Practice/Disclosures Flashcards
What should sellers do when they are uncertain whether 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
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.
Answer: B—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 the property is located within one of the specified hazard zones.
In the sale of a business, bulk transfer laws pertain to:
A) - fixtures.
B) - goodwill.
C) - stock-in-trade.
D) - All of the above
C) - stock-in-trade.
Answer: C—A “bulk sales transfer” is any transfer in bulk (not a transfer in the ordinary course of the seller’s business) of a major part of the materials, inventory, or supplies of an enterprise (stock-in-trade).
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
B) - type listings and sales contracts for salespeople.
Answer: B—An unlicensed secretary can only take messages and type for agents. The other choices would be considered activities that would require a real estate license.
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 talk 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.
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: D—The Realtor’s Code of Ethics considers this to be unethical behavior. One Realtor may not solicit owners who have listed their property with another licensed real estate broker.
Accounts payable of a business would be a(n):
A) - asset.
B) - liability.
C) - prorated item in escrow.
D) - None of the above
B) - liability.
Answer: B—Accounts payable is considered a liability.
Regulation of proper sewage and sanitation construction practices are enforced by the:
A) - Department of Housing and Urban Development (HUD).
B) - Department of Sanitation and Disposal.
C) - local health office.
D) - Department of Real Estate.
C) - local health office.
Answer: C—Drainage, plumbing, water, and sewage are under the control of the state Department of Public Health and are enforced by the local health officer.
Mr. Wiseguy salesperson introduces himself to the seller as being employed by a large, successful real estate company because he knew that the seller would only list with a licensee who is employed by a “large company.” If Mr. Wiseguy does not work for a large company, but he said it just to be able to sell the property, his conduct would be considered:
A) - lawful.
B) - unethical.
C) - professional.
D) - fiduciary.
B) - unethical.
Answer: B—Since many buyers and sellers associate “bigness with safety,” it is considered unethical to represent one’s self as being protected by a large corporation franchise when such is not true.
When a deed contains discriminatory language or 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.
C) - the discriminatory words or clauses are unenforceable.
Answer: C—Clauses which were written into deeds or CC&R’s which allow discrimination are unenforceable. There is no requirement that the deeds or CC&R’s must be rewritten.
Agent Jones has an offer on a listing contingent on the buyer’s uncle approving the property, since he will be financing the loan. Agent Jones hasn’t discussed this with the buyers, but assures the seller that there will be no problems regarding the uncle. After the seller accepts the offer, the buyers tell the agent that the uncle is out of town and they don’t know when he will return. With regard to the seller, the agent acted:
A) - illegally.
B) - unethically.
C) - practically.
D) - properly.
B) - unethically.
Answer: B—The listing agent has acted unethically in this case since he failed to explain the potential risks concerning the contingency. An agent must explain the meaning and probable significance of any contingency in an offer that he/she knows or reasonably believes may affect the closing date of the transaction, or the timing of vacating the property by the seller, or its occupancy by the seller.
Commingling 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 buyer) 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.
A) - Holding an uncashed deposit check after acceptance of an offer when directed to do so by the seller.
Answer: A—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:
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, and
The offeree is informed, before or at the time the offer is presented for acceptance that the check is being so held.
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
D) - $250,000
Answer: D—This 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.
California real estate law originated from:
A) - DRE regulations.
B) - Spanish law.
C) - English common law.
D) - European law.
C) - English common law.
Answer: C—In general, California’s laws relating to real estate originated from English common law.
A profit-and-loss statement would include all of the following EXCEPT:
A) - operating expenses.
B) - gross profit.
C) - interest charges.
D) - value of inventory.
D) - value of inventory.
Answer: D—The value of inventory would appear on the balance sheet.
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.
A) - one year of the examination.
Answer: A—A person must apply for their license within one year of passing the state exam.
If a business is sold without complying with the Bulk Sales Act:
A) - the assets still belong to the vendor as far as creditors are concerned.
B) - the transfer is unenforceable by all parties.
C) - the sale is completely void.
D) - the sale is considered illegal.
A) - the assets still belong to the vendor as far as creditors are concerned.
Answer: A—If the Bulk Sales Law is not complied with, creditors still have a claim on the assets of the vendor (seller) purchased by the vendee (buyer). This is why it is very important for the vendee (buyer) to see that the Bulk Sales Law is complied with.
