Mandatory Disclosures

Question 1

A fact about a property is considered a “material fact” 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 1

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

Question 2

A dual agency is legal if

(a) all parties are told before close of escrow.
(b) the buyer and seller consent to it.
(c) the broker and escrow company agree to it.
(d) all parties are told after they sign the contract.

Answer 2

(b) the buyer and seller consent to it.

Question 3

In addition to disclosing known material facts concerning the property, the listing agent also has a duty to disclose defects that can be discovered by

(a) canvassing the neighborhood and interviewing neighbors.
(b) conducting a reasonably diligent visual inspection.
(c) ordering a detailed inspection of historical records and police reports.
(d) All of the above.

Answer 3

(b) conducting a reasonably diligent visual inspection.

For 1-4 unit residential properties, the listing agent has a duty to conduct a diligent visual inspection of the accessible areas of the property.

Question 4

The licensee who brings the buyer into the transaction is called the

(a) listing agent.
(b) selling agent.
(c) associate licensee.
(d) subagent.

Answer 4

(b) selling agent.

Question 5

In the correct order, which of the following lists the chain of events necessary to comply with the agency disclosure law?

(a) confirm, disclose, elect
(b) investigate, disclose, confirm
(c) disclose, elect, confirm
(d) disclose, confirm, reconfirm

Answer 5

(c) disclose, elect, confirm

Question 6

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 6

(a) physical condition of the property.

Question 7

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 a public report.
(b) a transfer ordered by a probate court in administration of an estate.
(c) transfers by foreclosure sale after default.
(d) All of the above.

Answer 7

(d) All of the above.

Question 8

When inspecting for structural failure, agents should look for

(a) cracks in structural walls, beams, and columns, and foundations.
(b) severe bulging in floors or structural walls.
(c) doors that fail to close or that have been trimmed.
(d) all of the above.

Answer 8

(d) all of the above.

Question 9

What is a red flag?

(a) A detrimental financing factor that may prevent the buyer from qualifying for a loan.
(b) A physical factor about a property that is a potential material fact and that may need further investigation.
(c) A defect in the subject property’s chain of title that casts doubt on the validity of the seller’s ownership.
(d) A questionable commission split offer that may result in the selling agent receiving less than the advertised percentage.

Answer 9

(b) A physical factor about a property that is a potential material fact and that may need further investigation.

Question 10

In the course of taking a listing on a single-family dwelling, the owner informs you that his roommate died of AIDS on the property one year ago. Which of the following is correct regarding your disclosure requirements?

(a) If an occupant died on the property, it must always be disclosed to prospective buyers.
(b) If the occupant’s death was a result of AIDS, it does not have to be disclosed.
(c) A death on the property is not a material fact in any case and does not need to be disclosed.
(d) Unless the death occurred within one month of an offer to purchase, it does not need to be disclosed.

Answer 10

(b) If the occupant’s death was a result of AIDS, it does not have to be disclosed.

Civil Code Section 1710.2 states that no cause of action arises against an owner of real property or his or her agent, or any agent of a transferee of real property, for the failure to disclose that an occupant of that property was afflicted with or died from AIDS. However, if a buyer asks a direct question concerning deaths, the statute does not protect an agent from misrepresentation.

Question 11

When selling 1-4-unit residential properties built prior to January 1, 1960, the seller must disclose whether the dwelling has

(a) flood risk.
(b) fire risk.
(c) earthquake weaknesses.
(d) asbestos.

Answer 11

(c) earthquake weaknesses.

Question 12

A seller (or seller’s agent) must give the buyer a separate Natural Hazard Disclosure Statement if the property lies within which 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 12

(d) All of the above.

Question 13

Concerning the potential existence of lead-based paint in homes built prior to 1978,

(a) the owner can avoid liability by instructing his/her agent to physically remove the lead paint.
(b) the owner must deliver to prospective buyers the booklet entitled Environmental Hazards: A Guide for Homeowners, Buyers, Landlords, and Tenants.
(c) the owner should inform the party responsible for the painting that they are required to remove it.
(d) the owner may ignore the existence of lead-based paint as long as they did not reside in the home prior to 1978.

Answer 13

(b) the owner must deliver to prospective buyers the booklet entitled Environmental Hazards: A Guide for Homeowners, Buyers,

Question 14

In an effort to help real estate agents fully disclose environmental hazard issues to prospective buyers, the Department of Real Estate and the Department of Health Services developed the

(a) Sick Building Syndrome Pamphlet.
(b) Hazardous Substance Release Form.
(c) Residential Environmental Hazards Booklet.
(d) Water Contamination Disclosure Form.

Answer 14

(c) Residential Environmental Hazards Booklet.

Question 15

A public report is good for five years from the

(a) date of issuance.
(b) date the first lot is sold.
(c) date of approval.
(d) date of delivery to the buyer.

