Practice Test 1

Question 1

Land of riparian owner borders…

Answer 1

a river, stream, or watercourse (any moving water)

Question 2

The fee charged by a lender for expenses incurred to make a new real estate loan is a…

Answer 2

loan origination fee

Question 3

Who signs the promissory note and mortgage?

Answer 3

The mortgagor (borrower)

Question 4

Vegetation is ___ property

Answer 4

real

Question 5

A seller would get to harvest corn because corn is his __ property and wasn’t mentioned in the ___ ___

Answer 5

personal; sales agreement

Question 6

Example of a freehold estate:

Answer 6

life estate (is limited to someone’s life)

Question 7

The impairment of desirability and usefulness in real estate brought about by economic changes in the community is known as:

Answer 7

obsolescence

Question 8

Which is true when a broker takes an oral listing to sell real property?

Answer 8

The broker has no legal right to enforce payment of commission on an oral listing to sell real property. The listing to sell real property must be in writing to be enforceable.

Question 9

The market data approach to appraisal is based upon the principle of…

Answer 9

substitution

Question 10

The holder of a life estate based on the holder’s own life may not…

Answer 10

…devise (leave by will) the property to anyone

Question 11

A common example of police power is…

Answer 11

zoning laws which restrict and limit the use of land

Question 12

A contractor obtained a construction loan, and the loan funds are to be released in a series of progress payments. Most lenders disburse the last payment when:

Answer 12

the period to file a mechanic’s lien has expired.

Question 13

An easement by prescription does not require…

Answer 13

a confrontation with the true owner

Question 14

Private restrictions on the use of land may be created by…

Answer 14

private use land controls, written agreement, or a developer’s general plan restrictions for a subdivision

Question 15

Government land use, planning and zoning laws are important examples of:

Answer 15

use of police power

Question 16

Generally when the government forces the sale of private land for public use, it is governed by due process of law and is accomplished through:

Answer 16

eminent domain

Question 17

Depression, recession, expansion and prosperity represent the four phases of:

Answer 17

the business cycle

Question 18

When a real estate broker is acting as a subagent for the seller, her fiduciary duty is owed by and primary responsibility is to:

Answer 18

the seller only

Question 19

Which laws exert the greatest control over the California housing and construction industries?

Answer 19

State Housing Law, local building codes and the Contractor’s License Law

Question 20

When there is a conflict between different building codes, which code has precedence?

Answer 20

whichever code sets the highest standards for construction and safety. Remember: “The most restrictive restriction restricts you!”

Question 21

A tenant leased a building from an owner. The owner then sells the building to a new owner. What is true?

Answer 21

The change in lessee’s financial situation is none of the new owner’s business

Question 22

A home was sold and the escrow closed Oct. 1, 2011. How would the property taxes for the 2011-12 tax year typically be prorated between the seller and buyer?

Answer 22

The seller would pay for the first 3 months of the property tax year (July, Aug., Sept.) by proration in escrow. The buyer would pay for the remainder of the tax year plus supplemental taxes based upon the reassessment that was triggered by the sale.

Question 23

When you, as a real estate agent, know that a seller will not accept an offer from a buyer, you should not do what:

Answer 23

change the buyer’s offer to what you believe the seller will accept, initial the changes, & then present the offer to the seller

Question 24

Home sold for $200K. Buyer assumed existing loan against property for $160K. The documentary transfer tax for this county is $.55 per $500 of consideration. The transfer tax is?

Answer 24

$44

$200K-$160K = $40K consideration
$40K / $500 = 80 taxable units
80 X $.55 = $44

Question 25

Puffing is when an agent

Answer 25

exaggerates the features or condition of the property

Question 26

Joe owns a grocery store and wanted to raise some money. He decided to sell his land and building to an investor and leased it back to himself in order to continue running his grocery store. What would be a tax benefit to Joe?

