Briefing Exam 7

Question 1

1. Which of following lists the essential elements of an enforceable contract?

a. acceptance, consideration, performance, lawful object
b. lawful object, competency, mutual consent, consideration
c. tender, consideration, deposit performance
d. execution, consideration, mutuality, competence

Answer 1

b. lawful object, competency, mutual consent, consideration

There are four essential to all contracts: (1) a lawful object; (2) Competency: parties capable of contracting; (3) Mutual consent: Their consent which includes the offer and acceptance; and (4) Consideration: A sufficient consideration. A fifth requirements exists for real estate contracts - “in writing.”

Question 2

2. Which of the following describes “mutual consent”?

a. offer and acceptance
b. tender
c. counter offer
d. none of these

Answer 2

a. offer and acceptance

Mutual consent means a meeting of the minds, usually in the form of an offer and acceptance.

Question 3

3. Failure to perform any of the terms or conditions of a contract is called:

a. breach
b. novation
c. break
d. addendum

Answer 3

a. breach

Breach of contract is the violation of the terms or conditions of a contract without legal excuse. The non breaching party can usually seek one of three alternative remedies upon a material breach of the contract: rescission of the contract, action of money damages, or an action for specific performance.

Question 4

4. Which of the following is NOT essential to all contracts?

a. in writing
b. mutual consent
c. capable parties
d. none of these

Answer 4

a. in writing

Only real estate contracts are required to be in writing.

Question 5

5. Which of the following is NOT essential to a contract?

a. offer
b. acceptance
c. consideration
d. performance

Answer 5

d. performance

You can still have a valid contract without performance.

Question 6

6. To have a valid contract, all but one of the following would be necessary:

a. paid compensation
b. lawful object
c. competent parties
d. a deed

Answer 6

d. a deed

A deed transfers title to property and thereafter evidences ownership. It is not a part of the contract nor is it necessary to complete a transaction unless made a part thereof. Paid compensation is just another way of saying “consideration”.

Question 7

7. A contract based on am illegal consideration is:

a. valid
b. void
c. legal
d. enforceable

Answer 7

b. void

A contract must be legal in its formation and operation. Both its consideration and its object must be lawful.

Question 8

8. Consideration may be:

a. money
b. work
c. a promise
d. all of these

Answer 8

d. all of these

A consideration is the inducement to a contract. It is the cause, motive, or compelling influence which induces a contracting party to enter into a contract. Consideration means something of value in the eye of the law and considered as such by both parties. It may be money, services, or a promise, and consists of either a benefit to the promisee, or a loss or detriment to the promisor.

Question 9

9. A 17 year old unemancipated minor enters into a contract to sell real property. The contract is:

a. enforceable
b. valid
c. illegal
d. unenforceable

Answer 9

d. unenforceable

An unemancipated minor is incapable of entering into a contract to sell a real property.

Question 10

10. A 17 year old girl inherits a parcel of vacant land form her uncle. While still a minor, she deeds the land to her church, which promptly builds on it. When she turns 18, she decides she wants the land back. In this case she:

a. cannot get it back under any circumstances
b. must buy it back
c. can get the land back
d. all of the above

Answer 10

c. can get the land back

Most contracts, except those for necessities such as food and clothing, entered into by a minor are generally voidable at the minor’s option. The minor must disaffirm the contract within a reasonable time after attaining legal age. If the minor does not disaffirm the contract within a reasonable time, it becomes fully enforceable. A minor may receive realty by gift or inheritance.

Question 11

11. Seller Smith sold a home to buyer Jones under contract. Shortly before close of escrow, it was judicially determined that Jones was incompetent prior to entering into the contract with Smith. The contract between Smith and Jones is:

a. unenforceable
b. enforceable
c. void
d. voidable

Answer 11

c. void

If Jones was legally incompetent before entering into the contract with Smith, the contract was void at its inception.

Question 12

12. You enter into a contract with a person not knowing he was judicially declared incompetent. The incompetence of one of the parties to this agreement would make the contract:

a. void
b. voidable
c. enforceable
d. valid

Answer 12

a. void

Since one of the parties to the agreement was incompetent, the contract is void.

Question 13

13. A contract signed under duress is:

a. void
b. voidable
c. illegal
d. enforceable

Answer 13

b. voidable

Duress is a threat whereby a person is forced to do some act against his or her will. The person who was forced to perform under a threat has the right to void the agreement or let it stand. A voidable contract is one that appears valid and enforceable on its face but is subject to rescission by one of the parties who acted under a disability.

