Briefing Exam 6

Question 1

1. The fundamental basis for Fair Housing throughout the United States stems from:

a. the First Amendment of the Constitution
b. the National Association of Fair Housing
c. the 13th Amendment of the Constitution
d. the Rumford Fair Housing Act

Answer 1

c. the 13th Amendment of the Constitution

The constitutionally of all Fair Housing laws is based on the 13th Amendment of the Constitution.

Question 2

2. A seller lists a property with an agent. The agent shows the property to a white prospect at one price and the agent’s broker shows the property to a minority couple at a higher price. The seller then sells the property to a neighbor because the neighbor does not want minorities next door. Who has NOT broken the law?

a. the broker
b. the seller
c. the neighbor
d. the white prospect

Answer 2

d. the white prospect

The broker, and anyone associated with him/her, have broken the law by representing the property of a higher price to the minority couple. The white prospect is the only on who has not broken the law.

Question 3

3. Complaints involving violations of discrimination should be reported to the:

a. Real Estate Commissioner
b. Labor Commission
c. Department of Fair Employment and Housing
d. Department of Housing and Community Development

Answer 3

c. Department of Fair Employment and Housing

Complaints involving violations of the Fair Housing Laws are submitted to the Department of Fair Employment and Housing.

Question 4

4. A broker convinces a white family to put their home up for sale after saying that minority families are moving into the neighborhood. The broker’s actions are all of the following EXCEPT:

a. blockbusting
b. panic selling
c. illegal
d. legal but unethical

Answer 4

d. legal but unethical

Blockbusting or panic selling violate both federal and state fair housing laws as well as real estate licensing law.

Question 5

5. A licensee was farming a non integrated neighborhood which was next to an integrated neighborhood by telling the owners that if minority people moved into their neighborhood, their property values would go down. This is an example of:

a. steering
b. panic peddling
c. blockbusting
d. both b and c

Answer 5

d. both b and c

Blockbusting or panic selling (or panic peddling) violated federal fair housing laws.

Question 6

6. A listing agent received two offers in the morning and immediately presented the offers to the seller. In the evening the agent received two more offers, both with a lower price. What should the agent do?

a. don’t present the evening offers to the seller because the offers were low
b. wait until the seller has made a decision on the morning offers before presenting the evening offers
c. wait until the next day to present the lower evening offers
d. let the seller know of the two new offers immediately

Answer 6

d. let the seller know of the two new offers immediately

Even though it is a temptation to favor the higher offers, it is the listing agent’s fiduciary duty to notify the buyer of the new offers immediately.

Question 7

7. A broker is showing property to a person who is an ethnic minority. The broker decided to show property in a certain area because of his customer’s race. This is an example of:

a. redlining
b. block busting
c. plottage
d. steering

Answer 7

d. steering

Steering is the illegal practice of channeling prospective home purchasers or renters into homogeneous neighborhoods and actively directing them away from neighborhoods of different racial or ethnic composition.

Question 8

8. A loan broker asks a person applying through the broker’s office for a new loan to fill out a questionnaire which asks the borrower’s race and marital status. The applicant can:

a. refuse to disclose his race or marital status
b. file a complaint with the real estate commissioner
c. supply the information requested so his credit history can be properly checked
d. all of the above

Answer 8

a. refuse to disclose his race or marital status

With reference to a loan application, the borrow is not obligated to disclose either race or marital status.

Question 9

9. When an agent is accused of “puffing,” the agent might be guilty of which of the following:

a. trying to convince a potential seller of his wide popularity among local people
b. convincing the appraiser to assign a higher value to the property than is justified by the comparable recent sales in the area
c. exaggerating the features of the property or neighborhood when showing the property to prospective buyers
d. convincing a seller to offer a higher commission than is customary for that type of property

Answer 9

c. exaggerating the features of the property or neighborhood when showing the property to prospective buyers

Puffing is the exaggerating of features of neighborhood or property.

Question 10

10. When a deed contains discriminatory language of clauses:

a. the deed must be rewritten by the owner before the property may be sold
b. the title company must re-write the deed
c. the discriminatory words or clauses are unenforceable
d. the clauses may be enforced, since they would be considered “grandfathered” into law

Answer 10

c. the discriminatory words or clauses are unenforceable

Clauses which were written into deeds or CC&R’s which allow discrimination are unenforceable. There is no requirement that the deeds of CC&R’s must be rewritten.

Question 11

11. A licensed real estate broker who owned a large real estate firm operating under the name ABC Realty Company, listed a property for a total price of $40,000. The broker and many of his salespersons were all principals in an investment company operating under the name of Realty Income Investment Company. The investment company decided to purchase the property so the broker presented an all cash offer to the owner for the full price, but did not disclose to the seller who the purchasers were. The seller accepted the offer and opened escrow. Under these circumstances:

a. the broker’s actions were perfectly legal since he offered the full cash price
b. the broker’s offer would be legal provided he added to the escrow instructions the fact that the purchasing firm was composed of brokers and salesperson
c. the broker acted properly provided he agreed to waive any commission
d. the broker’s actions was improper because he did not reveal the true identity of the purchaser

Answer 11

d. the broker’s actions was improper because he did not reveal the true identity of the purchaser

The broker has a duty to the seller to reveal all material facts. The fact that the buyers are licensed would be considered a material fact, and therefore, must be revealed before the buyer accepts the offer.

Question 12

12. Realtor Ken hired an unlicensed person named Jose to hand out his brochures, fliers, and door hangers in his farm neighborhood. Ken also instructed Jose to go to his health club and hand out printed information. Property owner Mary, who has already listed her home with another broker, received a phone call from Jose talking about a possible meeting with Ken. Jose was using dialogue which was a scripted pitch written by Ken. Mary happened to record the conversation. Which of the following statements is correct?

a. this is perfectly acceptable for the unlicensed person and the broker
b. the unlicensed person is performing acts for which a real estate license is required
c. an unlicensed person may pass out brochures, but under no circumstances, take to a prospective client
d. Realtors agree to work under the Realtor’s Code of Ethics. It is unethical for a Realtor to solicit business from an owner who has a listing with another broker.

