TEST 2 -- WRONG

Question 1

An offer which is made contingent upon the buyer’s first obtaining a satisfactory lease on another property is:

(A) an illusory offer; (B) a valid offer; (C) a unilateral contingent offer; (D) unenforceable.

Answer 1

(B) a valid offer

An offer made contingent upon the happening of a certain event (obtaining a lease) is a valid offer. It is quite common for an offer to have contingencies.

Question 2

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

(A) both the buyer and seller will then be equally liable for the debt; (B) the seller is completely relieved from liability on the loan; (C) the buyer assumes all liability for the loan; (D) the buyer will not be personally liable for the loan and the seller remains the borrower of record.

Answer 2

(D) the buyer will not be personally liable for the loan and the seller remains the borrower of record.

When a buyer takes property “subject to” an existing loan, the lender will keep the seller on the loan as the borrower. Seller would be liable for a deficiency (benefit is to the buyer). The buyer’s loss is limited to his equity if foreclosed.

Question 3

In the usual percentage lease, rent is calculated as a percentage of:

(A) the assets of the lessee’s business; (B) the net sales of the lessee’s business; (C) the gross sales of the lessee’s business; (D) the net taxable income of the lessee’s business.

Answer 3

(C) the gross sales of the lessee’s business

A percentage lease is based on a percentage of the gross receipts of the tenant’s business.

Question 4

All of the following statements regarding options are true, EXCEPT:

(A) the option binds the optionee to perform; (B) some valuable consideration must pass from optionee to optionor; (C) in the lease/option, the provisions of the terms of the lease is sufficient consideration to support the option; (D) an option does not give the optionee the right to use the land.

Answer 4

(A) the option binds the optionee to perform

The option binds the optionor, not the optionee.

Question 5

A real estate broker handles both real estate sales and property management. How are the buyer’s earnest money deposits, and the rent collected on apartments owned by the broker, along with apartments managed for others handled as they relate to the client trust account?

(A) all money received by the broker may be put in his trust account if he is fidelity bonded for the full account balance; (B) all money may be placed in the trust account if the broker keeps proper records of each deposit and withdrawal in the trust account ledger; (C) it is legal only if the broker maintains two separate trust accounts, one for the earnest money deposits and one for the rent he collects for his own property and the property he manages for the clients; (D) it is illegal for the broker to place any rent he collects on property he owns in the client trust account.

Answer 5

(D) it is illegal for the broker to place any rent he collects on property he owns in the client trust account.

A trust account is for holding client’s money, not the brokers. A broker may legally keep no more than $200 of his own money in the trust account.

Question 6

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

(A) actual authority; (B) specific authority; (C) ostensible authority; (D) all of the above.

Answer 6

(D) all of the above.

An agent has authority which the principal actually, specifically or ostensibly (apparently) confers upon him.

Question 7

In order to exist, an easement must:

(A) be visible; (B) be recorded; (C) have a dominant tenement; (D) have a servient tenement.

Answer 7

(D) have a servient tenement.

All easements must have a servient tenement.

Question 8

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 the owner/seller of a home. The real estate broker must disclose that he is the brother of the tenant/optionee to:

(A) the owner/seller of the home; (B) the seller’s broker or agent; (C) the multiple listing service; (D) nobody.

Answer 8

(A) the owner/seller of the home

The broker must disclose any special relationship with the buyer/tenant/optionee when representing his brother in negotiations with a seller/ landlord/optionor.

Question 9

A real estate broker may escrow a transaction:

(A) if he or she is involved as an agent for the buyer or the seller in the transaction being escrowed; (B) whenever he or she is requested to do so by another broker; (C) under no circumstances unless he or she is acting as a principal; (D) only if he or she is incorporated and licensed by the Department of Corporations.

Answer 9

(A) if he or she is involved as an agent for the buyer or the seller in the transaction being escrowed

A real estate broker may escrow a transaction if he is involved as an agent, and not as a principal.

Question 10

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

(A) quantity; (B) quality; (C) durability; (D) all of the above.

Answer 10

(D) all of the above.

When an appraiser analyzes rent using the income approach, she will base her appraisal on the characteristics of the quantity, quality and durability of the income.

Question 11

Mary listed her farm with Broker Bob. In the listing Mary said she would not consider any offer with a down payment over 23%. Broker Bob presented a full price, all cash offer which Mary turned down. Which of the following is true?