Dividing office overhead by the number of salespersons gives:
A) - broker dollar.
B) - desk costs.
C) - company dollar.
D) - overhead.
B) - desk costs.
Answer: B—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.
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 the above
A) - 180 days written notice.
Answer: A—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.
In order for a licensed salesperson of a broker to legally manage the office, initial contracts, and constitute proper supervision, which of the following is required:
A) - 2 years full-time experience during the (immediate) preceding 5 years.
B) - 2 years full-time experience during the (immediate) preceding 5 years plus 16 college units.
C) - 2 years full-time experience during the (immediate) preceding 10 years.
D) - Experience is not required as long as they are licensed.
A) - 2 years full-time experience during the (immediate) preceding 5 years.
Answer: A—The salesperson must have 2 years full-time experience during the (immediate) preceding 5 years.
How long does a buyer have to sue the seller of a single family dwelling for something that was not disclosed but should have been disclosed after the buyer moves into the home?
A) - 1 year
B) - 5 years
C) - 2 years
D) - 7 years
C) - 2 years
Answer: C—A lawsuit alleging a breach of a licensee’s duty under this law must be filed within two years from the date of occupancy, the date of recordation of the deed to the buyer, or the date of close of escrow, whichever occurs first.
When leasing a commercial property that is merely a “shell” space, the landlord often agrees to spend a specific amount for a qualified tenant. This amount is properly designated as:
A) - a rent abatement.
B) - a tenant improvement allowance.
C) - a security deposit.
D) - earnest money.
B) - a tenant improvement allowance.
Answer: B—When the landlord or property manager allows a certain sum of money to the tenant to be used for improvements within the rental space, it is called a “tenant improvement allowance.” This is usually only found with commercial leases.
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.
B) - approve it.
Answer: B—An unlicensed assistant can gather information and help the broker create ad copy, but the broker must approve it first.
Broker A meets the Brown family and the Browns make an offer on a house on Elm Street which is owned by Jones. The offer is contingent on the sale of the Brown’s house on Main Street which is several counties away. Seller Jones accepted the offer. Broker A refers the Browns to Broker R for the sale of their Main Street home. A written compensation referral form is executed. According to Article 7 of the Code of Ethics, Broker A must disclose:
A) - The compensation on Elm St. to both Brown and Jones
B) - The compensation on Main St. to Brown only
C) - Both the compensation on Elm St. and Main St. to Brown
D) - Both the compensation on Elm Street and Main Street to Brown and Jones
D) - Both the compensation on Elm Street and Main Street to Brown and Jones
Answer: D—According to Article 7 of the Code of Ethics, of the National Association of Realtors®, all compensation must be revealed to all principals in the transaction.
What type of background check does the Real Estate Commissioner and Appraisal Commmissioner use?
A) - late rental payments
B) - personal habits
C) - credit history
D) - late child support
D) - late child support
Answer: D—In accordance with Section 17520 of the Family Code, DRE is precluded from 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 compiles the list from information provided by the District Attorney of each county in California.
DRE will issue a 150-day license to an otherwise qualified applicant who is on the list of child support obligors. DRE will advise the applicant that the license applied for cannot be issued unless a release is furnished to DRE from the District Attorney’s office during the 150 days.
DRE also receives a supplemental list of obligors who are over four months delinquent in child support payments. DRE 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.
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 agent had no actual knowledge that the property was 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.
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: D—The Natural Hazard Disclosure must be made 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. 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 not they have actual knowledge of that fact.
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.
A) - pay the fund back in full plus interest.
Answer: A—No broker or salesperson shall be granted reinstatement until he/she has repaid in full, plus interest at the prevailing legal rate, the amount paid from the Recovery Fund.
Neither the seller nor any listing or selling agent shall be liable for any error, inaccuracy, or omission of any information delivered to the buyer if:
A) - the seller or agent(s) did not know of the mistake.
B) - that item of information containing a mistake was provided by a public agency or third-person professional.
C) - the item of information containing the mistake was provided by a third-person expert but the mistake was known by the seller and seller’s agent.
D) - Both (a) and (b) are correct.
D) - Both (a) and (b) are correct.
