Simulated Exam 2 Flashcards
The property taxes for a condominium unit are paid by the:
A. Board of governors.
B. Homeowners association (HOA).
C. Owner of the condominium.
D. Subdividers who constructed the property.
C. In the condominium form of ownership, each individual unit is owned separately and the taxes are paid by the individual owner.
Which of the following action does not constitute constructive evection under a lease?
A. The owner fails to make necessary repairs to the property.
B. The owner makes extensive and unnecessary changes to the building, making it no longer usable for it original purpose.
C. The owner shows the property to a new prospective tenant and enters into lease negotiations with the new tenant.
D. The owner evicts the tenant after proper service of a three day notice to quit.
D. A constructive eviction occurs when the landlord substantially interferes with the tenants use and enjoyment of the premises during the term of a tenancy, and the tenant vacates the premises due to the interference.
What are the three steps of the agency disclosure in proper chronological order?
A. Elect, confirm, disclose.
B. Confirm, elect, disclose.
C. Disclose, confirm, disclose.
D. Disclose, elect, confirm.
D. There are three chronological steps of the agency law disclosure. Disclosure of the agency law is the first step. Then the agent elects the role they will play in the relationship. Finally, the agent confirms that role with each of the participants in the transaction.
A broker who simultaneously represents the best interests of both opposing parties in a transaction is known as a(n):
A. Finder.
B. Dual agent.
C. Subagent.
D. Unlawful agent.
B. A dual agent represents both principles in a transaction, buyer/seller or lessee/lessor.
Barnard made an offer to buy a vacant residence. The offer was excepted by the seller. Prior to the close of escrow, barnard requested permission from the broker to enter and make minor repairs to the house. Which of the following is true?
A. The broker is to get a signed rental agreement from barnard before allowing him to enter.
B. Barnard doesn’t need permission from anyone since he is the equitable owner of the property.
C. The broker needs to get the sellers permission.
D. Barnard may only enter to conduct repairs that correct material defects in the property.
C. A seller needs to provide approval to a buyer who intends to enter a vacant house prior to the close of escrow oh. Until escrow closes, the property still belongs to the seller. When the buyer is given permission to enter and make repairs, it creates liability if something happens prior to the close of escrow, such as an injury on the property.
Broker Sarah delivered an offer to purchase real property to owner Martha. Owner Martha asked for 24 hours to consider the offer. Later that same day, broker Sarah received two additional offers through the other brokers. Broker Sarah believe the owner will reject all three offers. In order to comply with the law, broker Sarah is to:
A. Hold the new offers until owner Martha has made a decision on the first offer, then present the other offers.
B. Present the two additional offers in the order they arrived.
C. Simultaneously present the two additional offers to owner Martha as soon as possible.
D. Refused to receive the offers until owner Martha decides not to except the original offer.
C. The decision regarding any offer is for the seller to make. The broker in this question is required to notify the seller and present both additional offers as soon as possible.
What contributes to the value of a well-planned neighborhood versus a poorly planned neighborhood?
A. Non-conforming improvements.
B. Inconsistent improvements.
C. Improper orientation.
D. Conformity of size and style.
D. A well-planned neighborhood will contain residences with a high degree of conformity, similar size, quality and amenities. This is a hallmark of modern subdivisions, especially those with recorded conditions, covenants and restrictions (CC&Rs) and a homeowners association (HOA) to enforce these requirements.
And appraiser reviews the addition of an amenity to an apartment building under which appraisal principle?
A. Substitution.
B. Contribution.
C. Anticipation.
D. Progression.
B. The principle of contribution states that improvements to property are only worth what they add to value, not what they cost to construct. Most improvements contribute less than their cost. The alternative answer choices are all fellow principles of value. Substitution is the basic principle of appraisal. Anticipation has to do with the future. Progression represents under improved properties within a neighborhood.
What type of depreciation is the most challenging to correct?
A. Functional.
B. Economic obsolescence.
C. Physical.
D. Where in tear.
B. Economic obsolescence is the most challenging type of depreciation to correct. Economic obsolescence exists off the property and it is out of the direct control of the property owner. Examples of economic obsolescence include reduced employment opportunities in the area or changed aircraft landing patterns at a local airport. Physical obsolescence and wear and tear are one in the same. Functional obsolescence can require replacing outdated equipment.
Return of an investors investment is provided for through:
A. Sinking funds.
B. Depreciation.
C. A reserve for replacement.
D. Profit.
B. Depreciation, as an income tax deduction, is the means by which investors have their investment returned.
The maximum number of properties that can be covered by a trust deed without a blanket encumbrance is:
A. Three.
B. Two.
C. One.
D. There is no limit.
C. Only one property may be covered by a single trust deed without a blanket encumbrance. Alternatively, a blanket trust deed covers more than one property.