(A) Mary can turn down the offer without liability, because the offer did not fully meet the terms of the listing; (B) the broker is entitled to a commission based upon 23% of the purchase price; (C) the broker should advise Mary to put the funds in excess of 23% of the purchase price in a long term CD; (D) the broker is entitled to a full commission.

Answer 11

A) Mary can turn down the offer without liability, because the offer did not fully meet the terms of the listing

The seller can turn down the offer without liability because the offer did not fully meet the terms of the listing

Question 12

All of the following are common types of misrepresentation, except:

(A) innocent misrepresentation; (B) malicious misrepresentation; (C) negligent misrepresentation; (D) fraudulent misrepresentation.

Answer 12

(B) malicious misrepresentation

Innocent misrepresentation, negligent misrepresentation and fraudulent misrepresentation are common types of misrepresentation. Malicious misrepresentation is relatively rare.

Question 13

When an applicant passes the real estate exam, how much time does he/she have to apply for the license?

(A) one year from the date of the exam; (B) one year from the date they received the results of the exam; (C) two years from the date of the exam; (D) two years from the date they received the results of the exam.

Answer 13

(A) one year from the date of the exam

When you pass the salesperson or broker exam, you have one year from the date of your exam to apply for the license.

Question 14

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:

(A) unethically; (B) illegally; (C) as a single agent; (D) as a dual agent.

Answer 14

(C) as a single agent

The broker was acting as a “single agent,” representing the buyer only in the transaction.

Question 15

A charge imposed on real property is called a:

(A) an encumbrance; (B) a quitclaim; (C) a lien; (D) a covenant not to impose encumbrances.

Answer 15

(C) a lien

A lien can be described as a charge on real property.

Question 16

The Foreign Investment in Real Property Tax Act requires that a buyer of real property must withhold and send to the Internal Revenue Service (IRS) 10% of the gross sale price if the seller of the real property is a foreign person. When Bob is buying a home from a foreign seller, he will not have to withhold any funds if:

(A) he provides the IRS with his tax payer ID number; (B) the home is purchased for $200,000 and he plans to reside in the home; (C) the home is purchased for less than $500,000; (D) Bob provides the IRS with an affidavit proving that Bob is a United States citizen.

Answer 16

(B) the home is purchased for $200,000 and he plans to reside in the home

The Foreign Investment in Real Property Tax Act (FIRPTA) requires that a buyer of real property withhold and send to the Internal Revenue Service (IRS) 10% of the gross sale price if the seller of the real property is a foreign person. There is an exemption to this requirement when the sale price does not exceed $300,000, and the buyer intends to reside in the property.

Question 17

Elizabeth, a licensed California 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 California Real Estate Law:

(A) Elizabeth may split the commission with a broker of another state; (B) Elizabeth cannot divide a commission with a broker of another state; (C) Elizabeth can pay a commission to a broker of another state only if that broker is also licensed in California; (D) none of the above.

Answer 17

(A) Elizabeth may split the commission with a broker of another state

A California real estate broker can share her commission with an out-of-state broker.

Question 18

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

(A) by the broker for 3 years from the date of the execution of the contract: the salesperson’s employment. (B) by the salesperson for 3 years from the date of the execution of the contract; (C)
by the broker for 3 years from the date of the termination of the salesperson’s employment; (D) by both broker and salesperson for 3 years from the date of the termination of the salesperson’s employment.

Answer 18

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

The employment agreement between the broker and a salesperson must be retained by both broker and salesperson for 3 years from the date of the termination of the salesperson’s employment.

Question 19

A tenant entered into a two year lease. The lease made no mention of assignment or subleasing. The tenant:

(A) may assign or sublease to another tenant, because the lease made no mention of assignment or subleasing; (B) may sublease to another tenant, but only with the prior consent of the landlord; (C)
cannot sublease to another tenant; (D) may assign the lease, but not sublease.

Answer 19

(A) may assign or sublease to another tenant, because the lease made no mention of assignment or subleasing

A tenant may assign or sublease the property if the lease does not prohibit it.

(What is difference between assign and sublease?)

Question 20

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

(A) within 2 days of the time the borrower signs it; (B) within three days of receipt of a completed loan application or before the borrower is obligated to take the loan, whichever is earlier; (C) within 36 hours of the time the borrower signs it; (D) before escrow closes.

Answer 20

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

When a real estate licensee negotiates a loan secured by real property, he must deliver the mortgage loan disclosure statement to the borrower within three days of receipt of a completed loan application or before the borrower is obligated to take the loan, whichever is earlier.

Question 21

Agents must present offers to the seller until:

(A) opening of escrow; (B) buyer has qualified for the loan; (C) documents were already drawn; (D) close of escrow.