Answer: D—Neither the transferor nor any listing or selling agent shall be liable for any error, inaccuracy, or omission of any information delivered to the transferee as long as the transferor did not know of the mistake. The seller would also be relieved of responsibility for mistakes if the information was provided by a public agency or third-person professional as to that item of information. The receipt of a report from a third-person expert would not relieve the seller or the seller’s agent from the common-law duty to disclose defects in the property which were known or reasonably should have been known.
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.
B) - prior to the sale of the first lot in a subdivision.
Answer: B—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 report must indicate in writing that they have received and read the applicable report.
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.
C) - Exaggerating the features of the property or neighborhood when showing the property to prospective buyers.
Answer: C—Puffing is the exaggerating of features of neighborhood or property.
You are a California real estate broker. A prospect is referred to you by an out-of-state broker and a sale is consummated by you. You want to split your commission with the cooperating broker. Under the California Real Estate Law:
A) - you may pay a commission to a broker of another state.
B) - you cannot divide a commission with a broker of another state.
C) - you can pay a commission to a broker of another state only if he/she is also licensed in California.
D) - None of the above
A) - you may pay a commission to a broker of another state.
Answer: A—A California licensed real estate broker may pay a commission to a broker of another state.
A material fact that must be disclosed to a purchaser would include all of the following EXCEPT:
A) - a leaky roof.
B) - a septic tank.
C) - the racial composition of the neighborhood.
D) - plans for a nearby freeway.
C) - the racial composition of the neighborhood.
Answer: C—The racial composition of a neighborhood is not considered a material fact. Discussing this with the purchaser may be considered a violation of fair housing laws.
The seller is required to deliver the “Homeowner’s Guide to Earthquake Safety” to the buyer of any one-to-four unit property built prior to:
A) - 1953
B) - 1960
C) - 1968
D) - 1975
B) - 1960
Answer: B—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.
The basic regulation of the housing and construction industries is accomplished by:
A) - State Housing Law.
B) - Local Building Codes.
C) - State Contractor’s License Law.
D) - All of the above
D) - All of the above
Answer: D—All three of these jurisdictions work together to regulate activities in the housing and construction industries.
The most common violation of the Commissioner’s Regulations concern:
A) - fair housing violations.
B) - trust fund accounts and records.
C) - ethics and professional conduct.
D) - agency disclosure.
B) - trust fund accounts and records.
Answer: B—Statement of fact
Which of the following would be advised to obtain a clearance receipt in the sale of a business?
A) - the vendee
B) - the vendor
C) - the lender
D) - the Franchise Tax Board
A) - the vendee
Answer: A—The vendee (buyer) wants to avoid successor’s liability.
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
C) - the income of an office after all commissions are subtracted.
Answer: C—The term “company dollar” is the amount leftover after all commissions have been paid out.
A Master Plan would be concerned with all of the following EXCEPT:
A) - conservation.
B) - noise.
C) - land use.
D) - deed restrictions.
D) - deed restrictions.
Answer: D—Deed restrictions are prohibitions against a property’s use that are imposed in the grantee’s deed.
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 or salesperson for 3 years.
D) - by the salesperson only for 3 years.
C) - by the broker or salesperson for 3 years.
Answer: C—After the transaction closes, both the broker and salesperson must retain copies of all listings, deposit receipts, cancelled checks, trust records, and other documents for three years.
The Subdivided Lands Law controls the sale or leasing of new subdivisions to California residents:
A) - only if the property is located in California.
B) - only if the property is unimproved.
C) - regardless of the location of the property.
D) - only if the property is unimproved and located outside of California.
C) - regardless of the location of the property.
Answer: C—Subdivisions offered for sale to Californians that are either in state or out-of-state are still under the control of the Subdivision Lands Act.
Which of the following events would require 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
D) - All of the above
Answer: D—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.
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.
D) - Environmental Impact Report.
Answer: D—An Environmental 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.
As to running a business, which of the following is FALSE?
A) - Assets - liabilities = net worth
B) - Income - expenses = profit
C) - Total sales = gross income
D) - Gross income - profit = net income
D) - Gross income - profit = net income
Answer: D—Statement of fact. Remember, you are looking for the incorrect choice.
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
B) - conditional public report
Answer: B—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 transaction completed, however until the final public report (called the “white report”) is received.
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) - either (a) or (b).
D) - either (a) or (b).