Question 14

14. What is it called when one person is substituted for another in a contract?

a. redaction
b. novation
c. subordination
d. hypothecation

Answer 14

b. novation

The most general definition of novation is the substitution of a new obligation for an old one. It also means substitution of new parties to an existing obligation, as when the parties to an agreement accept a new debtor in place of an old one. For example, in the assumption of a loan, the lender amy release the seller and substitute the buyer as the party primarily liable for the mortgage debt.

Question 15

15. The Statute of Frauds outlines what contracts must b in writing to be enforceable though court action. Which of the following contracts would be enforceable?

a. a verbal lease for one year or less
b. a verbal listing to secure a loan of $1,500
c. an exclusive listing taken orally by a broker to sell a single family residence
d. an oral agreement to pay a broker a commission for the negotiation of an exchange of two businesses

Answer 15

a. a verbal lease for one year or less

The Statute of Frauds is state law that requires certain contracts to be in writing and signed by the party to be charged (or held) to the agreement in order to be legally enforceable. The Statue of Frauds generally require that all contracts for the sale of land or any interest herein be in writing. Oral leases for a period not exceeding one year, however, are generally valid and enforceable.

Question 16

16. A tenant verbally agrees a house for six months. The following month, the tenant notifies the owner that he has found a more desirable unit and will be moving out. The contract is:

a. void
b. invalid since it was not in writing
c. enforceable
d. unenforceable

Answer 16

c. enforceable

Oral leases for a period not exceeding one year, however, are generally valid and enforceable.

Question 17

17. All of the following would be required to be in writing EXCEPT:

a. sale of a vacant lot
b. sale of a personal residence
c. sale of a condominium
d. none of these

Answer 17

d. none of these

The Statute of Frauds generally requires that all contracts for the sale of land or any interest herein be in writing.

Question 18

18. The word “laches” most nearly pertains to:

a. doors and other swinging items
b. failure to do something
c. doing something within a prescribed time
d. failure to do something within a prescribed time

Answer 18

d. failure to do something within a prescribed time

Laches means failing to do something which should have been done, or to file a claim, or to enforce a right, within a prescribed time. The Statute of Limitations outlines actions that can be brought within a certain time frame.

Question 19

19. A listing agreement is:

a. a promise for a promise
b. a bilateral contract
c. an employment contract
d. all of these

Answer 19

d. all of these

A listing agreement is an employment agreement between an owner of property and the real estate broker authorizing the broker to find a buyer for the property. They are also bilateral contacts in that the seller promises to pay the broker a commission when the property sells and the broker promises to make reasonable efforts to obtain a purchaser.

Question 20

20. An agent acquired a listing for house and orally promised to hold an open house every week until the house was sold. The agent failed to hold them as promised. This is an example of:

a. illusory fraud
b. constructive fraud
c. actual fraud
d. deliberate fraud

Answer 20

b. constructive fraud

Constructive fraud is a breach of duty, as by a person in a fiduciary capacity, without an actual fraudulent intent. Actual fraud is an act intended to deceive another, e.g., making a false statement or false promise without intending to perform it.

Question 21

21. If the owner enters into an exclusive agency listing and thereafter sells the property though his own efforts:

a. no commission is payable
b. the broker is entitled to 50 percent of his commission
c. the broker is entitled to his full commission
d. none of the above

Answer 21

a. no commission is payable

Under an Exclusive Agency Listing, the seller may sell the property himself or herself and not pay anyone a commission.

Question 22

22. Under an exclusive agency listing, a broker advertises a home for sale. The owner sells the home prior to the expiration of the listing. The broker is entitled to:

a. noting
b. the full commission
c. half of the commission
d. expenses only

Answer 22

a. noting

Since the listing was an Exclusive Agency Listing, the seller may be sell the property himself or herself.

Question 23

23. All of the following listings require that the broker be the “procuring cause” of the sale if he/she is to be entitled to a commission, EXCEPT:

a. exclusive listing
b. open listing
c. exclusive right to sell listing
d. none of these

Answer 23

c. exclusive right to sell listing

Under an Exclusive Authorization and Right to Sell Listing, the listing broker is entitled to a commission if the property sells through the efforts of the broker or any other person. The broker is not required to produce a buyer or be the procuring cause to be entitled to a commission.