Answer 26

Joe’s rent payments to the investor will be fully deductible for income tax purposes as a business expense

Question 27

The roof of a rectangular building with sides that rise at inclined planes on all four sides is called a:

Answer 27

hip roof

Question 28

What describes an open-end loan?

Answer 28

one in which additional financing could be obtained without rewriting the contract

Question 29

Which of the following is an appraiser’s primary concern in the appraisal of a residential subdivision?

Answer 29

Marketability and acceptability

Question 30

When determining the value of a property, which of the following dates is most important to an appraiser?

Answer 30

The date the contract was signed

= the date on which a “willing buyer” and “willing seller” mutually agreed upon the sale price (value) of the property

Question 31

Valuations of single-family dwellings are usually based on:

Answer 31

sales prices of comparable properties

Question 32

To estimate the value of a parcel of vacant land, the appraiser concentrated only on the cost to the buyer of acquiring a comparable, substitute parcel of land. This approach is most similar to what appraisal method?

Answer 32

Market data

Question 33

When land is valued by its highest and best use, and there is a building on the land that has little or no value, the appraiser should:

Answer 33

deduct the demolition cost of the building from his highest and best use opinion of value

Question 34

The primary purpose of a site analysis by an appraiser is to determine the

Answer 34

highest and best use

Question 35

In real estate appraisal, “market value” is based primarily upon what?

Answer 35

the willing buyer and willing seller concept

Question 36

When attempting to determine current market value, real estate appraisers are least concerned with:

Answer 36

original cost

Question 37

When real estate increases in value because of an increase in population and/or inflation, this would be classified as

Answer 37

an unearned increment

Question 38

What is not an essential element of value?

Answer 38

appreciation

Question 39

The primary purpose of RESPA (Real Estate Settlement Procedures Act) is to:

Answer 39

require lenders to make special disclosures without cost to the borrower, for loans involving the sale or transfer of four or less residential dwellings.

Question 40

The placement of a building on a lot and its relationship to the surrounding environment is described as

Answer 40

orientation

Question 41

A lender must notify a borrower when a balloon payment is due:

Answer 41

90 to 150 days prior to the due date

Question 42

The most common method used by an appraiser in the appraisal of an amenity property would be

Answer 42

market comparison (a.k.a. market data approach)

Question 43

When an appraiser analyzes rent using the income approach, she will base her appraisal on which characteristics?

Answer 43

quantity, quality, durability

Question 44

When would the cost approach to appraisal be least appropriate?

Answer 44

old buildings

Question 45

The unit of comparison when appraising land is:

Answer 45

frontage, front foot value, OR cost per SF / cost per acre

Question 46

Valuable consideration in a contract consists of

Answer 46

services to be provided by one or both parties, whatever the parties consider to be of value, or one dollar or more

Question 47

The selling agent, Jones, prepared an offer for the buyer of a home. At the very latest, when should agent Jones give the buyer the Agency Disclosure form?

Answer 47

before preparing the offer for the buyer

Question 48

When an appraiser determines a “loss in value from any cause”, he is determining:

Answer 48

depreciation

Question 49

A property owner who carries the proper amount of fire insurance coverage will be indemnified in the event of loss. In such case, the insured

Answer 49

should neither gain nor lose

Question 50

A real estate appraiser reduced his opinion of the value of a home because the local sewer system was in poor condition and in need of repair. This loss in value would be classified as:

Answer 50

economic obsolescence (because the sewer system is an external cause)

Question 51

Economic or social obsolescence would not result from

Answer 51

an outdated heating system (this would result in functional obsolescence)

Question 52

Under California state law, the maximum fine which may be imposed by the Real Estate Commissioner on a person falsely claiming to be a real estate licensee is:

Answer 52

$20,000

Question 53

The process of calculating the present worth of a property on the basis of its capacity to continue to produce an income stream is called

Answer 53

capitalization

Question 54

The capitalization approach to appraisal is a process whereby an appraiser:

Answer 54

converts annual net income into capitalized value

Question 55

Interest rates on real estate loans are primarily determined by:

Answer 55

demand and supply of money

Question 56

When using the capitalization approach to appraisal, what would an appraiser subtract from the scheduled gross income to arrive at annual net income?

