deed even though not found printed in the deed itself). (a) appears to be the correct answer, except that it reads there are NO ENCUMBRANCES. The implied warranty is not there are NO ENCUMBRANCES, it is "NO ENCUMBRANCES OTHER THAN THOSE REVEALED," which means if there are encumbrances that would have to be revealed.

Answer 178

201. d. These are the two implied warranties (legally a part of the deed even though not found printed in the deed itself). (a) appears to be the correct answer, except that it reads there are NO ENCUMBRANCES. The implied warranty is not there are NO ENCUMBRANCES, it is "NO ENCUMBRANCES OTHER THAN THOSE REVEALED," which means if there are encumbrances that would have to be revealed.

Answer 179

203. b. Change of flight patterns are an off-site form of obsolescence. Therefore would relate to "Economic Obsolescence."

Answer 180

204. a. QUANTITY SURVEY is the most detailed and difficult method of determining the cost of replacement. However, it happens to be also the most accurate.

Answer 181

205. b. All are methods of determining the cost of replacing improvements at today's costs. They all relate to the "Reproduction Approach (Cost Approach)" to appraising real property.

Answer 182

206. b. DEPRECIATION is the most difficult to determine in older properties. Historic costs are not necessary as the reproduction or cost approach determines the cost to reproduce at today's costs, not what it would have cost in the past to replace. Determining inflation on the land would not relate to this question as it is looking for the cost to replace the structure. Determining replacement cost would be relatively easy to accomplish. It is determining depreciation suffered from the cost new that would pose the major problem.

Answer 183

207. a. A Postal Department, which is government subsidized has a lower risk factor than a hardware store. The LOWER THE RISK the LESSER THE RETURN EXPECTED. The GREATER THE RISK the HIGHER THE RETURN EXPECTED

Answer 184

208. d. "VALUE" also means the "WORTH." COST or PRICE identifies the original amount paid. UTILITY is one of the four essentials that create value (Utility, Scarcity, Demand and Transferability).

Answer 185

209. a. An appraisal is meant to show the maximum or CEILING VALUE of the property being evaluated not the lowest (floor) value. It has nothing to do with other homes in the neighborhood, only the one currently being appraised. And it only indicates the maximum value of this particular property, not the average price of the other properties in the neighborhood.

Answer 186

210. d. This principal of appraisal specifies that one should determine how a major improvement if added to an income property would contribute to its overall value. This obviously should be determined prior to the possible addition of the improvement.

Answer 187

211. b. Steps (a), (c) and (d) then would follow.

Answer 188

212. c. CASH FLOW is calculated by DEDUCTING payments of "PRINCIPAL AND INTEREST" from the NET INCOME. Depreciation is not considered a cash item and therefore not deducted.

Answer 189

213. b. One of the first steps in the Reproduction (cost) Approach is to determine the current value of the land. The value of land is most often determined through means of the Market Data (Comparison Approach) approach to appraising.

Answer 190

214. b. ECONOMIC LIFE - The period of time the improvements used for their present use are Cost Productive to the owner. PHYSICAL LIFE - Ends upon the complete deterioration of the improvements.

Answer 191

215. a. Past performance or experience is least important as we are appraising for the PRESENT WORTH of FUTURE BENEFITS. (b) , ( c ) and (d) are all important factors in determining the value of income producing properties.

Answer 192

216. c. Statement of fact. The Income Approach bases the value of income property on what one is willing to pay today to acquire the property's future benefits.

Answer 193

217. b. One can ask as much for rent as they choose, however, you realistically can only get what the market is currently willing to pay. This can be determined by a Market Comparison of rents from similar properties.