Question 24

24. A borker secured a buyer for his principal and the seller accepted the offer presented through the broker. Under which type of listing would the broker not receive a commission form the principal?

a. net listing
b. open listing
c. exclusive listing
d. exclusive authorization and right to sell listing

Answer 24

a. net listing

A Net Listing is an employment contract in which the broker receives as commission all excess monies over and above the minimum sales price agreed on by broker and seller.

Question 25

25. Which of the following accurately describes a listing agreement which allows the broker to either find a prospective buyer, or purchase the home himself/herself?

a. exclusive authorization and right to sell
b. open listing
c. net listing
d. option listing

Answer 25

d. option listing

An Option Listing is listing in which the broker also retains an option to purchase the property for the broker’s own account.

Question 26

26. A broker has listed Mr. Applegate’s property under a net listing. He also has an option to purchase the property within 30 days. If after 27 days the broker decides to buy the property, he must:

a. disclose all material facts known to him and to the seller
b. inform the seller of any additional offers on the property
c. disclose any profit he might make
d. all of the above

Answer 26

d. all of the above

If a broker employed to sell property is also given an option to purchase the property himself, he occupies the dual status of agent and purchaser and he is not entitled to exercise his option except by divesting himself of his obligation as agent by making a full disclosure of all material facts know to him. The broker must also inform the principal of the amount of profit the broker will make, and obtain written consent form the principal approving the amount of such profit before the broker may exercise the option.

Question 27

27. A broker has a combination of a listing and an option. She exercises the option without disclosing that she already has a buyer at a higher price. The broker:

a. is guilty of fraud
b. has made a secret profit
c. created an illegal dual agency
d. has done nothing wrong

Answer 27

b. has made a secret profit

Secret profit refers to a broker making an undisclosed profit at the seller’s expense. Brokers cannot conceal offers form buyers until after they have exercised the option. Full and fair disclosure must be given to the seller.

Question 28

28. Mr. Seller signs an open listing on his home with five different brokers. In this case,:

a. each broker has an opportunity to earn the entire commission
b. the brokers will split the commission five ways regardless of who sells it
c. the owner must pay a full commission to al five brokers when it sells
d. the owner must pay the first broker to take the listing no matter who sells it

Answer 28

a. each broker has an opportunity to earn the entire commission

An open listing is one given to any number of brokers who can work simultaneously to sell the owner’s property. The first broker to secure a buyer who is ready, willing and able to purchase at the terms of the listing earns the commission.

Question 29

29. A “safety clause” is found in a:

a. deposit receipt
b. loan broker’s statement
c. lease
d. listing agreement

Answer 29

d. listing agreement

A “safety clause” is a clause found in the listing contract that provides payment of a commission to the listing broker should the seller sell the property after the listing expires.

Question 30

30. On the last say of a 90 exclusive listing, broker Jones submits a list of names of people with whom he negotiated to the seller. Broker Jones accidentally left out Adam’s name. One week later, the owner sells to Adams. Which of the following is correct?

a. Adams is liable for the full commission
b. The owner is liable for the full commission
c. The owner is liable for half of the full commission
d. The owner is not liable for any commission

Answer 30

d. The owner is not liable for any commission

A safety clause in a listing requires the broker to submit the names of all prospective buyers with whom he/she negotiated prior to the expiration of the listing.

Question 31

31. Thinking that he is acting property regarding the safety clause in a listing, a broker notifies the owner verbally of a prospective buyer with whom he negotiated. The day after the listing expires, the buyer purchases the property. Which of the following is correct?

a. the broker is entitled to a commission
b. the broker is entitled to one half of the commission
c. the matter would need to go to board arbitration to be resolved
d. the broker is not entitled to any commission

Answer 31

d. the broker is not entitled to any commission

A safety clause in a listing requires the broker to submit the names of all prospective buyers with whom he/she negotiated, in writing.

Question 32

32. A verbal agreement between two brokers to split a commission is:

a. enforceable
b. void under the Statute of Frauds
c. unenforceable
d. voidable

Answer 32

a. enforceable

A verbal agreement between two brokers to split a commission is enforceable and is one of the exceptions to the Statute of Frauds.