Answer 12

d. Realtors agree to work under the Realtor’s Code of Ethics. It is unethical for a Realtor to solicit business from an owner who has a listing with another broker.

The Realtor’s Code of Ethnics considers this to be unethical behavior. One Realtor may not solicit owners who have listed their property with another licensed real estate broker.

Question 13

13. An unlicensed secretary in a real estate office can:

a. quote prices over the phone
b. type listings and sales contracts for salespeople
c. prepare and mail postcards for salespeople
d. all of the above

Answer 13

b. type listings and sales contracts for salespeople

An unlicensed secretary can only take messages and type for agents. The other choices would be considered activity that would require a real estate license.

Question 14

14. An unlicensed assistant puts together information and assists in writing an advertisement for a broker. For this to be legal the broker must:

a. write it himself
b. approve it
c. terminate the assistant immediately
d. proofread it

Answer 14

b. approve it

An unlicensed assistant can gather information and help the broker create ad copy, but the broker must approve it first.

Question 15

15. A sales person tells his broker that he is quitting and plans to go to work for another broker. His present employing broker should:

a. notify the real estate commissioner and hold the license until further notice from the commissioner
b. give the salesperson his license and notify the real estate commissioner immediately in writing
c. request cancellation of the salesperson’s license
d. call the other broker to confirm the change

Answer 15

b. give the salesperson his license and notify the real estate commissioner immediately in writing

The Commissioner’s Regulations state that upon termination of employment of a salesperson, the broker shall immediately return the license certificate to the salesperson and immediately notify the commissioner thereof in writing.

Question 16

16. A salesperson asked the listing broker, who was not his employing broker, to advance him $600 against the commission the listing broker and agreed to pay to the selling agent. The listing broker paid the selling agent the $600 even though the deal had not yet closed escrow. In this situation:

a. the listing broker had violated the Real Estate Law
b. this is permissible if it is in writing
c. this is fraud
d. none of the above

Answer 16

a. the listing broker had violated the Real Estate Law

A salesperson may only collect a commission from his or her employing broker. Likewise a broker may not pay a commission to anyone other than his employed salespeople. “Selling agent” means the broker considers his or he salespeople to be employees or independent contractors.

Question 17

17. After passing the real estate license examination, a person must apply for the license within:

a. one year of the examination
b. one year of notification of passing
c. six months of the examination
d. six months of notification of passing

Answer 17

a. one year of the examination

A person must apply for their license within one year of the examination date.

Question 18

18. When a licensee is employed as an independent contractor, the employing broker may still have to cover the licensee for:

a. unemployment insurance
b. worker’s compensation insurance
c. errors and omissions insurance
d. all of the above are required

Answer 18

b. worker’s compensation insurance

The worker’s compensation law requires all employers to provide insurance coverage for their employees in case of injury on the job. This law may apply to real estate brokers, regardless of whether the broker considers his or her salespeople to be employees or independent contractors.

Question 19

19. What is the maximum amount that could be recovered from the Recovery Fund for one salesperson?

a. $20,000
b. $50,000
c. $100,000
d. $250,000

Answer 19

d. $250,000

The question is asking for the maximum amount that may be recovered for any one salesperson. $50,000 for a single transaction, but $250,000 maximum for any one licensee.

Question 20

20. Buyer Frank sued broker Sam for a misrepresentation in the sale of a single family residence. He was awarded a judgment but Broker Sam was bankrupt and unable to pay the judgment. Buyer Frank appealed to the Real Estate Recovery Account. Assuming the Recovery account agrees to pay Frank, he will receive a maximum of _______ for this single transaction.

a. $20,000
b. $50,000
c. $100,000
d. $250,000

Answer 20

b. $50,000

The Recovery Fund will pay a maximum of $50,000 for a single transaction, but $250,000 maximum for any one licensee. If the broker or salesperson is bankrupt, he/she will not be granted reinstatement until the fund is repaid in full, plus interest at the prevailing legal rate.

Question 21

21. The Commissioner paid from the Recovery Fund for settlement of a claim based upon a judgment against a licensed broker. If the broker is bankrupt, he/she would be required to:

a. pay the fund back in full plus interest
b. make monthly payments
c. pay back only a certain percentage
d. pay back nothing

Answer 21

a. pay the fund back in full plus interest

No broker or salesperson shall be granted reinstatement until he or she has repaid in full, plus interest at the prevailing legal rate, the amount paid from the Recovery Fund.

Question 22

22. When budgeting for a real estate office, the phrase “company dollar” means:

a. the money required to establish an office and run it for a given period of time
b. the income of an office after all expenses are subtracted
c. the income of an office after all commissions are subtracted
d. none of the above

Answer 22

c. the income of an office after all commissions are subtracted

The term “company dollar” is the amount left over after all commissions have been paid out.

Question 23

23. Dividing office overhead by the number of salespersons gives:

a. broker dollar
b. desk costs
c. company dollar
d. overhead

Answer 23

b. desk costs

The term “desk costs” reflect the fact that salespeople do, in fact, make use of support staff, have telephone calls, need desk space, and take up some of the time of colleagues and managers. Overhead is divided by the number of salespersons NOT desks.

Question 24

24. Copies of real estate transaction documents must be kept:

a. by the broker for 4 years
b. by the broker only for 3 years
c. by the broker and salesperson for 3 years
d. by the salesperson only for 3 years

Answer 24

b. by the broker only for 3 years

After the transaction closes, the broker must retain copies of all listings, deposit receipts, cancelled checks, trust records, and other documents for three years.

Question 25

25. A real estate broker’s ad must contain:

a. the name of the broker
b. that the advertiser is a broker or agent
c. the broker’s address
d. both a and b

Answer 25

d. both a and b

This is correct to avoid being classified as a “blind ad.”

Question 26

26. An advance fee is:

a. a listing agents commission
b. a bonus paid to the seller by an agent to obtain a listing
c. a prepaid fee to cover advertising and promotional costs
d. a gift to the listing broker

Answer 26

c. a prepaid fee to cover advertising and promotional costs

An advance fee is any fee paid before any services are rendered. Specifically, it is a practice of some brokers to obtain a non refundable fee from the seller in advance to cover advertising of properties or businesses for sale while giving no guarantee that a buyer will be found.