Answer 56

allowance for rent loss and vacancies

Question 57

The Alquist-Priolo Special Studies Act discloses the location of earthquake fault lines on maps for properties located:

Answer 57

all counties in California

Question 58

Lenders in the “prime” mortgage market generally prefer that not more than what percent of an applicant’s gross income be spent for housing?

Answer 58

25% to 28%

Question 59

In home construction, the parallel wooden beams used to support ceiling loads and floors are called

Answer 59

joists

Question 60

What is conveyed incident and appurtenant to the land?

Answer 60

natural rights, easements & restrictions, and servitudes

Question 61

A loan which calls for regular periodic payment of both principal and interest to completely repay the loan is called a:

Answer 61

fully amortized loan

Question 62

A real estate broker was helping his brother find a home. The broker, representing his brother, negotiated a lease with an option to buy from an owner/seller of a home. The real estate broker must disclose that he is the brother of the tenant/optionee to:

Answer 62

the owner/seller of the home

Question 63

When a loan is fully amortized by equal monthly payments of principal and interest, the amount applied to principal reduction:

Answer 63

increases while the amount applied to interest payment decreases as the loan gets older

Question 64

When the debt has been paid in full, the trustee will record what legal instrument to remove the lien of a trust deed from the public record

Answer 64

deed of reconveyance (also called a reconveyance deed)

Question 65

The item that would appear as a debit on the buyer’s closing statement is

Answer 65

the purchase price

Question 66

In a real property sales contract, the seller who is also acting as the lender is usually referred to as the

Answer 66

vendor

Question 67

In a real estate transaction where the seller uses a land contract instead of a trust deed, the land contract may be described as:

Answer 67

a security device

Question 68

According to California law, what would not be considered a blanket encumbrance?

Answer 68

real property taxes - because a tax lien would be tied to one specific parcel

Question 69

A grant deed, when compared to a land contract of sale, may be different with respect to:

Answer 69

the interest conveyed to the buyer, the signatures of the parties, & the designation of purchase price

Question 70

Promissory notes often include an “or more” clause. An “or more” clause would:

Answer 70

allow the borrower to make accelerated payments if he wishes

Question 71

A charge imposed on property is called:

Answer 71

a lien

Question 72

The effect of a tight money policy implemented by the Federal Reserve Board would have a net effect of increasing:

Answer 72

the use of second trust deeds in creating real estate transcations

Question 73

Henry is a tenant with a 5-year lease on a ranch belonging to Jack. Fred is the owner of an adjacent piece of land. One day, Fred asked Henry to grant him an easement to cross the ranch land. Henry grants Fred an easement in writing, granting Fred permission to cross the land. Is the easement valid under these circumstances?

Answer 73

Yes, but the easement may not extend beyond the term of Henry’s lease

Question 74

What does not affect the movement of mortgage rates?

Answer 74

the rate of unemployment

Question 75

When four people own property as joint tenants:

Answer 75

there is still only one title to the whole property

Question 76

When analyzing a real estate loan application, a lender would correlate characteristics of the borrower, the loan, and the property securing the debt to make:

Answer 76

a loan commitment

Question 77

In what way is the FHA loan program different from conventional lending?

Answer 77

FHA is a mortgage insurer rather than a mortgage originator

Question 78

When an eligible veteran purchases a home under the Cal-Vet program, the seller executes a grant deed in favor of:

Answer 78

the California Department of Veterans Affairs

Question 79

Under the Federal Truth-in-Lending Law, two of the most critical facts which must be disclosed to buyers or borrowers are:

Answer 79

finance charge and annual percentage rate

Question 80

The Real Estate Settlement Procedures Act (RESPA) does not prohibit:

Answer 80

buyer requiring a specific lender

Question 81

The formula to calculate net operating income of an apartment building:

Answer 81

scheduled gross income minus vacancies and collection losses, minus operating expenses

Question 82

An agreement by a lender to make a long term loan on real estate at some future date, upon the borrower’s request, is known as:

Answer 82

a standby loan commitment

Question 83

A lender may require an impound account for some real estate loans. Who benefits from this impound account?