Answer 194

``` 218. a. Loss of the physical life would refer to the total deterioration of the improvements. (b), ( c ) and (d) would all relate to a loss in value (depreciation), which may be great or small. The loss of the physical life would be a complete or total loss ```

Answer 195

219. a. Statement of Fact

Answer 196

220. c. Functional Obsolescence relates to poor or outdated design, style or construction techniques. (a) is an example of Economic Obsolescence. (b) an example of Physical Deterioration. (d) an example of Economic Obsolescence.

Answer 197

221. d. Statement of fact. TRANSFERBILITY is the LEAST IMPORTANT of the four characteristics of value. (a) UTILITY is the MOST IMPORTANT of the four. (c) DEMAND is the characteristic that must be backed or implemented by "Purchasing Power" to be effective.

Answer 198

222. c. ECONOMIC OBSOLESCENCE relating to outside factors causing loss of value, such as a freeway built in back of a residential property are generally out of the personal control of the owner and would be too costly to remedy (INCURABLE). Both DETERIORATION and FUNCTIONAL OBSOLESCENCE are "Inherent (found within the property) and the owner has a substantial amount of control over making changes (if cost effective), which could remedy the causes of depreciation (CURABLE).

Answer 199

223. c. REHABILITATION means to RESTORE property to its original condition. (d) REPLACEMENT is a term used in appraising, meaning to use today's design, style and techniques. (b) RE-MODEL means to "change the architectural design or style. (a) REPRODUCTION means to "Rebuild" the property exactly AS IT WAS, Not changing the design or style.

Answer 200

224. d. Equity in real property does not earn interest. If the property were sold, then the equity could be taken and placed into a loan or savings account where it could earn interest. (a) Land does not DEPRECIATE. (b) AMENITIES "increase" the value of the property. (c) APPRECIATION (Unearned Increment) indicates an increase in value.

Answer 201

225. d. A statement of fact. This is the definition of a COMERCIAL ACRE. It simply describes the useable area of a standard acre of land after the square footage for the areas set aside for public use have been deducted (streets, sidewalks, alleyways, etc.). The alternate answers lead you to believe these words relate somehow to commercially zoned property.

Answer 202

226. a. INDUSTRIAL PRPERTY is evaluated by either the "Acre" or by the "Square Foot." WATERFORNT and COMMERCIAL PROPERTY is valued generally on a FRONT FOOT basis and RESIDENTIAL PROPERTY by the SQUARE FOOT.

Answer 203

227. b. ECONOMIC OBSOLESCENCE (Social Obsolescence) - An outside factor causing a property to lose value.

Answer 204

228. c. The (Comparison of) MARKET DATA APPROACH has proven to be the most accurate means of determining the value of raw land.

Answer 205

229. d. This is the actual definition of EFFECTIVE (adjusted) GROSS INCOME. Deducting from the "Effective Gross" the allowable expenses in operating the property would give us the NET INCOME (used to determine the appraised value in the Income Approach to appraising). Deducting from the Net Income the Loan Payments (Principal and Interest), we arrive at the CASH FLOW.

Answer 206

230. c. Statement of fact. This is a common technique to determine the capitalization rate that is so important to arriving at an appraised value using the Income Approach to appraising. It is not necessary to understand how it works for the State Examination. Just know that "Band of Investment Theory" is a way of arriving at a capitalization rate.

Answer 207

231. a. (Update) New tax laws eliminate age limitations and exempted larger amounts from taxation when selling a personal residence. Personal residences may be sold every two-years and may qualify for a $250,000 exemption against profits if filing single and $500,000 if filing as married. To qualify, must have resided in the residence for a least 2 of the past 5 years prior to the sale.

Answer 208

232. b. Capital improvements added to an income, trade or business property are to be depreciated over the life of the improvement.

Answer 209

233. a. Capital improvements added to a residence are added to the cost basis. However they may be additionally depreciated over their life if they are added instead to properties held for the production of income, trade or business.

Answer 210

234. d. (Update) Newest federal tax laws for long-term capital gains benefits requires a minimum holding period of 12 months before sale. Maximum tax rate was lowered to 20% of the profit.

Answer 211

235. d. Fruit and nut trees can be depreciated as property held for the production of INCOME , TRADE or BUSINESS. Owneroccupied property as indicated in answers (b) and (c) and raw land answer (a) CANNOT BE DEPRECIATED.

Answer 212

236. a. TAX and TAX ASSESSMENT LIENS take PRIORITY over ALL OTHER LIENS (recorded or unrecorded).

Answer 213

237. c. Statement of fact. Prepaid rents are taxable in the year they are received. However, security deposits would not be taxable.

Answer 214