Question 27

27. All materials used in obtaining advance fee agreements must be submitted to the real estate commissioner at least __________ before they are used.

a. 5 calendar days
b. 10 calendar days
c. 20 calendar days
d. 30 calendar days

Answer 27

b. 10 calendar days

The Real Estate Commissioner requires that any or all materials used in obtaining advance fee agreements, including but no limited to the contract forms, letters or cards used to solicit prospective sellers, and radio and television advertising be submitted to him or her at least 10 calendar days before they are used.

Question 28

28. A landlord and a tenant entered into a two year lease on commercial retail space. Three months into the lease, the tenant realizes he is unable to continue paying the rent and asks the landlord to release him from the lease. The landlord agrees. This would be considered a(n):

a. surrender
b. assignment
c. abandonment
d. default

Answer 28

a. surrender

Surrender occurs when both the landlord and tenant agree to a termination of the lease. There is no financial liability on either the landlord or the tenant.

Question 29

29. It is important for a landlord to obtain all the information on a rental application in order for the landlord to make a decision about renting to a particular person or to more than one person. A landlord thinks it is important to know whether or not a couple is married. Is it legal for the landlord to inquire whether or not a couple is married on the rental application?

a. yes as it may affect the couple’s ability to pay rent
b. yes because this is a moral issue
c. it is legal, but might considered unethical
d. no this would be considered discrimination

Answer 29

d. no this would be considered discrimination

It is considered discrimination to require disclosure of marital status in a rental application.

Question 30

30. A subdivider must give a copy of the Commissioner’s public report to:

a. anyone who intends to purchase one or more lots
b. any person, at any time, upon request
c. only purchasers of lost just before they sign the purchase contract
d. only their salespeople

Answer 30

b. any person, at any time, upon request

All prospective purchasers must be given a copy of the public report and be allowed to read it. A copy of the report must be given to anyone requesting a copy at any time.

Question 31

31. When is the subdivider required to give the public report to prospective purchasers?

a. prior to the sale of the last lot in a subdivision
b. prior to the sale of the first lot in a subdivision
c. prior to advertising the lots for sale
d. prior to approval of the tentative map

Answer 31

b. prior to the sale of the first lot in a subdivision

No sales can be closed or transactions completed until the final public report is received by the prospective purchasers. All persons who make an offer to purchase based on a final public must indicate in writing that they have received and read the applicable report.

Question 32

32. Which of the following must be kept on file by the broker for three years?

a. loan broker statement
b. real property security statement
c. receipt for copy of public report
d. all of these

Answer 32

c. receipt for copy of public report

The broker/subdivider must keep the receipt and make it available for inspection by the commissioner for three years from the date it is signed. Do not confuse the public report, which is good for five years, with the receipt.

Question 33

33. Which of the following statements is TRUE regarding public reports?

a. a public reprot may be renewed under certain circumstances
b. a copy of the public report shut be given to anyone upon request
c. a copy of the public report must be displayed in the subdivision sales office
d. all of the above

Answer 33

d. all of the above

All of the choices are true as to public reports. If all parcels have not been sold within five years of issuance of a final public report, it can be renewed for an additional five years.

Question 34

34. Which of the following events would required the subdivider to notify the Real Estate Commissioner?

a. the subdivider changes lot sizes
b. the subdivider changes provisions in the purchase contract
c. the subdivider changes financing terms
d. all of the above

Answer 34

d. all of the above

Any material change involving the subdivision must be reported to the Real Estate Commissioner. Examples of material changes include physical changes, changes in contracts, or changes in deed restrictions. New ownership of the subdivision would also constitute a material change.

Question 35

35. A subdivider sold five 1 acre lots to Mr. Dalton and optioned five lots to Mr. Bernstein. What course of action does the subdivider have to take as a result of this action?

a. notify the real estate commissioner of a material change
b. nothing, but Mr. Dalton and Mr. Bernstein need to contact the commissioner
c. notify the commissioner of an intent to subdivide
d. report the sale now and report the option when it is exercised by Mr. Bernstein

Answer 35

a. notify the real estate commissioner of a material change

The commissioner’s regulations state that if the owner of any subdivision options or sells five or more parcels to another, such option or sale constitutes a material change and the owner or original subdivider must immediately notify the commissioner.

Question 36

36. A subdivider may use the public report in their advertising as long as:

a. they only use a picture of the report and not its verbiage
b. they only reference certain applicable parts of the report
c. they use the report in its entirety
d. they receive permission to use specific parts of the report

Answer 36

c. they use the report in its entirety

A subdivider may use a public report in their advertising as long as they use it in full.

Question 37

37. A public report is required if a person is going to subdivide a lot for condominiums into:

a. one or more units
b. two or more units
c. four or more units
d. five or more units

Answer 37

d. five or more units

A subdivision (requiring a public report) is the dividing of improved or unimproved land for the purpose of sale, lease, or financing into five or more parcels.

Question 38

38. Which of the following allows a subdivider to enter into binding contracts with purchasers for lots but does not allow transactions to be completed?

a. final public report
b. conditional public report
c. white report
d. negative declaration

Answer 38

b. conditional public report

Because the public report may take months to compile, the subdivider may begin taking reservations for future purchases on the basis of an approved conditional public report (called the “pink report”). No sales can be closed or transactions completed, however, until the final public report (called the “white report”) is received.

Question 39

39. If a subdivision project will have a significant effect on the environment, the government agency that approves the project may be required to prepare a(n):

a. alquist priolo report
b. earthquake fault zone report
c. coastal zone impact report
d. environmental impact report

Answer 39

d. environmental impact report

An Environment Impact Report (EIR), authorized by the California Environmental Quality Act of 1970 (CEQA), may be required before subdivision approval if the project will have a significant effect on the environment.