Answer: D—This is correct to avoid being classified as a “blind ad.”
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 to 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 from McGrew.
B) - Easton could recover from Rothchild, but McGrew is not liable to Rothchild.
C) - McGrew is liable to Easton, but Rothchild is not.
D) - Easton is not entitled to recover from either Rothchild or McGrew on the basis of caveat emptor.
A) - Easton would be successful in his suit against Rothchild who would be entitled to recover damages from McGrew.
Answer: A—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.
It is important for a landlord to obtain all of 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 be considered unethical.
D) - No, this would be considered discrimination.
D) - No, this would be considered discrimination.
Answer: D—It is considered discrimination to require disclosure of marital status on a rental application.
A statement 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.
A) - negative declaration.
Answer: A—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 preparation of an EIR. Be careful, this one is easy to get backwards. Study Aid: Negative declaration = No impact.
Salesperson Kim has several listings and is an agent of Broker Ling. These listings are:
A) - Void if Salesperson Kim changes brokers
B) - The property of Salesperson Kim
C) - The property of Broker Ling
D) - The property of Salesperson Kim and Broker Ling
C) - The property of Broker Ling
Answer: C—The listing agreement is a contract between the broker and the seller. It remains the property of Broker Ling if Salesperson Kim changes brokers and the listing remains valid.
If a property owner splits one parcel into 25 or more parcels, the subdivider must comply with federal control under the:
A) - Interstate Land Sales Act.
B) - Real Property Acquisition Act.
C) - Common Interest Subdivision Act.
D) - None of the above
A) - Interstate Land Sales Act.
Answer: A—The words “federal control” should tip you off to recognize the Interstate Land Sales Act.
Which of the following would realize the greatest benefit from the Bulk Sales Law?
A) - creditors
B) - buyers
C) - sellers
D) - patrons
A) - creditors
Answer: A—The major purpose of the bulk transfer status is to afford a merchant’s creditors an opportunity to satisfy their claims against a merchant who owes them money before the merchant can sell his/her assets and vanish with proceeds of the sale.
Each tenant of a proposed conversion of their building from residential property to a condominium has the right to:
A) - vacate the premises.
B) - cancel their lease.
C) - purchase their unit.
D) - extend their lease.
C) - purchase their unit.
Answer: C—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.
Seller Jones hired broker Smith to list his property. Seller Jones excluded his washer and dryer. Buyer Dana makes an offer on the property and includes the washer and dryer in the offer. After reviewing the offer, seller Jones was still not willing to sell the appliances. Buyer Dana was out of town and unreachable. Broker Smith said he was sure that buyer Dana would not want to lose the house so he crossed out the appliances on the offer and initialed the change himself. To further induce seller Jones to accept the offer, broker Smith said he would find seller Jones another house immediately, which he never did. Which of the following is TRUE regarding broker Smith’s actions?
A) - His behavior would subject him to criminal action.
B) - His behavior is considered unethical.
C) - Both (a) and (b)
D) - Neither (a) nor (b)
C) - Both (a) and (b)
Answer: C—Making an addition to or modification of the terms of an instrument previously signed or initialed by a party to a transaction without the knowledge and consent of the party is illegal. In most cases, actions that are considered illegal would also be considered unethical.
The Financial Discrimination Act of 1977, also known as the Holden Act, has to do with which of the following?
A) - redlining.
B) - rentals.
C) - education.
D) - subdivisions.
A) - redlining.
Answer: A—The Holden Act prohibits state financial institutions from engaging in the practice of redlining. It is also known as the Housing Financial Discrimination Act of 1977.
Under the Subdivision Map Act, subdivision reports must be filed with the:
A) - city or county where the land is located.
B) - Real Estate Commissioner.
C) - Division of Architecture.
D) - Division of State Lands.
A) - city or county where the land is located.
Answer: A—The Subdivision Map Act gives the local authorities control over the physical aspects of the subdivision as to zoning, building, and health codes.
A broker advertises properties through the World Wide Web. Rules exist making it mandatory for the broker to do which of the following?
A) - Return all messages promptly and correctly within 24 hours.
B) - Employ only real estate licensees to respond to queries.
C) - Exercise proper supervision over non-licensees responding to queries.
D) - Report all international queries to the DRE.
B) - Employ only real estate licensees to respond to queries.