Heather, a single mother, is able to get down payment assistance as well as a below market rate of interest on her mortgage. What type of mortgage did she receive?
A. CalVet.
B. US department of Veterans Affairs (VA)-guaranteed loan
C. Federal housing administration (FHA)-insured loan.
D. California housing finance an agency(CalHFA).
D. The California housing financing agency (CalHFA) program offers first time homebuyers special consideration. CalVet is not a mortgage program, and US department of Veterans Affairs and Federal housing administration are insured and guaranteed loans arranged through mortgage brokers and banks.
Deficiency judgments can only be granted when:
A. A property has been judicially forclosed.
B. The value of the property equals or exceeds the underlined balance due on the loan.
C. The mortgage is classified as a purchase money mortgage.
D. A property has been foreclosed under a trustees sale.
A. Only judicial foreclosure’s handled through the courts can demand a deficiency judgment if the price received for a property is less than the outstanding mortgage balance.
Sally applied for a real estate loan. The lender can lawfully require her to answer questions in regards to her:
A. Marital status.
B. Race.
C. Gender.
D. Income.
D. A lender cannot ask a borrower about marital status, gender or religion under discrimination law.
A husband nominates his wife to manage his will. Thus, she will function as an:
A. Executrix.
B. Administratrix.
C. Administrator.
D. Executor.
A. The term for manager of the will is executor. As the wife is managing the will, the correct answer is the feminine form of this word: executrix.
If a buyer and seller decided to rescind a deal after the deed has been recorded, the buyer is to:
A. Record a deed of reconveyance.
B. Return the deed to the seller in exchange for consideration.
C. Record a cancellation of the transaction.
D. Provide a new grant deed to the seller.
D. Once the deed is recorded, a new deed is needed to transfer the property to anyone else.
Broker fees deposited with the broker before they are earned are called:
A. Kickbacks.
B. Advance fees.
C. Referral fees.
D. Duplicate charges.
B. Advance fees are monies received before they are earned. Note that answer choice A. Kickbacks is illegal. Choices that are illegal or unethical will only be right if they are expressed as such.
An exception in a grant deed:
A. Is the same as a reservation in a grant deed.
B. Voids the deed entirely.
C. Excludes part of the property from the grant.
D. Makes certain provisions of the deed voidable.
C. Grant deeds transfer title to property. When an exception is stated, a portion of the property is not transferred with the grant deed. For example, consider an easement being retained by the owner, or a specific space such as highway frontage or beach frontage to be held for other purposes.
To be valid, restrictions in a grant deed need to:
A. Be contained in a deed or a written agreement.
B. Be less restrictive than existing zoning requirements.
C. Run with the land.
D. Be posted on a sign in a conspicuous spot on the property.
A. Restrictions, such as conditions, covenants and restrictions (CC&Rs) for a subdivision need to be recorded as a statement on the deed or as a reference to another recorded document such as the subdivision restrictions.
The maximum commission a loan broker may charge to negotiate an $8000 hard money first trust deed that is due in two years is:
A. $400.
B. $500.
C. $1000.
D. $1500.
A. The commission for hard money lender‘s is set by law within the business and professions code. The size of the loan, the length of the loan term and whether it is a first trust deed or junior mortgage affect the commission that may be charged. A commission on first trust deed with the term of less than three years is limited to 5%. The commission is limited to 10% for those with the term of three years or longer. For Junior trust deeds, the commission limits are 5% for a term of less than two years, 10% for a term of less than three years, and 15% for three years or longer.
A seller carryback note is classified as a ________ lien.
A. Specific
B. General
C. Involuntary
D. Equitable.
A. As a specific lien , a seller carryback note will stipulate the specific property that is securing the loan. If this is an income tax lien, it will be attached to everything the person owns and be classified as a general lien.
The real estate commissioners rules:
A. Are administrative agency regulations.
B. Have the effect of law.
C. Both a. and b.
D. Neither a. nor b.
D. The real estate commissioner overseas and administers real estate law, the subdivided land law, and the regulations of the real estate commissioner. Note these elements are categorized as laws and regulations, not rules, which carry less effect then either regulations or laws.