Answer 83

The beneficiary (lender) and the trustor (borrower)

Question 84

An interest in real property may be taken by either prescription or by adverse possession. The interest taken by prescription is:

Answer 84

the right to use land which belongs to another person

Question 85

A quitclaim deed conveys only the present right, title, and interest of:

Answer 85

the grantor

Question 86

Title to real property is transferred with a deed. A valid deed does not need to contain what?

Answer 86

acknowledgment of the grantor’s signature

Question 87

A valid deed can be:

Answer 87

signed by a witnessed mark

Question 88

A person holding title to real property in severalty would have:

Answer 88

sole ownership

Question 89

A joint tenancy in real property can legally be created with the execution of a deed by:

Answer 89

• husband and wife to themselves as joint tenants
• existing joint tenants to themselves & others as joint tenants
• existing tenants in common to themselves as joint tenants

Question 90

Which factor will a lender usually consider to be the most important when making the decision whether or not to make a home loan?

Answer 90

the degree of risk

Question 91

The “standard coverage” title insurance policy on real property insures the policy holder against loss occasioned by:

Answer 91

a forgery in the chain of recorded title

Question 92

What is not covered by the standard coverage (CTLA) title insurance policy?

Answer 92

rights of parties in possession

Question 93

Escrow instructions are commonly executed by:

Answer 93

buyers, sellers, and third parties

Question 94

What would most likely result in the termination of a real estate sales escrow?

Answer 94

the mutual consent of the buyer and the seller

Question 95

During escrow, if a dispute should arise between the buyer and seller preventing the close of escrow, the escrow holder may legally:

Answer 95

file an interpleader action in court

Question 96

According to the Seller Transfer Disclosure law, the real estate licensee:

Answer 96

has a responsibility to visually inspect the property and reveal pertinent information which the seller has failed to disclose

Question 97

Broker Bob has just taken an exclusive right to sell listing to sell a home. This brand new listing may be described as:

Answer 97

an express, bilateral, executory, employment contract

Question 98

The term “express contract” describes a contract which is expressed

Answer 98

in words, either oral or written

Question 99

A contract based on an unlawful consideration is

Answer 99

void

Question 100

Which agreement is required to be in writing in order to be enforceable?

Answer 100

an agreement by a buyer to assume an existing real estate loan

Question 101

Mr. Baker sold his country home to Mr. Jones, but reserved a life estate and remained in possession of the property. Later, Mr. Baker sold the life estate to Mrs. Connor and surrendered possession of the property. Mr. Jones then demanded the immediate possession of the property. Based on these facts, what is correct?

Answer 101

Mrs. Connor may remain in possession (as long as Mr. Baker is alive)

Question 102

Broker John took a 60 day exclusive agency listing to sell a property that was owned by Jones. After 30 days, Broker John had not sold the property, so Jones sent him a letter by certified mail canceling the listing. One week later Jones listed the property with Broker Bob using an open listing. Two weeks later, Broker Bob sold the property under the open listing. In this situation how will the commission be handled?

Answer 102

Seller Jones will be liable for two full commissions (one to Broker Bob as the procuring cause of the successful offer under an open listing, and one to Broker John, because the property sold during the term of his 60 day exclusive agency listing)

Question 103

An exclusive listing contract is

Answer 103

an employment contract, a bilateral contract, & a promise for a promise

Question 104

When a broker takes an exclusive authorization and right to locate property listing with a buyer, the broker is authorized to:

Answer 104

represent other buyers at the same time

Question 105

Any exclusive listing must contain:

Answer 105

a definite termination date

Question 106

A “safety clause” is usually found in which contract?