Question 40

40. A statment issued by the authorizing government agency that there will be no impact on the environment significant enough to warrant preparation of an EIR is called a:

a. negative declaration
b. positive declaration
c. neutral declaration
d. go ahead declaration

Answer 40

a. negative declaration

The authorizing government agency is authorized to issue a negative declaration if it determines that there will be no impact on the environment significant enough to warrant perpetration of an EIR. Be careful, this one is easy to get backwards. Study Aid: Negative declaration = No impact

Question 41

41. The installation of curbs, gutters, streets, and autos in a new subdivision is the responsibility of:

a. the homeowner’s association
b. developer
c. buyers as a group
d. city

Answer 41

b. developer

As a condition of approval, developers must provide plans for installation and/or improvement of curb, gutters, streets, and utilities.

Question 42

42. A developer produces the same house in each of the following locations: 1) A house across the street from a shopping center; 2) A house adjacent to a bus stop on a heavily traveled thoroughfare; 3) A house in the center of the subdivision; 4)A house on a key lot in the subdivision. These various properties could all be purchases for the same price. Which one would you, a knowledgeable real estate licensee, advise a home buyer to purchase?

a. in the center of the subdivision
b. on the key lot
c. across from the shopping center
d. near the bus stop on the heavily traveled street

Answer 42

a. in the center of the subdivision

If a buyer were looking for a home, the most desirable home location would be in the center of the development as it should afford the most pleasant situation for living.

Question 43

43. With regard to the public report, which of the following would be considered a material change in a subdivision?

a. change in lot sizes
b. changes in sales contracts
c. changes in CC&Rs
d. all of these

Answer 43

d. all of these

Examples of material changes include physical changes, changes in contracts, or changes in deed restrictions. New ownership of the subdivision would also constitute a material change.

Question 44

44. When converting an existing residential property to a condominium, existing tenants must be given:

a. 180 days written notice
b. 30 days written notice
c. 12 months notice
d. none of these

Answer 44

a. 180 days written notice

Before approving the conversion of an existing residential property to a condominium, community apartment, or stock cooperative, the local government agency cannot give its approval unless each of the existing tenants is given written notice of the developer’s intention to convert at least 180 days prior to the termination of the tenancy.

Question 45

45. Each tenant of a proposed conversion of their building from residential property to a continuum has the right to:

a. vacate the premises
b. cancel their lease
c. purchase their unit
d. extend their lease

Answer 45

c. purchase their unit

Each tenant of a proposed conversion has an exclusive right to contract for and purchase the unit he/she lives in. The tenant must be offered the same or better terms and conditions that such unit would be initially offered to the general public.

Question 46

46. A blanket encumbrance exists on a large subdivision. The owner negotiates to pay off the loans on certain lots as they are sold. To accomplish this the beneficiary would execute a:

a. partial deed transfer
b. deed of partial reconveyance
c. quitclaim deed
d. subordination agreement

Answer 46

b. deed of partial reconveyance

Under the provisions of a blanket encumbrance, as each individual lot is sold, it is released from the blanket loan, which is correspondingly reduced. The beneficiary (lender) requests the trustee to execute and record a deed of partial reconveyance describing the portion of the property released form the blanket loan.

Question 47

47. In real estate transactions, the type of misrepresentation which occurs least often is:

a. innocent misrepresentation
b. negligent misrepresentation
c. fraudulent misrepresentation
d. malicious misrepresentation

Answer 47

c. fraudulent misrepresentation

Fraud is deliberate. Few brokers try to deliberately commit fraud.

Question 48

48. Generally, a fact concerning a transaction is considered “material” if:

a. the seller elects to disclose the fact prior to consummation of the transaction
b. prior knowledge of the fact would have prevented the other party from entering into the contract
c. all parties to the transaction agree in advance that the fact is important
d. the seller’s agent determines that the fact warrants disclosure

Answer 48

b. prior knowledge of the fact would have prevented the other party from entering into the contract

Material Fact: Generally, a matter is considered material if the other party would not have entered into the contract had he or she known the true facts.

Question 49

49. A broker sells a house advertised “as is.” There are no obvious defects that would be evident to a prudent buyer upon inspection, but the seller and the broker know that the plumbing is very defective. The buyer moves in and discovers the defects. The buyer then sues the broker and the seller for misrepresentation. The suit will probably be:

a. Successful because the seller and the broker withheld material information that should have been disclosed.
b. Successful because an “as is” clause does not relieve a seller or broker from liability for disclosing material facts which they knew of.
c. Unsuccessful because selling the property “as is” gives constructive notice that there are defects.
d. Unsuccessful because the defects would have been revealed if the purchase agreement had contained an inspection clause.

Answer 49

b. Successful because an “as is” clause does not relieve a seller or broker from liability for disclosing material facts which they knew of.

An “as is” clause, by itself, does not relieve a residential property seller or broker from liability for latent detects which they knew of or latent defects which the seller or broker had a duty to inspect for and discover. This is because an “as is” clause, by itself, never bars claims of fraudulent misrepresentation and does not even bar claims of negligent misrepresentation, concealment, or nondisclosure.

Question 50

50. The seller must disclose any material change in the condition of the property, or the tile, that occurs or is discovered by the seller:

a. after close of escrow and within one year of ownership by the new buyer
b. after close of escrow and within a reasonable amount of time thereafter
c. after the contract is executed and prior to the close of escrow
d. none of the preceding

Answer 50

c. after the contract is executed and prior to the close of escrow

The seller must disclose any material change in the condition of the property, or the title, that occurs or is discovered by the seller after the contract is executed and prior to the close of escrow.

Question 51

51. In July, Easton bought Rothchild’s home through the listing broker, McGrew. In November when the first rain came, the tile roof leaked badly in many places. Easton sued Rothchild and McGrew for the cost of the new roof. Testimony in court showed that Rothchild mentioned the need for a new roof for McGrew, but McGrew did not mention it to Easton because “he had not asked about it.” What would most likely occur?

a. Easton would be successful in his suit against Rothchild who would be entitled to recover damages form McGrew
b. Easton could recover from Rothchild, but McGrew is not liable to Rothchild
c. McGrew is laible to Easton, but Rothchild is not
d. Easton is not entitled to recover from either Rothchild or McGrew on the basis of caveat emptor

Answer 51

a. Easton would be successful in his suit against Rothchild who would be entitled to recover damages form McGrew

The principal is responsible for all acts of his agents within the authority of the contract. In this case, Rothchild would be responsible for McGrew’s negligence and Easton would probably be successful in a suit against Rothchild.