238. c. A commission paid by the seller is considered for income tax purposes to be an expense of the sale and TAX DEDUCTIBLE. Example: Sale price $50,000 Net to Seller $47,000 Commission -3,000 Cost Basis $30,000 Net to Seller $47,000 PROFIT $17,000 (a) and (d) are incorrect as the commission is an expense, NOT AN INCOME. (b) is incorrect as commissions vary in amount based on the mutual agreement of the broker and owner and therefore could not indicate a standard or set deduction.

Answer 215

239. d. A patio is a capital improvement and for tax purposes on a residence it would be added to the cost basis. DEPRECIATION cannot be taken on a residence and therefore would not be used in adjusting the basis (it would be used if this were an income, trade or business property). PREMIUMS ON INSURANCE are a cost of home ownership and have no effect on the cost basis. INTEREST ON THE LOAN is a tax deduction allowed each year, but has no effect on the basis.

Answer 216

240. d. (Update) A residence is eligible for CAPITAL GAINS treatment. LONG-TERM CAPITAL GAINS are available for investment and residential properties held over 12 MONTHS before reselling.

Answer 217

241. a. The MORE YOU EARN, THE MORE YOU PAY. The percentage rates you pay are based on the premise that the greater your income, the higher the tax bracket you would fall into. Each segment of income shown would fall progressively into a higher and higher bracket.

Answer 218

242. b. The TAX ASSESSOR BILL shows an assessors number, not a legal description. (a) a PRELIMINARY TITLE REPORT and (c) a TITLE INSURANCE POLICY would both show a legal description. (d) a DEED usually would show a legal description, but it is not necessary.

Answer 219

243. b. BOOT is the word used in exchanges to describe anything received in the exchange other than equity that is traded in the property. Boot is the taxable part of the exchange

Answer 220

244. a. BOOT as indicated above is considered the TAXABLE part of the exchange.

Answer 221

245. b. SEPTIC TANKS may be unacceptable for use due to health or safety reasons. Items such as ROADS, SIDEWALKS AND STREET LIGHTS are not as important.

Answer 222

246. b. This is the definition of a CONDOMINIUM. The key wording is "Separate Interest in the Unit" as a COMMUNITY APARTMENT PROJECT allows only for use or occupation of the unit.

Answer 223

247. c. Street, sewers, etc. are under the direct control of the local authorities (city or county). The Real Estate Commissioner is interested in assuring the buyer in subdivisions under the Department of Real Estate's control against FRAUD. Therefore requiring that all commonly owned areas such as lakes, country clubs, beaches, swimming pools, golf courses, etc. that the developer has promised would be completed will be completed. The money to insure the completion of these common areas must be either held in trust or a PERFORMANCE BOND posted.

Answer 224

248. d. 5-Units in a Planned Unit Development would be a subdivision not 3 units. (a), (b) and (c) are all considered subdivisions under current subdivision laws.

Answer 225

249. b. Statement of fact (14 Calendar Days). An alternate question regarding Land Projects may be: "How many parcels would be necessary to create a Land Project?" Answer would be 50 or more.

Answer 226

250. b. According to the Subdivided Lands Law (Real Estate Law), all material changes regarding a subdivision approved by the Department of Real Estate must be reported to the Real Estate Commissioner immediately. The SALE or OPTIONING of 5 or more parcels to one purchaser in a subdivision is considered a MATERIAL CHANGE.

Answer 227

251. d. A PRELIMINARY REPORT is issued for a MAXIMUM of 1-YEAR. However, it would terminate should the Final Report be issued within that year or if any material change occurred where a new Preliminary Report would have to be issued to replace the old report

Answer 228

252. b. This action would indicate the creation of either a COMMUNITY APARTMENT PROJECT (CO-OP) or a CONDOMINIUM, depending on whether the sale indicated a 1/5 undivided interest with the right of possession and use of a designated unit (CO-OP) or a 1/5 undivided interest in the common areas with a separate ownership in a designated unit (CONDOMINIUM). In order to divide a property into 5 or more Condominium units, Community Apartment Project units or Stock Cooperative ownership's and to be able to legally transfer the title, a FINAL PUBLIC REPORT from the Department of Real Estate (Subdivided Lands Law) would be necessary after approval from the local authorities (Subdivision Map Act).

Answer 229

253. d. The SUBDIVIDED LANDS ACT (Real Estate Law), which is regulated by the Real Estate Commissioner is predominantly interested in the prevention of FRAUD. Whereas the SUBDIVISION MAP ACT, which is under the control of the local authorities (city and county) deals with physical aspects of subdividing of land. Therefore the Real Estate Commissioner would be most interested in the purchase contract (DEPOSIT RECEIPT) being used where the city or county would be more interested in streets, sidewalks, sewers and easements.

Answer 230

