Practice Exam (Textbook) Flashcards
A “loss in value from any cause” is a definition of:
a. economic obsolescence
b. depreciation
c. leverage
d. goodwill
b. depreciation (ch. 10)
A couple recently married and each person had children from a previous marriage. They wish to take title to property so they can pass their share to their own children by will. The best form of title would be:
a. joint tenancy
b. severalty
c. community property
d. tenancy in whole
c. community property (ch. 6)
A valid deed passes title when it is:
a. signed
b. sealed
c. delivered and accepted
d. acknowledged
c. delivered and accepted (ch. 6)
In July, a buyer bought a home through the listing broker at ABC Realty and received a property disclosure. After a hard rain in November, the roof developed a severe leak. The buyer sued the seller and listing broker for the cost of a new roof. Testimony in court revealed that the seller mentioned needing to add the roof leak to the disclosure, which the listing broker failed to do. The listing broker also failed to inform the buyer of the issue. What was most likely the outcome of the court case?
a. the broker, not the seller, is liable for payment and for not disclosing the material fact
b. the buyer cannot collect since the house has closed escrow
c. the buyer could only recover from the seller since the broker is not liable for disclosures
d. the buyer cannot recover from either the seller or buyer based on the principle of caveat emptor
a. the broker, not the seller, is liable for payment and for not disclosing the material fact (ch 4.)
agents/brokers must ALWAYS disclose of material facts!
The main purpose of the Truth-in-Lending Law is to:
a. prevent usury
b. require disclosure of credit terms
c. reduce the cost of credit
d. regulate annual percentage rates
b. require disclosure of credit terms (ch. 8)
The difference between judgment liens and mechanics’ liens is that:
a. mechanics’ liens are general liens
b. mechanics’ liens can take priority before they are recorded
c. mechanics’ liens are voluntary liens
d. judgment liens are involuntary liens
b. mechanics’ liens can take priority before they are recorded (ch. 8)
Broker Santos is in the process of listing a home. The agency disclosure must be given:
a. within five days
b. prior to close of escrow
c. prior to the seller signing the listing agreement
d. immediately after the seller signs the listing agreement
c. prior to the seller signing the listing agreement (ch. 4)
On October 1, 2014, Garcia agreed to purchase Chan’s home. Both parties agreed that escrow would close on December 1, 2014, and that property taxes would be prorated taxes for the year 2014-2015. According to the escrow closing statement, which of the following is true?
a. Garcia paid Chan for seven months’ taxes
b. Garcia paid Chan for one months’ taxes
c. Chan paid Garcia for eight months’ taxes
d. Chan paid Garcia for one months’ taxes
a. Garcia paid Chan for seven months’ taxes (appendix b)
escrow closes December 1, 2014; tax year runs July 1 to June 30
count proration months from December 1 to July 1
= 7 months
A quitclaim deed conveys only the present rights of the:
a. grantor
b. servient tenant
c. grantee
d. trustee
a. grantor (ch. 6)
grantor: the seller of property; one who signs the deed
quitclaim deed: to relinquish grantor’s interest in property
To have a valid recorded homestead, certain elements are essential. Which of the following is not essential?
a. a description of the property
b. a statement of residence
c. to be a married person
d. to be recorded
c. to be a married person (ch. 8)
A licensed loan broker arranged for a loan on a home purchase and has the borrower sign the required statement. The title work shows clouds on the title that the seller cannot clear in a timely manner. If the loan cannot be closed, the borrower is liable for:
a. cost and expenses incurred to date
b. no cost and expenses
c. all cost and expenses and half the commission
d. none of the above
b. no cost and expenses (ch. 8)
A person purchased a property for $200,000, which was equal to $4.75 per square foot. The rectangular lot was 300 feet deep. The cost per front foot was:
a. $1425
b. $950
c. $827
d. $793
a. $1425
200,000 / 4.75 = 42,105
42,2015 / 300 = 140.35
200,000 / 140.35 = 1425
Which of the following is not essential to form an agency?
a. a fiduciary relationship
b. agreement of the parties
c. consideration
d. competent parties
a. a fiduciary relationship
An owner sells a lot for cash and receives $67,100 from escrow. The only expenses were a 6% commission and $517 in other expenses. The property sold for:
a. $71,643
b. $71,933
c. $72,591
d. $73,137
b. $71,933
$67,100 + $517 = $67, 617
$67,100 / 0.94 = $71,933
A real estate agent must disclose all material facts to a seller principal. Which of the following is considered a material fact?