Answer 15

(a) date of issuance.

Question 16

When a developer intends to convert an apartment to a condominium, the developer must notify current tenants of their right to

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

Answer 16

(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 17

Creative financing and the complaints stemming from these questionable types of financing helped enact existing

(a) seller financing disclosure requirements.
(b) creative financing protection statutes.
(c) purchase money disclosure forms.
(d) ARM disclosure requirements.

Answer 17

(a) seller financing disclosure requirements.

Question 18

Which of the following items/facts must be disclosed when seller financing is involved

(a) That the loan has or will have negative amortization, or that deferred interest ARMs could have negative amortization.
(b) That the note, if not fully amortized, will have to be refinanced at maturity and that this might be difficult or impossible to accomplish in the marketplace.
(c) The buyer’s creditworthiness (credit report, job verification, etc.).
(d) All of the above.

Answer 18

(d) All of the above.

Question 19

The Real Estate Settlement Procedures Act (RESPA) applies to

(a) 1-4 unit residential property.
(b) second mortgages.
(c) commercial loans.
(d) loans for multi-unit apartment complexes.

Answer 19

(a) 1-4 unit residential property.

Question 20

The agent does not disclose a Mello-Roos tax. After close of escrow the buyer may

(a) rescind the contract within three days of receipt of the notice.
(b) sue the seller for recovery.
(c) sue the selling agent for recovery.
(d) sue the listing agent for recovery.

Answer 20

(a) rescind the contract within three days of receipt of the notice.

Question 21

There are statutory rescission rights for a number of transactions. Which of the following provides for rescission rights?

(a) A loan for consumer credit that is secured by a borrower’s residence.
(b) Selling his or her equity interest in a residence in foreclosure.
(c) Purchase of a time-share.
(d) All of the above.

Answer 21

(d) All of the above.

Question 22

Real estate disclosure laws apply:

(a) uniformly to all real estate transactions.
(b) primarily for 1-4 residential units.
(c) to disclosures to principals only.
(d) to buyer disclosure only.

Answer 22

(b) primarily for 1-4 residential units.

Question 23

A fiduciary relationship applies to a real estate licensee and to:

(a) his or her principal.
(b) all parties the agent has dealings with.
(c) buyers only.
(d) the Department of Real Estate.

Answer 23

(a) his or her principal.

Question 24

The proper order of the steps taken in agency disclosure is:

(a) elect, confirm, disclose.
(b) confirm, elect, disclose.
(c) disclose, elect, confirm.
(d) elect, disclose, confirm.

Answer 24

(c) disclose, elect, confirm.

Question 25

A selling agent must comply with agency disclosures to the buyer:

(a) prior to showing property.
(b) before the buyer executes an offer.
(c) prior to qualifying the buyer.
(d) upon delivery of the seller’s acceptance.

Answer 25

(b) before the buyer executes an offer.

Question 26

A Transfer Disclosure Statement must be provided to the buyer when the sale involves:

(a) a vacant lot.
(b) a commercial building.
(c) a 3-unit residential building.
(d) all of these.

Answer 26

(c) a 3-unit residential building.

Question 27

An agent’s inspection under Easton vs. Strassburger (as codified by state statutes) applies to:

(a) visual inspections and known or should-have-known defects.
(b) accessible areas only.
(c) 1-4 residential units.
(d) all of these.

Answer 27

(d) all of these.

Question 28

An agent need not disclose to a buyer that:

(a) a former owner had AIDS.
(b) there was a death by murder or suicide on the property more than 3 years ago.
(c) Both a former owner had AIDS AND there was a death by murder or suicide on the property more than 3 years ago.
(d) None of these.

Answer 28

(c) Both a former owner had AIDS AND there was a death by murder or suicide on the property more than 3 years ago.

Question 29

The Seller Financing Disclosure Statement provided to both buyer and seller provides:

(a) credit terms.
(b) a warning as to balloon payments.
(c) disclosure of deferred interest.
(d) all of these.

Answer 29

(d) all of these.

Question 30

The earthquake safety disclosure statement:

(a) is voluntary.
(b) applies to 1-4 residential units.
(c) must be signed by buyer and seller.
(d) both applies to 1-4 residential units and must be signed by buyer and seller.

Answer 30

(d) both applies to 1-4 residential units and must be signed by buyer and seller.

Question 31

Compliance with environmental hazards disclosure requires:

(a) chemical tests of the soil for all dangerous contaminants.
(b) the buyer sign that they have received a booklet entitled Environmental Hazards: A Guide for Homeowners and Buyers.
(c) that the seller post a bond to cover damages by hazards discovered at a later date.
(d) that the Alquist-Priolo Act be complied with.

Answer 31

(b) the buyer sign that they have received a booklet entitled Environmental Hazards: A Guide for Homeowners and Buyers.