Question 52

52. The Real Estate Transfer Disclosure Statement (TDS) provides information regarding the:

a. physical condition of the property
b. properties chain of title
c. agency relationships between the parties to the transaction
d. commission split between real estate agents

Answer 52

a. physical condition of the property

As required by California Civil Code Sections 1102-1102.14, a transferee (buyer) of residential real property is entitled to a statement form the transferor (seller) which provides information regarding the physical condition of the property.

Question 53

53. What is the difference between the Real Estate Disclosure Statement and the Natural Hazard Disclosure Statement?

a. Only the seller is responsible for the TDS but the buyer is responsible for the Natural Hazard Disclosure Statement
b. Only the buyer is responsible for the Natural Hazard Disclosure Statement but the seller is responsible for the TDS.
d. The seller is responsible to check the map and make the natural hazard disclosure if necessary; on the other hand, the seller is responsible to disclose known facts only on the TDS.

Answer 53

d. The seller is responsible to check the map and make the natural hazard disclosure if necessary; on the other hand, the seller is responsible to disclose known facts only on the TDS.

The Natural Hazard Disclosure must be made by the seller if the property is located on a list of parcels of properties located within a special hazard’s area; or a map exists that specifies the property located within a particular hazard zone. This applies whether or not the seller has actual knowledge of that fact. The Real Estate Transfer Disclosure Statement (TDS) is the responsibility of the seller and serves to disclose known facts regarding the physical condition of the property.

Question 54

54. If more than one licensed real estate broker is acting as an agent in a transaction, who is responsible to assure the delivery of the Real Estate Transfer Disclosure Statement (TDS) to the buyer?

a. the broker who represents the seller
b. the broker who has obtained the offer made by the buyer
c. the broker who holds a valid Listing Agreement with the seller
d. the seller is ultimately responsible no matter how many agents are involved

Answer 54

b. the broker who has obtained the offer made by the buyer

If more than one licensed real estate broker is acting as an agent in a transaction, the agent who has obtained the offer made by the buyer (buyer’s agent) is responsible to assure the delivery of the statement to the buyer, unless the seller has given other written instruction for the delivery. If the agent who obtained the offer is other than the listing agent, he/she must also fill out and sign the “Agent’s Inspection” section of the form.

Question 55

55. The Real Estate Transfer Disclosure Statement (TDS) is NOT required when the transfer involves:

a. transfer of a unit in a subdivision when the buyer has been given me a public report
b. a transfer ordered by a probate court in administration of an estate
c. transfer by foreclosure sale after default
d. all of the above

Answer 55

d. all of the above

Certain types of transfers are specifically exempted in Civil Coce 1102.1 They are as follows:

1. Transfers requiring a public report pursuant to 11018.1 of the Business and Professions Code and transfers pursuant to 11010.8 of the Business and Professions Code where no public report is required.
2. Transfers pursuant to court order (such as probate sales, sales by a bankruptcy trustee, etc.).
3. Transfers by foreclosure (including a deed in lieu of foreclosure and a transfer by beneficiary who has acquired the property by foreclosure or deed in lieu of foreclosure).
4. Transfers by a fiduciary in the course of the administration of a decedent’s estate, guardianship, conservatorship, or trust.
5. Transfers from one co-owner to one of more other co-owners.
6. Transfer made to a spouse or to a child, grandchild, parent, grandparent, or other direct ancestor or descendant.
7. Transfers between spouses in connection with a dissolution of marriage or similar proceeding.
8. Transfers by the State Controller pursuant to the Unclaimed Property Law.
9. Transfers or exchanges to or from any government entity.

*It should be noted, however, that a real estate licensee still has a duty to conduct a reasonably competent and diligent visual inspection of accessible areas in almost al of the above situations. In other words, although the seller is exempted from having to provide a disclosure statement in certain situations, a licensee must conduct this inspection, and disclose the results of the inspection, in almost all residential transactions involving one to four units.

Question 56

56. A buyer signs the purchase agreement and the seller accepts. The agent personally delivers acceptance of the offer to the buyer and also drops off the seller’s Transfer Disclosure Statement. How long after receiving the TDS does the buyer have to rescind the contract?

a. 2 days
b. 3 days
c. 5 days
d. 7 days

Answer 56

b. 3 days

Section 1102.3 of the Civil Code says, “If any disclosure, or any material amendment of any disclosure, required to be made by this article, is delivered after the execution of an offer to purchase, the transferee shall have three days after delivery in person or five days after delivery by deposit in the mail, to terminate his or her offer by delivery of a written notice of termination to the transferor or transferor’s agent.”

Question 57

57. In addition to the licensee’s duty to disclose matters know to the licensee, he/she also has the duty to:

a. provide legal advice in situations where there is not time to consult an expert
b. make minor repairs to a property when absolutely necessary
c. conduct a reasonable investigation to discover the true facts regarding the property
d. provide tax advice regarding the transfer of real property

Answer 57

c. conduct a reasonable investigation to discover the true facts regarding the property

In addition to the licensee’s statutory requirement to make certain disclosures to the buyer, both the listing agent and the selling agent have a statutory duty to conduct a reasonably competent and diligent visual inspection and disclose to a prospective purchaser all facts which materially affect the value or desirability of the property that such an investigation would reveal.

Question 58

58. A seller (or seller’s agent) must give the buyer a separate “Natural Hazard Disclosure Statement” if the property lies within thwack of the following specified areas?

a. a special flood hazard area
b. a very high fire hazard severity zone
c. an earthquake fault zone
d. all of the above

Answer 58

d. all of the above

In addition to the usual Transfer Disclosure Statement required by Civil Code Section 1102.6, a seller (or the seller’s agent) must give the prospective buyer a separate “Natural Hazard Disclosure Statement” if the residential property lies within one or more of six statutorily specified areas:

a. A special flood hazard area designated by the Federal Emergency Management Agency
b. An area of potential flooding in the event of a dam failure, designated by the state Office of Emergency Services.
c. A very high fire hazard severity zone designated by the California Department of Forestry and Fire Protection.
d. A wild land fire area that may contain substantial forest fire risks and hazards, designated by the State Board of Forestry.
e. An earthquake fault zone designated by the State Geologist.
f. A seismic hazard zone designated by the State Geologist.