Question 33

33. 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 33

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 offer immediately

Question 34

34. Broker Williamsburg obtained an exclusive authorization and right to sell listing from the owner of a residence. During the listing period, Williamsburg found a buyer who made an offer on the property which was accepted. Neither the offer nor the escrow instructions made any mention of Williamsburg being the agent or the payment of a commission. Under these circumstances:

a. Williamsburg will have no legal right to enforce commission collection
b. Williamsburg is legally entitled to a commission
c. Williamsburg must prove he was the “procuring cause” in order to collect the commission
d. Williamsburg is subject to disciplinary action by the commission for negligence

Answer 34

b. Williamsburg is legally entitled to a commission

Williamsburg has earned his commission because the terms of the listing contract with the seller have been met.

Question 35

35. An exclusive authorization and right to sell listing is given to Steve R. Stone (DBA: Steve R. Stone Realty). If Steve R. Stone dies prior to the sale of the property, the listing:

a. passes to Mrs. Stone provided she is a licensed real estate broker
b. terminates
c. passes to Steve R. Stone’s heirs
d. is retained by the brokerage company

Answer 35

b. terminates

Death of either the seller or the broker automatically terminates an exclusive right to sell listing. This will created problems for the deceased’s wife, but the contract as it stands is finished.

Question 36

36. To whom does a listing being?

a. listing agent
b. broker
c. broker and agent
d. seller

Answer 36

b. broker

This is true even though the listing was prepared by a salesperson. If the salesperson transferred his/her license to another broker, the listing would stay with the listing broker.

Question 37

37. A broker is going to take a listing on a church that is owned by an incorporated association. In order to determine who has the proper authority to sign documents and represent the group, the borer should do which of the following:

a. contact the head of the group who originally built the building
b. check the county recorder’s records
c. check the carter or bylaws of the group
d. contact the group members and arrange to have a meeting of the majority for a vote

Answer 37

c. check the carter or bylaws of the group

Both incorporated and incorporated associations are governed by bylaws or charges. The president of a corporation, by virtue of his or her office, does not have authority to act for the organization. The minister of a church does not have authority unless conferred by the bylaws.

Question 38

38. Owner Jones gives Smith a 90 day exclusive listing. One week later, Jones notifies broker Smith in writing that he is terminating the listing. The next day, owner Jones signs an open listing with broker King. Broker King quickly brings in an offer which owner Jones accepts. As to the commission, which of the following is true?

a. broker Smith is not entitled to a commission since the listing was terminated
b. Jones cannot enter into an open listing which is concurrent with another listing
c. owner Jones is liable to both Smith and King
d. King is entitled to a commission

Answer 38

c. owner Jones is liable to both Smith and King

Assuming nothing else than the information given, it appears that the listing was incorrectly terminated. Owner Jones is liable to both workers.

Question 39

39. A broker has shown a property which he has authorization to sell under an open listing. After showing the property, he should:

a. write a memo to his office
b. introduce the parties
c. phone the seller and notify him of the buyer’s name
d. write a memo to the seller saying that he has shown the property

Answer 39

d. write a memo to the seller saying that he has shown the property

Most listings contain a safety clause which entitles the agent to a commission should a sale be made to a person with whom the agent has negotiated. All safety clauses in listings require the broker to inform the seller, in writing, of the parties with whom he/she has been dealing (i.e., shown the property to) in order to later assert his/her rights for a commission on the grounds that he/she was the procuring cause.

Question 40

40. With an exclusive listing, a broker may be subject to disciplinary action for:

a. failing to give accurate tax advice
b. failing to give a copy to the seller
c. failing to include a definite termination date
d. both (b) and (c)

Answer 40

d. both (b) and (c)

An exclusive listing must include a definite termination date. The broker must also provide a copy of the listing to the owner.

Question 41

41. A broker listed an owner’s home and later received an offer from another licensee that met all of the listing terms and conditions. After considering the offer, the owner informed the broker that the owner no longer wished to sell, and asked to be released from the listing agreement immediately. Which of the following is a TRUE statement about the broker’s position in this situation?

a. the broker must release the owner without obligation
b. the broker must tell the owner that the offeror may sue for specific performance
c. the broker may succeed in collecting an earned commission from the owner
d. the broker may keep the earnest money that accompanied the offer as liquidated damages

Answer 41

c. the broker may succeed in collecting an earned commission from the owner

The owner may terminate the listing contract prior to its expiration, but he/she may still be liable to the broker for a commission. The buyer (offeror) cannot sue for specific performance because the offer was not accepted. The earnest money deposit would have to be returned to the buyer (offeror).