Answer: B—Only licensed individuals can answer questions (queries) about properties.
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.
B) - successful because an “as-is” clause does not relieve a seller or broker from liability for disclosing material facts which they knew of.
Answer: B—An “as-is” clause by itself does not relieve a residential property seller or broker from liability for latent defects 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.
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.
B) - worker’s compensation insurance.
Answer: B—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/her salespeople to be employees or independent contractors.
For his/her own protection, the purchaser of a business should obtain a:
A) - resale certification.
B) - clearance receipt.
C) - sales tax exemption authorization.
D) - use tax exemption form.
B) - clearance receipt.
Answer: B—To avoid any liability for unpaid sales tax, the purchaser of a business should obtain a clearance receipt from the state Board of Equalization stating that the sales tax has been paid through a particular date.
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 sales after default.
D) - All of the above
D) - All of the above
Answer: D—Certain types of transfers are specifically exempted in Civil Code 1102.1. They are as follows:
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 record is required.
Transfers pursuant to court order (such as probate sales, sales by a bankruptcy trustee, etc.)
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).
Transfers by a fiduciary in the course of the administration of a decedent’s estate, guardianship, conservatorship, or trust.
Transfers from one co-owner to one or more other co-owners.
Transfer made to a spouse or to a child, grandchild, parent, grandparent, or other direct ancestor or descendant.
Transfers between spouses in connection with a dissolution of marriage or similar proceeding.
Transfers by the State of Controller pursuant to the Unclaimed Property Law.
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 all 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.
Which of the following is provided by the purchaser upon resale of a business?
A) - resale certification
B) - clearance receipt
C) - disclosure form
D) - All of the above
A) - resale certification
Answer: A—A resale certificate allows a buyer (retailer) to purchase inventory without paying sales tax as long as the goods are going to be resold to customers. In the sale of a business, sales tax is not charged on stock-in-trade which was held for resale.
In addition to the licensee’s duty to disclose matters known 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.
C) - conduct a reasonable investigation to discover the true facts regarding the property.
Answer: C—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.
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.
A) - date of issuance.
Answer: A—A public report is good for five years from the date of issuance.
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
B) - Americans With Disabilities Act
Answer: B—The American With Disabilities Act (ADA) deals with public access to buildings to make sure they are readily accessible to disabled individuals.
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.
B) - all residential buildings within an earthquake fault zone.
Answer: B—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 earthquake 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.
Properties built before which year DO NOT need a geological report?
A) - 1963
B) - 1968
C) - 1975
D) - 1960
C) - 1975
Answer: C—Residential properties built before 1960 and masonry buildings with wood-frame floors or roofs built before 1975, require the seller or agent to deliver to the buyer the “Homeowner’s Guide to Earthquake Safety,” and if the property is commercial the “Commercial Property Owner’s Guide”. If the buyer receives these booklets, neither the agent nor the seller is required to obtain a geological report. If the property is in an earthquake fault area, a Natural Hazard Zone Disclosure Statement must be delivered to the buyer.
The Subdivision Lands Law is administered by:
A) - the Federal Government.
B) - the Real Estate Commissioner.
C) - city and county authorities.
D) - state government.
B) - the Real Estate Commissioner.
Answer: B—The Subdivided Lands Law is directly administered by the Real Estate Commissioner. Its objective is to protect purchasers of property in new subdivisions from fraud, misrepresentation, or deceit in the marketing of subdivided lots, parcels, units and undivided interests in California.
When a broker has a trust account, the name on the account must:
A) - Name broker as trustee
B) - Name an independent trustee
C) - Name each person who has money in the account as trustee
D) - Name the broker’s accountant as trustee
A) - Name broker as trustee
Answer: A—A trust account must: 1) Designate the account as a trust account; 2) Name the broker as the trustee for the account; the broker may never delegate his/her accountability for the trust account.
In an effort to enforce trust fund handling requirements, the Real Estate Commissioner continuously:
A) - sponsors lectures on trust 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.
B) - audits and examines broker’s trust fund records on a state-wide basis.
Answer: B—The Real Estate Commissioner continuously audits and examines broker’s trust fund records on a state-wide basis.
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
B) - $50,000
Answer: B—The fund will pay a maximum of $50,000 for a single transaction and $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.