a. the buyer’s racial background
b. the agent’s knowledge of a pending better offer
c. the lender’s requirement that a buyer pay a loan fee
d. that the buyer has a medical problem
b. the agent’s knowledge of a pending better offer (ch. 5)
material fact: anything that would affect 1) the value of the property or 2) a buyer/tenant’s decision to purchase/lease the property or how much to offer to purchase or lease the property
- buyer’s racial background is not a material fact
- the agent’s knowledge of a pending better offer deals with a buyer deciding what to offer to purchase
- buyer’s requirement to pay a loan fee does not affect the value of property or the buyer’s decision to purchase
- medical problems are personal; not a material fact
In appraising improved property, the least important factor is:
a. sales price
b. highest and best use
c. price of comparables
d. assessed value
d. assessed value (ch. 10)
Common interest developments in the form of community apartments and condominium projects fall within the California Subdivision Act and:
a. are illegal
b. are regulated by state law
c. are rarely approved
d. have fewer units per acre
b. are regulated by state law (ch. 13 subdivision map act; 2 or more units)
Studs are attached to rest upon the:
a. mud sill
b. subfloor
c. header
d. sole plate
d. sole plate (ch. 15)
A person borrowed 80 percent of the value of a studio condo. The loan interest rate was 7%. The first year interest was $10,500. The value of the condo was:
a. $173,500
b. $182,900
c. $187,500
d. none of the above
c. $187,500
Adams, Brown, and Chow are owners of commercial land as joint tenants. Adams dies and is survived by Brown and Chow. Which is correct?
a. Brown and Chow receive title by succession
b. the joint tenancy is terminated
c. Adam’s interest terminates
d. Brown and Chow are now tenants in common
c. Adam’s interest terminates (ch. 6)
joint tenancy:
- upon death, right of survivorship applies
- still joint tenancy; Adam’s interest only terminates
How many acres are in the NW 1/2 of the SW 1/4 of the NE 1/4 of Section 10?
a. 40
b. 20
c. 80
d. 640
b. 20 (ch. 6)
1st quadrant size: 160 acres
1/2 quadrant: 80 acres
1/4 quadrant: 40 acres
When the landlord and the tenant mutually agree to cancel a lease, their action is called a(n):
a. mutually agreed upon termination
b. rescission
c. release
d. abandonment
a. mutually agreed upon termination (ch. 12)
An amortized loan has equal monthly installments consisting of:
a. interest alone
b. principal alone
c. principal and interest
d. principal, interest, taxes, and insurance
c. principal and interest (ch. 8)
amortized loan: level payments loan; equal payments of BOTH principal and interest
Which of the following is an operating expense to be subtracted from gross income when appraising a property using the income approach?
a. interest payments
b. principal payments
c. property taxes
d. all of the above
c. property taxes (ch. 10)
operating expenses:
property taxes insurance repairs/maintenance property management fees supplies/utlities accounting/legal advertising reserves
The word emblements refers to:
a. attachments to a contract
b. annual crops
c. machinery
d. fixtures on a building
b. annual crops (ch. 2)
emblements: growing vegetable crops (bells & mints… veggies?)
A salesperson working for a broker had been wrongfully selling information to a loan company. When the broker, who had been using reasonable supervision, discovered this, the salesperson was fired. Based upon the information given:
a. the broker is probably not liable if he or she had no knowledge of the wrongdoing
b. both the salesperson and the broker are liable
c. there is no liability
d. a salesperson is licensed to sell loan information in his or her name only
b. both the salesperson and the broker are liable (ch. 4)
broker and seller must work as one entity; being under supervision, all acts if seller must be known to broker
The primary function of the secondary mortgage market is to:
a. originate loans for the primary mortgage market
b. supply private mortgage insurance to borrowers
c. buy loans to fund the primary mortgage market
d. protect consumers from fraudulent lenders
c. buy loans to fund the primary mortgage market (ch. 9)
Federal National Mortgage Association (FNMA or Fannie Mae): private corporation whose primary function is to buy and sell existing mortgages in secondary market
ex: mortgage-backed securities, etc
Williams entered into a nine-month oral lease on July 1 to start on September 1 at a rate of $1,000 per month. On August 15, Williams backed out of the lease. The lease is:
a. unenforceable
b. enforceable
c. void
d. restricted by the statute of frauds
b. enforceable (ch. 12)
- termination of lease must be given in advance
- if lease is greater than a year, lease MUST be in writing
Title insurance does not protect a buyer against:
a. forgery in the chain of title
b. lack of capacity of the grantor
c. recorded easements
d. zoning restrictions
d. zoning restrictions (ch. 11)
title insurance (CLTA, ALTA, ALTA-R) normally do not insure:
- undisclosed matters
- environmental laws, zoning, other governmental ordinances
- mining and water claims
- defects known to the insured before property was purchased and not revealed to title company before the sale
If state housing codes conflict with local codes, usually:
a. state codes prevail
b. local codes prevail
c. the stricter of the two prevails
d. the more lenient of the two prevails
c. the stricter of the two prevails (ch. 13)
A broker received deposits from principals and incorrectly placed the funds in the firms operations account for several days before moving the funds to the broker’s trust fund account at the bank. The broker is guilty of:
a. conversion
b. commingling
c. misrepresentation
d. fraud
b. commingling (ch. 4)
commingling: illegal mixing of broker and principal’s funds
A husband dies intestate in California. How is his separate property distributed to his wife and two children?