Question 42

42. Broker Jones takes an exclusive listing on a property owned by three different people. Broker Jones takes the listing contract to each of their places of business to get it signed. Broker Jones must:

a. give a copy to the first owner who sings only
b. give a copy to each owner when he/she signs
c. give one copy to any of the three owners
d. get them together in one place to sign at the same time

Answer 42

b. give a copy to each owner when he/she signs

When there are multiple owners, the broker is required to provide a copy of the listing contract to each owner when they sign.

Question 43

43. Mr. Owner enters into an exclusive listing with Broker X. One week later, Broker X brings in a full price offer, but Mr. Owner refuses the offer. Seeking an action of Specific Performance would be an option for:

a. the buyer
b. the broker
c. both the buyer and the broker
d. neither the buyer nor the broker

Answer 43

d. neither the buyer nor the broker

Specific performance is an action brought in a court of equity in special cases to compel a party to carry out the terms of a contract. There never was a contract between the buyer and seller since the offer was refused. Specific performance is not used to specifically enforce a contract to perform personal services, such as a broker’s agreement to find a buyer.

Question 44

44. The broker’s promise to use the diligence in finding a buyer:

a. makes the listing a unilateral contract
b. makes the listing voidable by the owner
c. makes the listing a bilateral contract
d. none of these

Answer 44

c. makes the listing a bilateral contract

A bilateral contract is a contract in which each party promises to perform an act in exchange for the other party’s promise to perform. An exclusive listing is an example of a bilateral contract, with the broker agreeing to use his or her best efforts (diligence) to locate a ready, willing and able buyer, and the seller promising to pay the broker a commission if the property is sold.

Question 45

45. A listing that does not require a booker to use diligence in obtaining a purchaser is:

a. void
b. illegal
c. a bilateral contract
d. not an exclusive listing

Answer 45

d. not an exclusive listing

An exclusive listing is an agreement in which the seller agrees to appoint only one broker to sell the property. For this reason, it must include a promise by the broker to use diligence.

Question 46

46. One week after entering into an exclusive authorization and right to sell listing, the owner dies. His designated administrator decides not to sell the property. In this case,:

a. the administrator must sell for the full 90 day listing period
b. the owner’s estate will be liable for the commission
c. the owner’s heirs will be liable for the commission
d. the owner’s death terminated the listing contract

Answer 46

d. the owner’s death terminated the listing contract

Death of either the seller or the broker automatically terminates an exclusive right to sell listing.

Question 47

47. A broker accepts an exclusive authorization and right to sell listing from a corporation. During the listing term, all of the officers of the corporation die. In this case,:

a. the listing is automatically terminated
b. the listing remains in full effect
c. the listing must be acknowledged by the newly appointed officers
d. the listing must be signed by the corporation’s board of directors

Answer 47

b. the listing remains in full effect

One of the main characteristics of a corporation is its perpetual existence (that is, corporations never die and only cease to exist when the property is dissolved).

Question 48

48. An exclusive authorization and right to sell listing has an expiration date of noon on September 5th. At 1 P.M. on September 5th, the owner signed a new listing with Larry, another broker. At 2 P.M., on September 5th, Sally, the original listing broker, presents a full price offer. In this case,:

a. Sally is entitled to a commission
b. Sally has acted illegally
c. Larry is entitled to a commission
d. none of these

Answer 48

c. Larry is entitled to a commission

Technically speaking, Larry is entitled to the commission, however, many other facts may come into play. Safety clause provisions may apply if Sally documented previous negotiations with this buyer. It is likely that the commission would be split between Larry and Sally.

Question 49

49. A parcel of vacant land is lister for $100,000, requiring 20% down, with the seller to carry back the balance. The broker brings in a full price cash offer, but the owner refuses. The broker is entitled to:

a. half of the commission
b. the full commission
c. a commission as a percent of the down payment
d. nothing

Answer 49

c. a commission as a percent of the down payment

Since the offer does not meet the exact terms of the listing, the broker is not entitled to any commission.

Question 50

50. A broker brought in an offer but the listing agreement did not include an authorization to accept a deposit. Which of the following is correct?

a. the authorization is implied
b. the broker cannot accept the deposit
c. if the broker accepts the deposit, he/she would do so as the agent of the buyer
d. none of the above

Answer 50

c. if the broker accepts the deposit, he/she would do so as the agent of the buyer

If the scope of authority of a real estate broker is limited to just producing a buyer, the broker does not have the authority to collect a deposit on behalf of the seller. When an agent does collect a deposit in this case, the agent is acting as agent for the bury (offeror) and not the seller.