Question 59

59. Seller Smith hires broker Jones to list his home. Neither have actual knowledge that the property is located in a hazardous earthquake, flood, or fire area, and for that reason they decide they will not make the Natural Hazard disclosure. After close of escrow the buyer checks with the county and finds out that a map exists that shows the property located within a particular hazard zone. Which of the following statements is correct?

a. since the seller and seller’s afferent had no actual knowledge that the property was a located in a hazardous area, they cannot be held responsible
b. since the buyer had the opportunity to hire a third party professional to investigate this matter, the seller and seller’s agent would be without fault
c. since there had never been a fire, flood, or earthquake in the area, the buyer has no recourse
d. since the map was available from the county where the property is located, the seller and his agent will be considered to have knowledge of the fact that the property is in a hazardous area

Answer 59

d. since the map was available from the county where the property is located, the seller and his agent will be considered to have knowledge of the fact that the property is in a hazardous area

The Natural Hazard Disclosure must be made if the property is located on list of parcels of properties located within a special hazard’s area; or a map exists that specifies the property located within a particular hazard zone. If this information has been made available to the local jurisdictions where the property is located, and the property is on either the list or map, the sellers and their agents will be considered to have knowledge of the fact that the property is in one of these high sensitivity areas. This applies whether or no they have actual knowledge of the fact.

Question 60

60. What should sellers do when they are uncertain if the property is located within one of the designated natural hazard areas?

a. claim (in writing) that you have no actual knowledge that the property is located in a hazardous area
b. hire a third party professional who specializes in natural hazard disclosures to find out if in fact the property is located within one of the specified hazard zones
c. make a notation in the Real Estate Transfer Disclosure Statement that you have no actual knowledge that the property is located in a hazardous area
d. none of the above

Answer 60

b. hire a third party professional who specializes in natural hazard disclosures to find out if in fact the property is located within one of the specified hazard zones

If the seller (or seller’s agent) is not sure, they should hire a third party professional who specializes in natural hazard disclosures, pay for the cost of obtaining this information, and find out if in fact the property is located within one of the special hazard zones.

Question 61

61. The Alquist Priolo Earthquake Fault Zone Act is concerned with:

a. all buildings in the entire state of California
b. all residential buildings within an earthquake fault zone
c. all buildings within an earthquake fault zone
d. commercial buildings within an earthquake fault zone

Answer 61

b. all residential buildings within an earthquake fault zone

The Alquist Priolo Earthquake Fault Zone Act was passed to prevent buildings constructed for human occupancy from being constructed astride active faults. The State Geologist has identified earthquakes fault zones called “Special Studies Zones.” Any development located within one of these Special Studies Zones (which is not exempt) must have a geologic analysis.

Question 62

62. The seller is required to deliver the Homeowner’s Guide to Earthquake Safety to the buyer of any one to four unity property built prior to:

a. 1953
b. 1960
c. 1968
d. 1975

Answer 62

b. 1960

In addition to the earthquake disclosure requirements contained in Civil Code Section 1102, since 1991, sellers of one to four unit homes built before 1960 must deliver to the buyer, “as soon as practicable before the transfer,” a copy of The Homeowner’s Guide to Earthquake Safety and disclose certain earthquake deficiencies. The booklet contains a reporting form that may be used for this disclosure. The seller’s real estate agent is to provide the seller of such a home with a copy of the booklet for delivery to the buyer.

Question 63

63. Who is responsible for disclosure of a Mello Roos bond against the property?

a. seller
b. seller’s agent
c. buyer’s agent
d. both buyer’s and seller’s agent

Answer 63

a. seller

Based on passage of the Mello Roos Community Facilities Act of 1982, certain housing tracts may be within what are called “community facilities districts” where special taxes are assessed to finance designated public facilities and/or services. Mello Roos liens are usually municipal bonds issued to fund streets, sewers and other infrastructure needs before a housing development is built. The seller of a property consisting of one to four dwelling units or a lease (for more than five years) subject to the lien of a Mello Roos community facilities district must make a good faith effort to obtain from the district a disclosure notice concerning the special tax and give the notice to the prospective buyer.

Question 64

64. The listing agent fails to disclose that the property is in a Mello Roos special tax district when the purchase contract is signed. Realizing his oversight, he delivers the required disclosure to the buyer in person the next day. Which of the following is correct regarding the buyer’s rights?

a. the buyer has a three day right of rescission after receipt of the disclosure
b. the buyer has no right to rescind if they did not specifically ask about the tax
c. the listing agent is protected under the doctrine of “buyer beware”
d. the failure to disclose the Mello Roos tax lien has no bearing on the contract

Answer 64

a. the buyer has a three day right of rescission after receipt of the disclosure

Failure to give notice of a Mello Roos tax before signing of the sales contract permits the buyer or tenant a three day right of rescission after receipt of the notice.

Question 65

65. Which of the following is considered trust funds?

a. cash
b. a check used as a deposit
c. a personal note made payable to the seller
d. all of the above

Answer 65

c. a personal note made payable to the seller
d. all of the above

Trust funds are money or other things of value that are received by a broker or salesperson on behalf of a principal or any other person, and which are held for the benefit of theres in the performance of any act(s) for which a real estate license is required. Trust funds may be cash or non cash items. Some examples are: cash, a check used as a deposit (whether made payable to the broker or to an escrow or title company), a personal note made payable to the seller, or even a pink slip to a car that is given as a deposit.

Question 66

66. A real estate licensee who accepts funds from others in connection with any transaction for which a license is required must place them in:

a. a neutral escrow depository
b. the hands of the offeree or owner
c. a trust account maintained by the licensee
d. any one of the above

Answer 66

d. any one of the above

A real estate licensee who accepts funds from others in connection with any transaction for which a license is required must place them in:

1. a neutral escrow depository
2. in the hands of the offers or owner
3. in a trust account maintained by the licensee

Question 67

67. When a real estate licensee accepts trust funds from his/her client in connection with the purchase of real property, the licensee must place these funds into the proper place:

a. by the next working day following receipt
b. within three business days following receipt
c. by midnight of the current business day
d. by midnight of the third business day following receipt

Answer 67

b. within three business days following receipt

If the broker (or broker’s salesperson) fails to place the funds into one of the three authorized places within three business days following receipt of the funds by the broker or by the broker’s salesperson, he/she is liable for commingling the funds.