254. b. A DISIST AND REFRAIN ORDER would immediately halt the sale of the property when properly served. The subdivider may then request a hearing by the Department of Real Estate. If the Real Estate Commissioner does not commence a hearing within 30 days of the subdivider's request, then the subdivider has the right to continue the offering of the propert y.

Answer 231

255. b. Upon the Final Subdivision Map being recorded, if the subdivider has dedicated an area(s) through a Dedication Certificate and the dedication has been accepted by the properly authorized official, then the recording of the approved map would be the final step in the Statutory Dedication process.

Answer 232

256. b. As a subdivider generally has several parcels in a development to which they are borrowing money to develop and market, the lender would when financing the development take a BLANKET DEED OF TRUST usually holding all of the parcels as security for their loan. So that the subdivider can sell parcels prior to paying off the entire loan a RELEASE CLAUSE is placed in the Deed of Trust, specifying that upon the payment of a certain amount of money, a parcel or parcels will be released (Partial Deed of Reconveyance issued) free and clear to the subdivider. Without the Release Clause it would be necessary to pay off the entire loan amount, which would release the lien on all the parcels held as security for the loan (Deed of Reconveyance issued.) (a) A SUBORDINATION CLAUSE would be more important to a buyer who wishes to acquire a Construction Loan at a future date. (c) An ALIENATION CLAUSE would be of interest to a borrower or a lender as it calls a loan due and payable upon the transfer of title of the property to which the loan is being held. (d) An OR MORE CLAUSE is of importance to a borrower as it allows them to pay the designated payment "Or More," which means the loan could be paid-off in full at anytime with NO PREPAYMENT PENALTY allowed.

Answer 233

257. c. The SHELLY vs. MANN DECISION in 1943 established that RACE RESTRICTIONS in deeds or incorporated thereto were ILLEGAL and that any such clauses were ruled UNENFORCEABLE, but not for all the restrictions created, only those in violation of this law.

Answer 234

258. b. Should any prospective purchaser enter your office requesting to see a particular property, you would assume they were interested in that particular property.

Answer 235

259. a. Under current laws an injured party may elect to file an action for a remedy with either a State or Federal Court. Discrimination is a "Personal Damage," which is CIVIL not CRIMINAL in nature.

Answer 236

260. a. As stated above, discrimination is Civil, not Criminal. The Department of Real Estate can grant no person a remedy in the event a discriminatory action has occurred. The only recourse the Department would have is to suspend or revoke the license of any currently licensed person should it be proven that they were guilty of discrimination.

Answer 237

261. c. Only the Real Estate Commissioner can institute an action to have a licensee's license suspended or revoked, and then only after a formal hearing has been provided the licensee. (a), (b) and (d) can be accomplished by direct action of the injured party.

Answer 238

262. d. All three parties, the broker, the seller and the neighbor were instrumental in an act of discrimination.

Answer 239

263. a. As discrimination is not a criminal act, we could eliminate answers ( c ) and (d). (b) is incorrect as the remedy available to the injured party is not limited to only an action through a State Court, it could take place through the Federal Courts

Answer 240

264. c. Advising them to do anything would be condoning the attempt at discrimination by the owner. The broker should simply refuse to take the listing.

Answer 241

265. b. This is the only answer which would indicate any reasonable excuse for refusing to show a particular property to a MINORITY or, in that matter, any client!

Answer 242

266. a. This is also the only answer of the four that would be correct as according to the FAIR EMPLOYMENT AND HOUSING ACT (Rumford Act). Recently expanded in scope by the GOVERNMENT CODE, the laws pertaining to discrimination applies to all dwellings (no matter how financed) EXCEPT AN OWNER-OCCUPIED SINGLE FAMILY RESIDENCE regarding a rental being made to one roomer or one boarder who will be sharing the premises with the owner.

Answer 243

267. b. This symbol was created by HOUSING & URBAN DEVELOPMENT and is the EQUAL HOUSING OPPORTUNITY SYMBOL.

Answer 244

268. d. Taxes are PRORATED as of the CLOSE OF ESCROW. The 3-Month period that the seller remains on the property after the close of escrow they (the seller) will probably have to pay rent to the buyer for it's use, but it does not have anything to do with calculating the taxes for the purpose of prorating. The current tax year referred to in the question would be 7/1/76 through 6/30/77, which was paid in full by the seller. Therefore the seller used all of JULY, AUGUST and SEPTEMBER…3 MONTHS. The seller paid for the entire year (12 months) and used only 3 months of the time for which they paid. Therefore the seller is entitled to a prorated CREDIT FOR 9 MONTHS.. another correct answer would be the BUYER WOULD BE DEBITED FOR 9 MONTHS TAXES, however this answer does not appear as one of the choices provided. 7/1/76 10/1/76 6/30/77 *-------------------------*---------------------------------------------------------------* [ Used 3-Months ] [ Unused 9 Months -Credited to Seller ]