Question 51

51. An exclusive listing contains a provision for termination upon the owner giving the broker 24 hours notice.

a. this provision has no effect
b. this provision makes the contract void at its inception
c. this is proper as long as it states 24 hours or more
d. the broker may be subject to disciplinary action

Answer 51

d. the broker may be subject to disciplinary action

Failure to include a specific termination date (12 noon on December 31st) in an exclusive listing can result in suspension or revocation of the broker’s license.

Question 52

52. An exclusive agency listing between a broker and owner incorrectly states 6 dollars rather than 6 percent as the commission payable to the broker if he produces a buyer. If the owner sells the property himself, the broker is entitled to:

a. 6 percent regardless of the mistake
b. an amount to be determined in arbitration
c. 6 dollars
d. nothing

Answer 52

d. nothing

Look out! Since this an exclusive agency listing, the owner may sell the property himself/herself without being liable for a commission.

Question 53

53. During the term of an exclusive authorization and right to sell listing, the broker has his license revoked by the Bureau of Real Estate. To prove that he is entitled to a commission, he must prove all of the following EXCEPT:

a. he was licensed at the time the commission was earned
b. the buyer and seller agreed to the sale during the listing term
c. the broker was the procuring cause of the sale
d. the listing was a legally binding agreement

Answer 53

c. the broker was the procuring cause of the sale

Here is another question that provides lots of irrelevant information. Under an exclusive authorization and right to sell listing, the broker is entitled to a commission regardless of who sells the property.

Question 54

54. A buyer has entered into an agreement with more than one buyer’s agent at the same time but owes compensation only if she uses the services of a buyer’s broker. This arrangement is know as a(n):

a. multiple listing agreement
b. exclusive right agreement
c. exclusive agency agreement
d. open agreement

Answer 54

d. open agreement

The buyer agency open agreement is similar to an open listing seller agreement.

Question 55

55. Select the choice which most nearly represents “price fixing” form the following:

a. a borker instructing his employees not to accept listings for less than a 6% commission
b. a broker casually mentioning, during a luncheon with several other brokers from other offices, that his office is planning to decrease the minimum office commission from 6% to 5%
c. at the request of a cooperating agent, the listing broker tells the cooperating agent the amount of compensation on an exclusive right to sell listing taken by one of his salesperson
d. advertising the amount of commission your office charges

Answer 55

b. a broker casually mentioning, during a luncheon with several other brokers from other offices, that his office is planning to decrease the minimum office commission from 6% to 5%

There is no such thing as an “innocent” discussion of commissions or fees between or among competing brokers and the law views this as price fixing. As a company policy, a broker may set a commission schedule for his/her own employees.

Question 56

56. An exclusive authorization a right to sell listing, does not contain a complete legal description.

a. the listing is void
b. it is a violation of the Real Estate Law
c. the listing is enforceable
d. none of these

Answer 56

d. none of these

A legal description is not required for a listing, however, the description must be clear and not ambiguous.

Question 57

57. Under a lease, the leasehold interest lies in the:

a. lessor
b. lessee
c. landlord
d. beneficiary

Answer 57

b. lessee

A “leasehold interest” is the right to exclusive possession and use of real property for a fixed period of time held by the lessee. Remember: lessor (landlord); lessee (tenant).

Question 58

58. A family rents a house from January 1st to June 30th. This is considered a(n):

a. periodic tenancy
b. tenancy at sufferance
c. estate for years
d. tenancy at will

Answer 58

c. estate for years

An estate for years is a leasehold is a leasehold created by landlord and tenant for a particular period of time. The period of time could be a fixed number of years, months, weeks, or even days. An estate for years always will have a definite termination date.

Question 59

59. If one uses the words “of definite duration” to describe a lease, it is most likely a(n):

a. periodic tenancy
b. estate for years
c. life estate
d. estate at sufferance

Answer 59

b. estate for years

An estate for years always will have a definite termination date.

Question 60

60. A month to month lease is considered a(n):

a. periodic tenancy
b. estate for years
c. life estate
d. estate at sufferance

Answer 60

a. periodic tenancy

A periodic tenancy is a lease that continues from period to period until one of the parties give notice of termination. A periodic tenancy has no definite terminate date.

Question 61

61. A tenants’ five year lease has expired but they continue to live on the premises and pay their rent monthly. This is considered a(n):

a. semi annual tenancy
b. periodic tenancy
c. estate at will
d. estate for years

Answer 61

b. periodic tenancy

At the end of the lease term, if the tenant offers an additional rent payment and the landlord accepts the payment, the lease is renewed as a periodic tenancy. The lease continues from period to period until one of the parties gives notice of termination.