Question 68

68.Commingly is one of the greatest single causes for loss of license. Which of the following would NOT be considered commingling?

a. holding an uncashed deposit check after acceptance of an offer when directed to do so by the seller
b. cashing a deposit check (made out to the broker) and placing the money in the broker’s safe, properly identified as being the deposit received from the buyer
c. depositing either cash or a check received as a deposit in the broker’s personal account to be held until called for by the escrow officer
d. depositing money received by his/her client in the broker’s personal account to pay miscellaneous expenses

Answer 68

c. depositing either cash or a check received as a deposit in the broker’s personal account to be held until called for by the escrow officer

An exception to this rule is when a check is received from an offeror in connection with an offer to purchase or lease. In this case, the deposit check may be held uncashed by the broker until acceptance of the offer if the following conditions are met:

1. The check by its terms expressly provides that it is not to be negotiated by the broker, or if the offeror has given written instructions to the broker that the check shall not be deposited or cashed until acceptance of the offer
2. The offeree is informed, before or at the time the offer is presented for acceptance, that the check is being so held.

Question 69

69. A broker may store records in which of the following formats?

a. paper
b. electronic
c. microfiche
d. all of the above

Answer 69

d. all of the above

In California, real estate brokers must hold on to their records for three years. That means all listings, deposit receipts, cancelled checks, trust fund records and other documents executed in connection with any transaction must be kept. Records can be created and kept in electronic format of they can be converted to electronic format for storage purposes.

Question 70

70. When broker Smith accepts a deposit check from a client, he forwards the check directly to escrow. According to trust fund record keeping requirements, which of the following is CORRECT?

a. it is not necessary to keep a record of trust funds received and forwarded to escrow
b. it is not necessary to keep a record of trust funds not deposited into the trust account
c. a record of trust funds received but not deposited to the trust fund bank account must be maintained
d. transaction folders maintained by a broker for each transaction showing the receipt and disposition of undeposited checks are acceptable alternatives to formal records.

Answer 70

c. a record of trust funds received but not deposited to the trust fund bank account must be maintained

Even if trust funds are forwarded directly to escrow, a broker is still required to keep track of funds received and not deposited to a trust fund bank account.

Question 71

71. Which of the following defines the term “reconciliation”?

a. comparing two or more sets of records to determine whether their balances agree
b. periodically emptying an account to obtain a zero balance
c. making sure debits always equal credits
d. checking the chronological sequence of trust fund receipts and disbursements

Answer 71

a. comparing two or more sets of records to determine whether their balances agree

There is an interrelation between the trust fund bank account record, the separate beneficiary or transaction record, and the bank statement. If there is an entry made on one record, there must also be a corresponding entry on the other records. Reconciliation is the process of comporting two or more sets of records to determine whether their balances agree.

Question 72

72. To assure the accuracy of trust fund accounting records, they must be reconciled at least:

a. once a month
b. once every six months
c. once a year
d. once every two years

Answer 72

a. once a month

To assure the accuracy of trust fund records, they must be reconciled at least once a month, usually at the end of each month.

Question 73

73. In an effort to enforce trust fund handling requirements, the Real Estate Commissioner continuously:

a. sponsors lectures on tust fund handling throughout the state
b. audits and examines broker’s trust fund records on a state wide basis
c. calls brokers to keep them up to date on trust fund handling requirements
d. changes the trust fund handling laws to keep brokers on their toes

Answer 73

b. audits and examines broker’s trust fund records on a state wide basis

The Real Estate Commissioner continuously audits and examines broker’s trust fund records on a state wide basis.

Question 74

74. The potential penalties for al licensee’s violation of the laws concerning the handling of trust funds include:

a. injunctions
b. suspension of license
c. revocation of license
d. all of the above

Answer 74

d. all of the above

The potential penalties for a licensee’s violation of the laws concerning the handing of trust funds are diverse and may be very costly in terms of money, reputation, and ability to continue licensed real estate activities. Potential penalties range from possible violations of the Relators Code of Ethics and Professional Conduct, to injunctions, to receivership, to suspension or revocation of the real estate license.

Question 75

75. In the event the commissioner has conducted an audit which reflects commingling or conversion of trust funds in excess of $10,000, the court may:

a. imprison the licensee for not more than thirty days
b. automatically revoke the violators license without a formal hearing
c. restrain the licensee from doing business pending a formal hearing
d. confiscate any and all commissions earned by that licensee during the preceding calendar year

Answer 75

c. restrain the licensee from doing business pending a formal hearing

In the event the commissioner has conducted an audit which reflects commingling or conversion of trust funds in excess of ten thousand dollars ($10,000), the court may enter an order restraining the licensee from doing any act or acts in furtherance thereof, and from further exercising the privileges of his or her license pending further order of the court, provided that a hearing shall be held on the order within five days after the date thereof.

Question 76

76. How much of a broker’s personal funds may be contributed to a client’s trust fund bank account to offset any bank service charges?

a. $25.00, or the amount of charges by the bank
b. $100.00
c. $200.00
d. nothing

Answer 76

c. $200.00

Since banks sometimes have service charges, out of necessity, the broker is allowed to maintain up to $200 of personal funds in a trust account to cover these type of bank charges. Trust funds may not be used to pay for these type of expenses. The better practice is to have the bank charge the broker’s office or general account for the trust account fees and charges.