Answer 106

a listing

Question 107

When a real estate broker arranges a loan originated by a federally related lender, the broker must provide the borrower with the federal RESPA booklet and disclosures when the loan is secured by a first trust deed and the proceeds are used for financing:

Answer 107

• the purchase of a personal residence by a family who owns three or more similar units
• the purchase of one individual unit in a complex of six residential units on the same block
• the purchase of a single family dwelling by an individual buyer

Question 108

If a contingency in a contract fails, what is true?

Answer 108

The buyer is not obligated to perform

Question 109

If a real estate licensee advises buyers about how to take title when preparing a deposit receipt, she may be:

Answer 109

• giving tax advice
• giving legal advice
• providing a basis for a possible claim of discrimination

Question 110

A buyer selected an expert to inspect the septic tank of the home he was about to purchase. The inspector damaged the home’s sprinkler system during the inspection. Who is liable for the cost of repairing the sprinkler system?

Answer 110

The buyer will be liable for damages, regardless of what was found during the inspection

Question 111

The effective date of a residential purchase agreement is the date that:

Answer 111

the seller’s acceptance was properly communicated to the buyer

Question 112

When a buyer buys a home “subject to” the seller’s existing loan on the property:

Answer 112

the buyer will not be personally liable for the loan and the seller remains the borrower of record

Question 113

What is not true regarding options?

Answer 113

The option binds the optionee to perform - the true statement is that the option binds the OPTIONOR, not the optionee

Question 114

A real estate licensee generally acts as:

Answer 114

a fiduciary

Question 115

The position of trust assumed by the real estate broker as an agent for the seller or buyer is described legally as:

Answer 115

a fiduciary relationship

Question 116

When representing a principal under a written listing agreement, what type of authority may an agent have?

Answer 116

actual, specific, or ostensible

Question 117

A seller of real property is not bound by the acts and representations of:

Answer 117

the buyer’s broker

Question 118

“Alienable” title means that the title:

Answer 118

can be conveyed

Question 119

The most essential element to create an enforceable broker-principal relationship concerning a transfer of interest in real property is:

Answer 119

a written employment contract

Question 120

On January 2nd, a buyer called a real estate agent to find out if the buyer’s offer had been accepted. The agent informed the buyer that the seller was out of town and would not be back until January 14th, after which she would make a decision as to whether the buyer’s offer would be accepted. Under these circumstances, what is true?

Answer 120

If the buyer decides not to wait for the seller to return, the buyer can rescind the offer & secure the return of the full amount of the deposit.

Question 121

When an existing contract is replaced by a new contract, it is called:

Answer 121

novation

Question 122

The maximum commission which can be charged by a real estate broker in the sale of residential income property is:

Answer 122

negotiable between the principal and broker

Question 123

The normal relationship between an escrow officer and the principals in a real estate transaction is that of:

Answer 123

neutral agent

Question 124

The buyer of a business, in order to avoid “successor’s liability” for unpaid sales tax, should require the seller to provide escrow with a “certificate of clearance” issued from what agency?

Answer 124

State Board of Equalization

Question 125

What is an appropriate termination date for an exclusive right to sell listing of residential real property?

Answer 125

90 days after the listing is signed. (There must be a definite termination date)

Question 126

A farmer deeded his farm to his sons, Able, Baker, and Charley as joint tenants. Shortly thereafter, Baker sold his interest to William. Able died and willed his interest to Sally. Ownership of the property would be:

Answer 126

Charley and William as tenants in common, Charley holding 2/3 interest, William 1/3 interest

Question 127

Under no circumstances may a real estate broker:

Answer 127

misrepresent material facts

Question 128

A lender required a borrower to pay two points to get a $52,000 loan. How much did the two points cost the borrower?

Answer 128

Each point costs 1% of the loan amount. Two points (2%) x $52,000 = $1,040

Question 129

Private restrictions on land may be created

Answer 129

by deed or written agreement

Question 130

Seller Jane was represented by Agent Able. Able convinced Jane to accept an offer by verbally promising her that he would find the “great replacement home” for her before the close of escrow. Assuming Agent Able was unable to find an acceptable replacement home for Jane, what is most correct?