Answer 245

269. b. Once funds and documents are placed in Escrow and instructions signed by both parties the Escrow Company CANNOT release them unless having a mutual consent of both parties. (c) is incorrect as the Escrow Company does not have to force the buyer and seller to arbitrate unless the buyer and seller cannot come to an agreement between themselves. Then the Escrow Company can require a Court Order for them to release any documents.

Answer 246

270. c. A REAL ESTATE BROKER may perform an ESCROW in a transaction where they (the broker) are the agent of either the buyer or seller or both parties as long as they have the consent of both parties. The broker is entitled to any compensation the parties agree to pay for this service. The broker however could not solicit escrow business where they are not involved as an agent of one of both parties in the transaction for which they are performing the escrow.

Answer 247

271. d. (a), (b) and (c) all describe a portion of a property manager's duties

Answer 248

272. a. The State Board of Equalization collects the Sales Tax. It is due on the transfer of furniture and fixtures. Stock in Trade and Goodwill transferred are not taxable items.

Answer 249

273. d. The State Board of Equalization is interested in Sales Tax that is collected on their behalf and that is due and payable. They are also interested in Sales Tax due on the sale or transfer of furniture or fixtures.

Answer 250

274. c. This is one of the two requirements under the Bulk Sales Law which is found in the UNIFORM COMMERCIAL CODE. This law was created to protect the CREDITOR'S interest in any unpaid for inventory. According to the law the TRANSFEREE (buyer) must 12 BUSINESS DAYS PRIOR TO THE "BULK TRANSFER" PUBLISH a "Notice of Intention of Bulk Transfer" at least once in a newspaper of general circulation in the county where the transfer is to take place, RECORD the notice at the County Recorder's Office and notify by certified or registered mail the County Tax Collector's Office. ADDITIONAL INFORMATION THAT COULD BE ASKED ABOUT THIS SUBJECT: The Bulk Sales Laws were set-up to protect the CREDITORS not the buyers. The law however requires the BUYER (transferee), not the seller of the merchandise to publish and record the required notices if they want to protect themselves against claims of the seller's creditors. It is not necessary according to the law that the creditors be individually notified as the publication and recording gives constructive notice of the transfer. The publication and recording must indicate the names of the TRANSFEROR (Seller), TRANSFEREE (Buyer) and the address of the business making the bulk transfer and the place and date of the sale. If the proper notifications have not been made, the transfer may be considered fraudulent and give the creditors the right to have the transfer voided. If an auctioneer handles the bulk transfer, they would be charged with the responsibility of the publishing and recording of the constructive notices. Should the proper notifications be made by the auctioneer, the auctioneer would have no liability for any losses suffered by the creditors. Should they not provide proper notification the auctioneer would be personally liable for any losses suffered by the creditors.

Answer 251

275. b. As stated in the above answer, it would be the buyer who would assume the liability if no notice were published or recorded.

Answer 252

276. d. A BILL OF SALE is the receipt (evidences the transfer) that conveys PERSONAL PROPERTY. (a) A CHATTEL MORTGAGE was an instrument that held personal property as security for a loan, which has been replaced by the use of the Security Agreement. (b) A LAND CONTRACT OF SALE is a personal agreement regarding the conditions under which a future transfer of real property may occur. (c) A DEED evidences the conveyance of real property.

Answer 253

277. d. The STATE BOARD OF EQUALIZATION requires both Wholesalers and Retailers to obtain a SELLER'S PERMIT.

Answer 254

278. a. JOISTS are the beams that run horizontal and parallel to each other and which are used to support the FLOOR and CEILING loads. Joists are "beams," not rafters!

Answer 255

279. b. The supports located between the floor and ceiling are known as STUDS. Studs are generally 2-Inches by 4-Inches by 8- Feet in length and are normally located in most construction 16-Inches from the center of one stud to the center of another (16-Inches on center).

Answer 256

280. a. This is just another definition of JOIST. The beams do run horizontally and are parallel to each other.

Answer 257

281. c. The SHEATHING is found nailed to the rafters. This is done to enclose the roof. The shingles are then nailed to the sheathing in order to keep the roof from leaking.

Answer 258

282. b. Statement of fact.

Answer 259