a. all to the wife
b. half to the wife and half to the children
c. all to the children
d. one-third to the wife, and the rest to the children
d. one-third to the wife, and the rest to the children (ch. 6)
separate property is distributed equally.
Under the Subdivided Lands Law, the real estate commissioner is primarily concerned with:
a. physical design and layout
b. health facilities
c. financing and marketing arrangements
d. none of the above
c. financing and marketing arrangements (ch. 13)
Jones leases a home from Santos under a three-month written lease. Upon expiration of the lease, Jones retains possession. Santos has not decided on the next step. Jones has an estate at:
a. will
b. sufferance
c. years
d. tenancy
b. sufferance (ch. 12)
estate at sufferance: tenant wrongfully holds over after expiration of term
- landlord can evict tenant as trespasser
- landlord can tenant accept for similar term
An investor has an apartment building with no vacancies in which reach unit rents for $600. The investor raises the rent 15% and suffers a 15% vacancy factor. Rental income:
a. increases
b. decreases
c. remains the same
d. the question cannot be answered with the information
b. decreases (ch. 10)
15% rent increase will not cover 15% vacancy.
A real estate agent is asked to hold the buyer’s deposit uncashed until acceptance of the offer by the seller. Upon the seller’s acceptance, the agent must put the deposit in escrow or in a trust fund or give the deposit to the seller within how many business days?
a. 5
b. 3
c. 2
d. 1
b. 3 (ch. 4)
The maximum amount of personal funds a broker may have in a trust fund account to cover charges and not be guilty of commingling is:
a. $50
b. $200
c. $500
d. $1,000
b. $200 (ch. 4)
Property is being sold where the buyer is going to take over the seller’s existing loan. To avoid legal conflict before closing, the real estate agent should check to be sure the loan does not include a(n):
a. release clause
b. prepayment penalty
c. alienation clause
d. subordination clause
c. alienation clause (ch. 8)
alienation clause: prohibits transfer of a loan obligation
- gives lender right to call loan upon sale of real estate
- also called due-on-sale clause
The stated policy of the real estate commissioner is to create an equal opportunity industry. This means agents should:
a. maintain an attitude free from bias
b. realize that race, creed, and color are not material facts
c. do unto others as you would have them do unto you
d. do all of the above
d. do all of the above (ch. 13)
A California subdivider sold five lots to one buyer and optioned five others lots to another buyer. The subdivider must:
a. notify the Bureau of Real Estate of a material change
b. close the option sales within three business days
c. record the sales within five business days
d. not sell five lots to a single purchaser
a. notify the Bureau of Real Estate of a material change (ch. 13)
Under the federal Truth-in-Lending Law (Regulation Z), certain borrowers have how many days to rescind their loan?
a. 30
b. 10
c. 5
d. 3
d. 3 (ch. 8)
A seller employed a broker under an open listing. The seller indicated to the broker that the roof leaked. While showing the home to a buyer, the broker stated that the roof was in good condition. After the sale, the buyer discovered that the roof leaked. The broker is guilty of:
a. false promise
b. statute of frauds
c. misrepresentation
d. all of the above
c. misrepresentation (ch. 4)
misrepresentation: broker misstates some material feature of real property
- failure to disclose in other cases
Under Division 6 of the Uniform Commercial Code (Bulk Sale), a public notice must be given 12 days before transfer by:
a. the seller
b. the buyer
c. the creditors
d. all of the above
b. the buyer (ch. 1)
The value of the subject property as set by the price of comparable properties is based on the principle of:
a. change
b. regression
c. substitution
d. highest and best use
c. substitution (ch. 10)
principle of substitution: maximum value of property tends to be set by cost of acquiring equally desirable and valuable substitute property (assuming no costly delay)
A California real estate broker sold a ranch in Montana to a California resident. A Montana broker assisted in the sale. To show appreciation, the California broker gave part of the commission to the Montana broker. This action was:
a. unlawful because the California broker was not licensed in Montana
b. unlawful because the Montana
c. lawful
d. none of the above
a. unlawful because the California broker was not licensed in Montana (ch. 4)
Income tax benefits for homeowners include deductions for:
a. interest on home loans
b. depreciation on buildings
c. expenses and repairs
d. all of the above
a. interest on home loans (ch. 14)
applicable to homeowners LIVING IN residence:
-interest paid deductible against personal income
applicable to absentee/non-owner occupied homes:
- depreciation on buildings
- repairs, maintenance, management, insurance, misc. operating expenses
- 1031 exchanges (like-kind property)
All REALTORS® in California are bound by which code of ethics?