Question 62

62. Brown leases a residence form Baker on a theres month written lease. Upon expiration of the written lease, Brown retains possession of the property without the consent of Baker. Brown now holds a(n):

a. estate at sufferance
b. estate for years
c. estate at will
d. estate for years

Answer 62

a. estate at sufferance

An estate at sufferance is defined as one in which a lessee rightfully comes into possession of the land and retains possession after the expiration of the lease.

Question 63

63. A periodic tenancy lease does not specify exactly when the rent payment is due. If this is the case, it would be due:

a. on the 1st of each month
b. before the 10th of each month
c. by the 15th
d. at the end of each rent paying period

Answer 63

d. at the end of each rent paying period

If the parties fail to stipulate when rent is due, California law provides that it shall be payable at the end of each rent paying period for a periodic tenancy or at the end of the lease term if the term is one year or less.

Question 64

64. A tenant signs a leas that stipulates that the lessee pays the property tax. This lease is probably a:

a. standard lease
b. sandwich lease
c. net lease
d. reverse lease

Answer 64

c. net lease

Net lease: A lease, usually commercial, in which the lessee not only pays the rent for occupancy but also pays maintenance and operating expenses such as taxes, insurance, utilities and repairs. The rent paid is said to be “net” to the lessor.

Question 65

65. Which type of lease requires the lessee to pay a flat rent?

a. gross lease
b. percentage lease
c. sandwich lease
d. net lease

Answer 65

a. gross lease

Gross lease: A lease of property under which the lessee pays a fixed rent and the lessor pays the taxes, insurance, and other charges regularly incurred though ownership.

Question 66

66. A lease where the rent is based on a percentage of the monthly or annual gross sales of the lessee is called a:

a. gross lease
b. sandwich lease
c. net lease
d. percentage lease

Answer 66

d. percentage lease

Percentage lease: A lease whose rental is based on a percentage of the monthly or annual gross sales made on the premises.

Question 67

67. When a lessee transfers all of his/her interest in the property, it is called a(n):

a. assumption
b. assignment
c. sale
d. transfer

Answer 67

b. assignment

An assignment of a lease is the transfer of all title, right and interest that a lessee possesses in a certain property.

Question 68

68. The transferee in an assignment of a lease is called the:

a. assignor
b. assignee
c. sublessor
d. sublessee

Answer 68

b. assignee

The assignor gives the assignment and remains secondarily liable under the lease. The assignee (transferee) takes over the assignor’s interest and is primarily liable to pay rent to the original lessor.

Question 69

69. A lease contains a clause in which the parties agree to an adjustment of rent based upon some stated criteria. This lease clause is called a(n):

a. increase clause
b. escalator clause
c. index clause
d. variable rate clause

Answer 69

b. escalator clause

Escalator clause: Many fixed rental net leases, particularly long term commercial leases, contain a clause in which the parties agree to an adjustment of rent based on set increases in taxes, insurance, maintenance and other operating costs. Similarly, the rent may be tied into the cost of living index to cover increases in the maintenance expenses and raised at stated intervals. An escalator callus is designed to protect the lessor’s investment position against a reduction in the rate of return over the term of the lease.

Question 70

70. Salesperson Beth took an offer to purchase from her buyer to Broker Smith’s office to present it. The offer included a $1,000.00 promissory note from the buyer as the earnest money deposit. Broker Smith should do which one of the following upon receipt of the offer:

a. tell Beth she wasted her time and that he cannot accept the offer without cash or a check for the deposit
b. tell Beth the note is not good enough because it did not come with a deed
c. tell Beth she should have called him first as not to waste her time, so he could call his seller to see if they would consider an offer with a promissory note
d. tell Beth that a promissory note is just as good as cash or a check for the deposit and present the offer to his seller

Answer 70

d. tell Beth that a promissory note is just as good as cash or a check for the deposit and present the offer to his seller

When acting as a listing agent, you must present or cause to be presented to the owner of the property, any written offer to purchases received unless expressly instructed by the owner not to present such an offer, or unless the offer is patently frivolous. The earnest money deposit is eerily in the form of a personal check, money order or cashier’s check, but may take the form of a promissory note.