A motivated seller in a seller’s market is least likely to except an offer contingent on the:
A. Buyer obtaining an 80% loan within 30 days.
B. Buyers approval of the preliminary title report.
C. Sale of the buyers current residence.
D. Results of a termite inspection.
C. The least favorable contingency to a seller in a sellers market is the sale of the buyers home, which could create lengthy delays in the closing of the subject transaction. The alternatives are all common contingencies in a sale.
Seller Sally lists her property with agent Fred and receives an offer. Agent Fred convinces seller Sally to except the offer by verbally promising her he will find her an ideal replacement home before the close of escrow. Agent Fred is unable to find an acceptable replacement home for seller Sally before the close of escrow. Which of the following is most correct?
A. Seller Sally can recover damages against agent Fred in a civil lawsuit as a result of her reliance on his false promise.
B. Seller Sally has no legal recourse against the agent Fred since the promise wasn’t in writing.
C. Seller Sally may cancel the sale of her home without liability.
D. Seller Sally can bring a criminal action against agent Fred for fraud.
A. Seller sally may Sue agent Fred in a civil suit for the false promise made by agent Fred. The alternative answer choices all contain weaknesses which prevent them from being the best answer selection. Canceling the sale will create a possible liability to the buyer who had no part in Fred’s promise. Criminal action for fraud is challenging and has little benefit for Sally.
A flood hazard report will note that flooding is frequent when it is described as:
A. A 50 year flood zone.
B. A 100 year flood zone.
C. Occurring at least twice every 10 years.
D. Occurring no less than three times every 20 years.
C. Twice in 10 years is the critical number for determining the frequency of floods.
Valid contracts require all of the following, except:
A. Written documentation.
B. Offer and exceptance.
C. Legal object.
D. Consideration.
A. A contract need not be in writing to be valid. There are four conditions for the formation of a valid contract. The missing condition that is not provided as an answer selection is capable parties.
If present at the formation of a contract, which of the following does not make a contract voidable?
A. Fraud.
B. Duress.
C. Undue influence.
D. Illegal purpose.
D. An illegal purpose makes the contract inherently void, not voidable purely at the discretion of the parties. Alternatively, voidable contract is one that can be enforced by the party who has the option to perform for not.
If a lease requires the tenant to pay certain expenses such as taxes, maintenance or insurance in addition to the rent, the lease is classified as a(n):
A. Gross lease.
B. Net lease.
C. Percentage lease.
D. Estate for Will.
B. A net lease causes the lessee (tenant) to pay certain expenses such as taxes and maintenance in addition to the rent. This question refers to how the rent is calculated on a commercial property. There are three basic forms: a gross lease requires the lesser (landlord) to pay all expenses. In a percentage lease arrangement, the rental amount is set as a percent of the sales of the business.
When rent is computed based on the gross sales of the business occupying the property, the lease is classified as a(n):
A. Valid lease.
B. Voidable lease.
C. Net lease.
D. Percentage lease.
D. A percentage lease establishes the rental charge based on the sales of the business tenant.
On which type of listing contract is a broker required to state the amount of their commission is negotiable and not fixed by law?
A. Multi family residential listing agreements.
B. Retail commercial center listing agreements.
C. Single use industrial property listing agreement.
D. 1 to 4 unit residential property listing agreements.
D. On listings for 1 to 4 unit residential properties, the broker is required to state that commission rates are negotiable and not fixed by law. This is a public policy requirement under federal law written to protect the less experienced buyer. The property type is the way this targeted group of buyers is distinguished.
If a 16-year-old emancipated minor wishes to sell real property, the broker mat:
A. Not except the listing.
B. Except the listing.
C. Except the listing only with a guarantee from an adult.
D. Except the listing, but it will be avoidable.
B. The broker may except the listing of an emancipated minor. A 16-year-old emancipated minor maybe treated as an adult who has the right to buy and sell real estate.
If a strip of land is washed away by flood, this action is known as:
A. Alluvium.
B. Accretion.
C. Avulsion.
D. Reversion.
Answer is C. Avulsion is the natural process in which land is removed from one person’s property and deposited onto another’s. ex, through a flash flood.
A. Alluvium is Sand or mud, carried by water and deposited on land.
B. Accretion is the buildup of soil by natural causes on property bordering a river, lake, or ocean.
Answers A, B, and C are all terms related to riparian rights.
D. Reversion is a future interest in an estate.
Which of these is a direct building cost?
A. Building permits.
B. Finance charges.
C. Lumber.
D. Legal services.
C. Direct building costs are the construction cost incurred for the labor and materials. All other expenses are indirect.
A residence that has 6”x 6” posts set 4 feet apart instead of 2”x 4” studs is an example of _____________ construction.