Question 77

77. A real estate licensee applies for license renewal, but the BRE does a background check and finds out that the licensee is delinquent on his child support payments. Which of the following is correct?

a. his license renewal will be denied until he is no longer in arrears with his child support
b. he will be given a temporary 150 day license, but if he still hasn’t paid his child support in 150 days, his license will be suspended
c. his license renewal will be denied and he will never be able to obtain a license even if he pays his child support obligation in full
d. his license renewal will be denied and the BRE will turn his file over to the District Attorney

Answer 77

b. he will be given a temporary 150 day license, but if he still hasn’t paid his child support in 150 days, his license will be suspended

In accordance with Section 17520 of the Family Code, BRE is precluded form issuing or renewing a full term license if the applicant is on a list of persons (obligors) who have not complied with a court order to provide child support payments. The Department of Child Support Services complies the list from information divided by the District Attorney of each county in California.

BRE will issue a 150 day license to an otherwise qualified applicant who iso n the list of child support obligors. BRE will advise the applicant that the license applied for cannot be issued unless a release is furnished to BRE from the District Attorney’s office during the 150 days.

BRE also receives a supplemental list of obligors who are over four months delinquent in child support payments. BRE compares this list to the total real estate licensee population. If there is a match of an existing licensee and the license is not due for renewal for at least six months, the licensee will be advised that the license will be suspended if the delinquency is not cleared within 150 days. The suspension will remain in effect until the delinquency is cleared.

Question 78

78. Which of the following deals with public access to buildings?

a. Fair Housing Act
b. Americans With Disabilities Act
c. Federal Housing Administration
d. None of the above

Answer 78

b. Americans With Disabilities Act

The Americans With Disabilities Act (ADA) deals with public access to buildings to make sure they are readily accessible to disabled individuals.

Question 79

79. The fees charged for property management are usually:

a. a flat fee and a percentage of gross rents
b. a percentage of net rents
c. flat fee plus expenses
d. flat rate

Answer 79

a. a flat fee and a percentage of gross rents

Property managers can charge a flat fee and/or a percentage of gross rents. Usually when they take over a property, the manager may require the flat fee in order to bring the property up to market.

Question 80

80. In which of the following ways is fraud different from misrepresentation?

a. a misrepresentation is a deliberate to deceive, while fraud is not
b. fraud is a deliberate attempt to deceive, while a misrepresentation is not
c. there is no difference between fraud and misrepresentation
d. a misrepresentation cannot result in discipline and fraud will always involve discipline

Answer 80

b. fraud is a deliberate attempt to deceive, while a misrepresentation is not

Fraud involves a deliberate attempt to deceive; misrepresentation does not. A licensee may be disciplined for either fraud or misrepresentation.

Question 81

81. An estoppel is a:

a. plumbing fixture
b. trade fixture
c. notice to terminate tenancy
d. document confirming tenant’s rights and landlord’s responsibilities

Answer 81

d. document confirming tenant’s rights and landlord’s responsibilities

A purchaser of rental property might have the existing tents execute estoppel statements acknowledging their obligation to pay the proper amount of rent according to the specified terms of their leases.

Question 82

82. In what year did the requirement for disclosure of lead based paint in dwelling units become effective?

a. 1976
b. 1980
c. 1996
d. 2000

Answer 82

c. 1996

Lead based paint laws went into effect in 1996. The law applies to owners, lessors, and real estate licensees. This law requires the owner or lessor of dwelling units built before 1978 to provide the buyer or lessee with the federal booklet entitled “Protect Your Family From Lead in Your Home.”

Question 83

83. A broker has a management contract on an apartment building complex. He collects rents and deposits them in his trust fund bank account. He also acts as a broker on other transactions and puts buyer deposits in the same trust fund bank account. Which of the following is correct regarding this practice?

a. it is legal as long as he keeps records of beneficiary transactions
b. it is legal as long as he is bonded for the maximum amount the trust fund bank account
c. it is legal as long as he does not deposit more than $30,000
d. this is never legal

Answer 83

a. it is legal as long as he keeps records of beneficiary transactions

A real estate broker may operate a property management company and a real estate sales office with his or her broker license. Client’s trust funds from both activities may be placed in one trust account. It is not necessary for the broker to maintain separate trust accounts for each activity.

Question 84

84. A broker owns many rental properties. He is selling one of the properties and the buyer gives him a check as a deposit. He should:

a. place the deposit check and all rents in his trust account
b. open a separate trust account for rents and put the deposit check in his old trust account
c. have two separate trust accounts
d. not deposit either the rents or the deposit check in his trust account

Answer 84

d. not deposit either the rents or the deposit check in his trust account

The rents and the deposit are personal funds of the broker. Remember, the deposit belongs to the seller and in this case the seller is the broker. Rents only belong in a trust account when the property does not belong to the broker and the broker is managing the property for an owner.

Question 85

85. A broker wanted to operate a real estate office under the fictitious name MLB Realty. Before operating under a fictitious name, the broker must:

a. publish the fictitious name in a newspaper of general circulation
b. file under the Secretary of State
c. obtain a DRE license bearing the fictitious business name
d. file with the city as fictitious business

Answer 85

c. obtain a DRE license bearing the fictitious business name

Although the other choices may be steps in obtaining a fictitious business name, the broker may not do business under a fictitious name until he/she has a DRE license issued in the fictitious name.

Question 86

86. A flood hazard exists when an area floods:

a. once a year
b. once in five years
c. more than twice in ten years
d. more than three times in ten years

Answer 86

c. more than twice in ten years

A flood hazard is an area which floods more than twice in ten years.

Question 87

87. According to California Real Estate Law, an unlicensed person may be paid a finder’s fee:

a. as long as it is disclosed
b. at the conclusion of escrow
c. when it is given just to influence someone to do something
d. never

Answer 87

c. when it is given just to influence someone to do something

A finder’s fee is allowed to be paid to an unlicensed person to influence them to do something - for example: to refer potential sellers or buyers to a real estate broker. The broker may pay an unlicensed person to perform an act which would require a license.

Question 88

88. Which of the following is NOT included in Phase 1 of an Environmental Report?

a. soil analysis
b. interview neighbors
c. aerial photos
d. drainage patterns

Answer 88

a. soil analysis

The correct term is Environmental Sit Assessment (ESA). In the United States, an environmental sit assessment is a report which identifies potential or existing environmental contamination liabilities. The actual sampling of soil, air, groundwater, and/or building materials is typically NOT conducted during a Phase 1 ESA.