Answer 130

Jane can recover damages in a civil lawsuit against Agent Able resulting from a false promise.

Question 131

What describes the practice of single agency?

Answer 131

The single agency broker is client oreinted

Question 132

A real estate broker showed a property to a prospective buyer which was not currently listed for sale and without the seller’s knowledge or consent. The broker then wrote up and presented an offer to the seller. In this situation, the broker acted

Answer 132

as a single agent (representing the buyer only)

Question 133

A “blind ad” placed in a newspaper by a license real estate salesperson does not properly

Answer 133

identify the broker

Question 134

Which of these is an encumbrance? freehold estate, fee simple absolute, recorded homestead, estate for years

Answer 134

estate for years - this is a lease, which effects and burdens the title to property

Question 135

The document used to encumber a personal property mobilehome is a:

Answer 135

certificate of title

Question 136

A real estate broker must retain copies of all listings, deposit receipts, canceled checks, loan documents, and trust records for

Answer 136

three years

Question 137

Elizabeth, a licensed CA real estate broker, received a referral of a buyer from an out-of-state broker. Elizabeth sold this buyer a home and wants to split the commission with the out-of-state broker. Under the California Real Estate Law:

Answer 137

Elizabeth may split the commission with a broker of another state

Question 138

The employment agreement between a broker and a salesperson must be retained:

Answer 138

by both broker and salesperson for 3 years from the date of the termination of the salesperson’s employment

Question 139

What is the most important reason for a broker to maintain a client trust fund account in addition to his regular business account?

Answer 139

the consequence which could occur should legal action be taken against the broker

Question 140

When a broker receives an advance fee for publishing a special pamphlet advertising properties which he has not listed for sale, he must:

Answer 140

give an accounting to the seller upon demand for any funds he has collected for the advertising

Question 141

When a real estate licensee negotiates a loan secured by real property, he must deliver the mortgage loan disclosure statement to the borrower

Answer 141

within three days of receipt of a completed loan application or before the borrower is obligated to take the loan, whichever is earlier

Question 142

A real estate broker negotiated a hard money loan secured by a second trust deed. As used in this context, “hard money” means:

Answer 142

a cash loan

Question 143

The oldest, easiest to learn, most adaptable, and quickest method of appraising residences and land, is

Answer 143

the market data approach (also called comparison or substitution)

Question 144

The purpose of the Federal Fair Housing Law is:

Answer 144

to prohibit discrimination in housing transactions

Question 145

A real estate licensee who shows minority buyers homes located in segregated neighborhoods only is guilty of:

Answer 145

steering

Question 146

Some real estate loans provide that the interest rate may be increased or decreased depending on money market conditions. This type of loan is called:

Answer 146

a variable interest rate loan

Question 147

A real estate broker would be subject to discipline by the Real Estate Commissioner and in violation of fair housing laws if he did which of the following: steering, blockbusting, hired salespersons from only one ethnic group

Answer 147

all of the above

Question 148

If an income property is valued at $300,000 using a 6% capitalization rate, how much would an investor pay for the property if he demanded an 8% capitalization rate?

Answer 148

$225,000

$300,000 x 6% = $18,000 net income
$18,000 / 8% = $225,000

Question 149

Ted borrowed $2,500 and gave the lender a four year straight note. In 8 months he had paid $150 interest. What was the interest rate on the note?

Answer 149

9%

8 months = 2/3 of a year
$150 / 2 = $75 interest in 1/3 of a year
$75 x 3 = $225 interest per year
$225 / $2,500 = 9%

Question 150

A buyer employs a broker to find a property with the condition that he will not purchase the property if represented by a dual agent. Under this condition, the buyer’s broker would consider a prospective seller to be a:

Answer 150

customer

The person who employs an agent may be called the client, fiduciary, or principal. Other people are typically called customers or potential customers.