A. Post and beam
B. Modular
C. Native American
D. Unsafe
A. Post and beam construction is the correct answer choice. Note the use of the word “posts” in the question as it matches the correct answer choice.
Which of the following is not a soil condition?
A. Alkaline.
B. Adobe.
C. Deciduous.
D. Expansive.
C. Deciduous refers to trees that lose their leaves in the winter, and is this not a soil condition.
What is a “gore”?
A. A triangular shaped parcel of land.
B. A parcel that cannot be developed.
C. Stigmatized property on which a murder was committed.
D. Damaged property.
A. A “gore” is a triangular piece of land.
A broker provides services to both a buyer and a seller in a transaction without disclosing their dual agency status. This is an example of:
A. Deniable agency.
B. Ostensible agency.
C. Voidable agency.
D. Ratified agency.
B. Without disclosure of the dual agency, the actions of the agent will create an ostensible agency relationship due to the appearance of acting as agent.
Which of these actions does not create an agency relationship?
A. Subordination.
B. Implication.
C. Ratification.
D. Verbal agreement.
A. Subordination is a legal matter, to induce someone to form an illegal act such as perjury. It does not create an agency relationship. The alternative answer selections are all possible ways to create an agency relationship.
A listing broker sells an office building to a syndicate of which of the broker is a member without informing the seller of this interest. Before closing, the seller discovers the brokers interest and refuses to sell. What would happen in a civil suit to collect a commission?
A. The case would be transferred to the real estate commissioner.
B. No commission would be due.
C. The broker would be awarded their full commission.
D. The court would demand a mitigation hearing.
B. The broker’s failure to disclose their interest in the syndication allows the seller to deny the commission to the broker.
Which of the following is an illegal activity for a broker under agency law?
A. Accepting commissions from both the buyer and the seller.
B. Acting as an escrow.
C. Selling their own property without disclosing their license status.
D. Depositing additional personal funds into a clients trust account.
D. Depositing personal funds into a clients trust account is an example of improper commingling
An agency relationship in real estate is terminated in multiple ways. Which of these is not likely to be the cause of termination of an agency relationship?
A. The incapacity or death of either the seller or broker.
B. Revocation of the agency by the owner.
C. Destruction of the property.
D. Estoppel.
D. Estoppel is a legal theory barring a person from later asserting or denying a condition based on the person’s previous acts or statements, and thus will not terminate an agency relationship. The alternative answer selections are ways in which an agency relationship is terminated.
A broker who fails to promptly disclose their dual agency status is subject to:
A. A $10,000 penalty.
B. Liability for their clients many losses.
C. Disciplinary action by the internal revenue service
D. Frequent auditing by the Federal Bureau of investigation.
B. Failure to disclose a dual agency status can lead to liability for any losses experienced by the client.
In which appraisal approach to value would the value for the land be calculated separately?
A. Capitalization.
B. Gross rent multiplier.
C. Market comparison
D. Cost.
D. In the cost approach, the cost of constructing the property improvements and the cost of the land are handled separately and then combined to arrive at a final value for the complete property.
The two other appraisal approaches are: sales comparison, comparing the subject property to similar properties recently sold, and the income approach, developing a properties value by comparing the income generated by similar properties that have recently sold to the income generated by the subject property.
To determine the accrued depreciation of a property, a buyers best resource is a(n):
A. County recorder representative.
B. Accountant.
C. Appraiser.
D. Real estate broker.
C. And appraiser is the individual who is most helpful in estimating accrued depreciation.
An important economic factor in real estate is:
A. It’s beneficial use.
B. Whether the property is mobile or immobile.
C. It’s permanence.
D. The size of the structure.
A. The beneficial use of a property is the best choice as an economic factor. Of the alternative answer choices, B and C are unusual since real estate is considered a immobile (versus personal property which is mobile). Answer selection D has merit, yet if the building is empty or of little practical use, the size of the structure itself is not an important economic factor for the property.
A lender must notify a borrower when a final/balloon payment is due:
A. 90 to 150 days prior to the due date.
B. 30 to 90 days prior to the due date.
C. Four weeks prior to the due date.
D. Six months prior to the due date.
A. The required notice for a final/balloon payment due date is 3 to 5 months (90 to 150 days) prior to the due date. The nature of a final/balloon payment, which can be quite large compared to the preceding regular monthly payments, necessitates a significant amount of advance notice.
Acquisition is the opposite of:
A. Ad Valorem.
B. Amortization.
C. Alienation.
D. Avulsion.
C. Alienation is a transfer of property, such as a sale. Thus, it is the opposite of acquisition, which is a purchase of a property.