a. National Mortgage Brokers Association
b. National Association of Real Estate
c. National Association of REALTORS® (NAR)
d. all of the above
c. National Association of REALTORS® (NAR) (ch. 1)
In issuing a policy of title insurance, the title company is least likely to make an on-site inspection if the policy is a(n):
a. CLTA standard owner’s policy
b. ALTA extended policy
c. construction loan policy
d. lender’s policy
a. CLTA standard owner’s policy (ch. 11)
A real estate broker must retain copies of all listings and deposit receipts for how many years?
a. 1
b. 3
c. 4
d. 5
b. 3 (ch. 5)
The first half of real property taxes is due and payable on November 1. The taxes become delinquent after December 10, at which time, if not paid, a penalty is added to the amount. The penalty is:
a. 10 percent
b. 8 percent
c. 6 percent
d. 3 percent
a. 10 percent (ch. 14)
A Notice of Non-responsibility is usually posted and recorded by an owner when a:
a. bulk sale takes place
b. tenant approves repairs without consent from the landlord
c. transfer of title takes place
d. mechanics’ lien is filed
b. tenant approves repairs without consent from the landlord (ch. 7)
The maximum ownership rights in property are known as:
a. fee simple absolute
b. estate for years
c. fee simple defeasible
d. life estate
a. fee simple absolute (ch. 6)
FEE / SIMPLE are synonymous.
ABSOLUTE: in estate involves greatest title power; no limitation or end.
DEFEASIBLE: open to revision or forfeiture.
Which of the following is not a fiduciary relationship?
a. broker to seller
b. trustor to beneficiary
c. attorney to client
d. attorney-in-fact to principal
b. trustor to beneficiary (ch. 8)
An appraiser determines that the market rent for a parcel of land is $700/mo. and that interest (capitalization) rates should be 11%. The approximate value is:
a. $54,545
b. $69,280
c. $76,364
d. $105,000
c. $76,364 (ch. 10)
$700 x 12 = $8,400
$8,400 / 0.11 = $76,364
An owner plans to divide a parcel of land into nine parcels, with the intention of selling three parcels per year for each of the next three years. The owner:
a. must satisfy the Subdivision Map Act
b. must report to the real estate commissioner, but not need to conform to the Subdivision Map Act
c. must comply with the Subdivision Map Act and the Subdivided Lands Law
d. need not comply with any special law, as fewer than five lots are being sold in any one year
c. must comply with the Subdivision Map Act and the Subdivided Lands Law (ch. 13)
subdivided lands act:
- FIVE or more lots OR parcels
- administered by STATE (CA) commissioner
subdivision map act:
- TWO or more lots OR parcels
- administered by LOCAL officials
Which of the following is a less-than-free hold estate?
a. fee simple defeasible
b. fee simple absolute
c. leasehold estate
d. life estate
c. leasehold estate (ch. 12)
leasehold estate: interest in property as a tenant
freehold estate: interest in property as an owners
A lease that lies between the primary lease and the sublessee is a:
a. sandwich lease
b. percentage lease
c. ground lease
d. wedge lease
a. sandwich lease (ch. 12)
A California easement by prescription requires a minimum period of hostile use of:
a. five years
b. three years
c. two years
d. one year
a. five years (ch. 7)
A corporation built a large tract of homes and hired a handyperson to take care of the maintenance. The handyperson was given extra compensation for showing the homes on weekends to prospective buyers.
a. the corporation is not in violation of real estate regulations
b. the handyperson could be fined for showing homes without a license
c. as an employee, the handyperson does not need a license to show homes
d. all corporate employees and officers selling the homes must be licensed
b. the handyperson could be fined for showing homes without a license (ch. 1)
After a trustee’s sale, any money remaining after paying lienholders and costs is remitted to the:
a. trustor
b. trustee
c. beneficiary
d. mortgagor
a. trustor (ch. 8)