Question 71

71. Which of the following would not be a required payment for the lessee under a net lease?

a. janitorial
b. lease commission
c. property taxes
d. insurance

Answer 71

b. lease commission

The lease commission is paid by the landlord.

Question 72

72. Regarding a promissory note,:

a. a promissory note secures the deed of trust
b. the deed of trust secures the promissory note
c. the promissory note is not part of the deed of trust
d. the grant deed secures the promissory note

Answer 72

b. the deed of trust secures the promissory note

The deed of trust secures the promissory note and the property. If payment is not made according to the terms of the note and deed of trust, the beneficiary may instruct the trustee to foreclosure as set forth in the deed of trust.

Question 73

73. Which of the following is TRUE concerning promissory notes?

a. they are used as security for trust deeds
b. they are recorded at the county recorder’s office
c. they are always used when real estate is sold
d. they are the evidence of the debt

Answer 73

d. they are the evidence of the debt

The promissory note is the evidence of the debt. The trust deed is the security (or mere incidence) of the debt.

Question 74

74. The lessee of an apartment and the owner of a condominium have many things in common. Which of the following is true for both? They each hold:

a. a fee interest
b. an estate in real property
c. a less than freehold estate
d. an estate of inheritance

Answer 74

b. an estate in real property

Although the estates are different, the only thing they have in common is that they each have an estate. A condo owner has a fee interest and an estate of inheritance. The lessee has a less than freehold estate. They each have an estate.

Question 75

75. When the letters “HVAC” appears in a commercial or industrial lease, it normally refers to:

a. use of a household vacuum on the average carpet
b. high violate alternating current
c. homesteads, vacancies, and additional conveyances
d. heating, ventilating, and air conditions

Answer 75

d. heating, ventilating, and air conditions

Heating, ventilating, and air conditioning (HVAC) system. The unit regulating the even distribution of heat and fresh air throughout a building.

Question 76

76. A tenant has a three year lease with the lessor of an apartment building. At the end of year one, the tenant is transferred to another city. The lease between the lessor and lessee is silent on the tenant’s ability to sublease or assign the lease. In this case:

a. the lessee may sublease, but not assign, the lease
b. the lessee may either assign or sublease the apartment, without the permission of the lessor
c. the lessee may assign, but not sublease the apartment
d. the tenant must have the lessor’s permission to either sublease or assign the lease

Answer 76

b. the lessee may either assign or sublease the apartment, without the permission of the lessor

Failure to mention assignment or subleasing in a lease allows the tenant to either assign or sublease the apartment without the permission of the lessor.

Question 77

77. Once an offer has been made and accepted by the seller, the buyer would have:

a. pending title
b. equitable title
c. contract title
d. no title

Answer 77

d. no title

Title remains in the owner (seller) until all the contingencies of the contract have been met and escrow closes. When escrow, legal title would transfer from the seller to the buyer.

Question 78

78. A broker has been in the business for many years. He currently has 40 exclusive listings in his office. The broker dies and his daughter, who is also a broker, takes over for him. What should she do about the current listings?

a. just inform the seller that she is taking over as broker
b. she must attempt to renegotiate all of the listings
c. she need only inform the Department of Real Estate that she is now the broker of record
d. do nothing

Answer 78

b. she must attempt to renegotiate all of the listings

Listings are personal service contracts and terminate with the death of either party. The listing agreement is between the seller and the broker. When the broker dies, the listing terminates. The new broker must attempt to renegotiate the listings with the sellers.

Question 79

79. A listing broker wants to give $50 to a buyer and $50 credit against his commission to a buyer or seller who either lists with him or purchases one of his listings. With regard to his actions:

a. it is permissible to give $50 to the buyer but not the seller
b. it is permissible to give $50 to the seller only
c. it is permissible to give $50 to the buyer and to credit his commission with the seller
d. it is against the real estate law to give $50 to either the buyer or the seller

Answer 79

c. it is permissible to give $50 to the buyer and to credit his commission with the seller

It is permissible for a listing broker to rebate a portion of his/her commission to the buyer or seller as long as the rebate and/or credit is disclosed to all parties.

Question 80

80. On a listing agreement what is included under the section, “Terms of the Sale”?

a. terms of sale, personal property, additional terms
b. loan amount, personal property, and compensation to broker
c. price, method of payment, and personal property
d. price, compensation to broker and deposit

Answer 80

c. price, method of payment, and personal property

The “Terms of the Sale” section in listing agreement lists the price anyhow the price is to be paid. It also discussed andy personal property which is included in the price.