A. Ad Valorem - Latin phrase meaning “according to value,” used to refer to taxes assessed on the value of property.
B. Amortization - Is the reduction of a financial loan through making payments.
D. Avulsion - A natural process in which land is removed from one person’s property and deposited onto another’s.
A properties cost basis is most affected by an owners:
A. Debt service.
B. Interest expense.
C. Costs of operation.
D. Costs of improvements.
D. Operating costs, interest expenses and debt service have no effect on a properties cost basis. The cost basis equals the purchase price plus improvements minus depreciation.
When the administrator of an estate sells a parcel:
A. It needs to be sold at public auction.
B. It can only be sold “as is”.
C. Court approval is required.
D. The sale cannot legally involve a real estate broker.
C. A sale from an estate involves the court and therefore requires court approval.
When a broker employs a sales person, the broker needs to:
A. Provide annual pay increases in an amount no less than 3%.
B. Exercise reasonable supervision over the activities performed by the agent.
C. Establish a retirement program for the agent.
D. Provide minimal health and dental insurance coverage for the agent.
B. The broker needs to exercise reasonable supervision over their sales staff, including independent contractors. Real estate sales persons are classified as employees for legal purposes and independent contractors for income tax purposes. Answer selection A does not apply and C and D are rare exceptions.
Real estate brokers are required to have written employment contracts with:
A. All clerical staff they employ.
B. Non-licensees they employ.
C. Sales persons they employ.
D. All of the above.
C. Written contracts are required to properly document a brokers employment of a sales person. The contract will state the duties of the broker and agent and who is responsible for a variety of issues such as risk management maintenance, insurance requirements and the split of the commissions.
A real estate broker is subject to disciplinary action from the California Bureau of real estate if they:
A. Extract secret profits that are not disclosed.
B. Commingle trust funds.
C. Fail to supervise the sales people they employ.
D. Any of the above.
D. A broker may be disciplined by the California Bureau of real estate for secret profits, commingling of client funds and failing to supervise their sales staff.
Without being licensed as an escrow office, a broker may handle escrow activities when they:
A. Represent the buyer.
B. Represent the seller.
C. Act as the principal.
D. Are not otherwise involved in a transaction.
D. The broker needs to be involved in the transaction representing one of the principles for themselves in order to act as the escrow officer.
A licensed real estate sales person is primarily responsible to:
A. The buyer.
B. The seller.
C. The principal who pays the commission.
D. Their employing broker.
D. The sales person is an employee of the broker and primarily responsible to the broker. The broker represents the principal.
A buyer is obligated to disclose to the seller:
A. That the listing price is too low.
B. That the seller is mistaken regarding their representations about the zoning of the property.
C. Both A. and B.
D. Neither A. and B.
D. The buyer has no obligation to disclose facts to the seller.
Which of the following does not affect real estate values in subsequent years?
A. Land use controls.
B. Monetary policy.
C. Construction techniques.
D. The purchase price paid for property.
D. Purchase price previously paid for a property has no bearing on the property future value.
Before soliciting business for a brokerage office operating under a fictitious business name, the broker is not required to:
A. Record the fictitious name with the recorders office in the county where their main office is located.
B. Publish the “doing business as” in a newspaper of general circulation.
C. Have a brokers license issued by the California Bureau of real estate with that name.
D. Publish an office policy manual under the fictitious business name.
D. In order to establish a fictitious business name, a broker is required to record the name with the County recorder, publish the name in a newspaper of general circulation and have a brokers license issued by the CalBRE in that name.
Appraiser licensing in California is controlled by what entity?
A. The California Bureau of real estate
B. The California Bureau of real estate appraisers.
C. The department of business oversight.
D. The California department of insurance.
B. California Bureau of real estate appraisers is the entity that controls appraiser licensing in California. The name should make this an easy point.
When an agent modifies a document after it is signed by one or both of the parties, this is referred to as:
A. Correction.
B. Defacing.
C. Notarization.
D. Amanuensis.
B. Defacing occurs when a document is improperly modified on its face, usually by striking copy and interlineation, after it is signed by one or both parties.
A broker receives a full price offer on a house they are listing. Before they present the offer to the seller, another broker brings in an all cash offer for $5000 less. The listing broker is to:
A. Present both offers at the same time.
B. Refuse to present the second offer.
C. Tell the other broker the property has been sold.
D. Present the first offer in the morning and the second offer in the evening.
A. The broker’s fiduciary duty owed to their client requires that all offers be presented so that the seller is allowed to make a decision as to which is best for them.