283. d. The use of SHORTER BLOCKS in a subdivision would utilize more land for the development of streets and less of the land for the development of the lots. A better use would be more lots (to sell) and lesser street space.

Answer 260

284. b. The function a BEARING WALL serves in construction is to support the main loads of the floors and ceilings. They are usually the least likely to have doors or windows and their removal without the proper re-supporting could cause structural damage to the property. Therefore, bearing walls should be a prime concern when planning the remodeling of a property.

Answer 261

285. a. The definition shown in a previous edition of the Department of Real Estate Reference Book described ORIENTATION as: Placing a structure on its lot with regard to its exposure to the rays of the sun, prevailing winds, privacy from streets and protection from outside noises.

Answer 262

286. b. This describes a PLOT PLAN - showing a house (improvement) in relation to the lot on which it is located and the lots relationship to the streets, sidewalks and other lots in the area. (a) ORIENTATION - Placement of the improvement on the land (see previous answer). ( c ) PLOTTAGE - An increase in value received as a result of combining several lots into one larger parcel. (d) ELEVATION SHEET - A blueprint (plan) showing outside heights and measurements of the improvements.

Answer 263

287. b. An AFFIRMATION is a verification or declaration that is not sworn to. An AFFIDAVIT is a declaration reduced to writing, which is then sworn to under oath.

Answer 264

288. c. The requirement by the Alcoholic Beverage Control Board is that a PRIVATE CLUB must be in operation at least 2-YEARS prior to a liquor license being issued to them. (a), (b) and (d) are businesses, not private organizations and therefore have no waiting period to establish moral background.

Answer 265

289. b. Both spouses, if married, must make application for a liquor license to the Alcoholic Beverage Control (ABC) not to the State Board of Equalization.

Answer 266

290. c. The original fee for a GENERAL ON-SALE or GENERAL OFF-SALE Liquor License is $6000. These newly issued licenses are acquired through a lottery. The license can only be resold for the original fee paid for the first five years after the original date of issuance. Once the license is 5-years old or older, it can be resold for whatever a person or entity (corporation) is willing to pay for it.

Answer 267

291. c. The process of EMINENT DOMAIN allows a governmental body (could be a city, county, state or federal government) to acquire privately owned property if it is for a use that will "Benefit the General Public." This acquisition is accomplished by negotiating to purchase the property from the owner at a "Fair Market Value." Should the owner refuse to sell, then it can be CONDEMNED under the Eminent Domain process.

Answer 268

292. b. See the explanation in answer 291.

Answer 269

293. b. This is the definition of POLICE POWER. Eminent Domain would refer to the process by which property is taken from private ownership to benefit the general public.

Answer 270

294. c. Statement of fact. Copies of the Structural Pest Control Report are sent by structural pest control companies to the Structural Pest Control Board in Sacramento. The Board must keep copies of these reports for 2 years and they are then of public record and a copy of any report can be acquired by anyone paying the required fee.

Answer 271

295. b. Statement of fact. The primary purpose of insuring oneself is to replace that which is lost, not to GAIN, nor LOSE!

Answer 272

296. b. Should there be a loan needed to acquire the real property, the INTEREST paid for the use of the money would be a cost of home ownership. (a) AMENITIES create value. (c) EQUITY is created through principal build-up and appreciation of value (unearned increment) and is beneficial to the owner. (d) PRINCIPAL is the pay-back on the amount borrowed and is a benefit as it usually then lowers the amount of interest due each month on the loan and brings the loan balance down.

Answer 273

297. d. EQUITY ASSETS such as the purchase of a home tend to increase in value in an inflationary economy and generally at a rate of value growth that exceeds the rate of inflation. (a) SAVING ACCOUNTS tend to offer rates of return below the inflation rates. (b) FIXED INTEREST RATE "GOVERNMENT-BACKED LOANS" also tend to offer undesireable returns as would…(c) LONG-TERM GOVERNMENT BONDS, which normally carry rates lower than that of other investment opportunities.

Answer 274

298. b. Statement of fact.

Answer 275

299. b. ALIENATION is the act of conveying the title of real property to another. The opposite of CONVEYANCE is ACQUISITION.

Answer 276

300. b. (Update) Under current state law the landlord is given up to 21 Days (tape has 14 days, which is old law) to return the entire amount taken or any unused amounts held for cleaning and security deposits along with an itemized list should anything have been deducted. Failure to do so may subject the landlord to a possible penalty and suit for damages suffered by the tenant.