Answer 21

(D) close of escrow

A real estate agent must present all offers unless:
(1) Patently (obviously) frivolous, or (2) The principal has told him not to present further offers, or certain types of offers, or (3) The property has already sold and escrow has closed.

Question 22

When a real estate licensee handles the sale of a registered mobilehome, the agent must give written notice to the Department of Housing and Community Development within how many days?

(A) three calendar days; (B) five business days; (C) ten calendar days; (D) ten business days.

Answer 22

(C) ten calendar days

When a real estate broker sells a registered mobilehome, the broker must give written notice of the transfer to the Department of Housing and Community Development no later than ten calendar days after the sale.

Question 23

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

(A) the purchase price; (B) prepaid rents; (C) prepaid property taxes; (D) none of the above.

Answer 23

(A) the purchase price

The purchase price is a debit on the buyers closing statement.

Question 24

Which of the following may a minor be able to undertake without court approval?

(A) acquisition of real property through gift or inheritance; (B) give valid power of attorney to encumber property; (C)
sell real estate through a guardian; (D) all of the above.

Answer 24

(A) acquisition of real property through gift or inheritance

A minor may acquire real property by gift or inheritance without court approval.

Question 25

A broker has an oral listing to sell real property. The broker presented an offer, which the seller accepted. The seller then requested that the broker give him the buyer’s deposit check. The broker must:

(A) first deposit the check into the broker’s trust account; (B) deposit the check with a neutral escrow within three business days; (C) obtain the written consent of the buyer before releasing the check to the seller; (D) return the check to the buyer within three business days.

Answer 25

(C) obtain the written consent of the buyer before releasing the check to the seller

If a seller requests the deposit after an offer has been accepted, the broker must obtain the written consent of the buyer before releasing the check to the seller.

Question 26

Mr. Robles constructed a $500,000 income producing building on a lot for which he paid $200,000. Mr. Robles financed the construction of the building by paying $300,000 cash and obtaining an 8% per annum interest rate loan for $200,000 secured by a first trust deed lien against the property. Under these conditions, Mr.Robles can depreciate on future income tax returns:

(A) $200,000; (B) $300,000; (C) $500,000; (D) $700,000.

Answer 26

(C) $500,000

A developer who built an income producing building for $500,000 could take depreciation totaling $500,000 over the life of the building.

Question 27

A contract has been executed when it has been:

(A) signed, notarized and recorded; (B) entered into under the jurisdiction of the probate court; (C) completely and fully performed; (D) signed under threat of death.

Answer 27

(C) completely and fully performed

A contract has been executed when it has been completely and fully performed.

Question 28

A loan secured by real property usually consists of:

(A) a financing statement and trust deed; (B) a promissory note and a trust deed; (C) FHA or VA insurance; (D) a security agreement and financing statement.

Answer 28

B) a promissory note and a trust deed

A loan secured by real property usually consists of a promissory note and a trust deed.

Question 29

Senior citizens may be able to defer the payment of the property taxes on their residence. In order to find out if they qualify for the program, the senior citizen should contact the:

(A) Real Estate Commissioner; (B) State Controller; (C) State Housing Authority; (D) County tax assessor.

Answer 29

(B) State Controller

A senior citizen who wishes to defer payment of property taxes must contact the State Controller

Question 30

A taxpayer with an adjusted gross income of less than $100,000 can offset ordinary income with a passive loss not to exceed:

(A) $10,000; (B) $15,000; (C) $20,000; (D) $25,000.

Answer 30

(D) $25,000

A taxpayer with an adjusted gross income of less than $100,000 can offset ordinary income with a passive loss not to exceed $25,000.

Question 31

The Statute of Frauds requires which of the following contracts to be in writing?

(A) an employment contract to represent the seller of a business opportunity; (B) a contract selling a business opportunity; (C) a contract which is not to be performed within one year of its making; (D) a nine month lease

Answer 31

(C) a contract which is not to be performed within one year of its making

A contract which is not to be performed within one year of its making must be in writing in order to be enforceable under the Statute of Frauds.
A. debt and equity funds;
B. liquid and non-liquid investments;
C. the supply and demand of investment capital;
D. guaranteed returns and speculative investments.
F. Real estate investments are commonly funded by a combination of debt (loan) and equity funds (down payment).

Question 32

An agent who acts exclusively as the agent for the buyer may:

(A) present offers to the seller only; (B) present offers to the seller and/or seller’s agent; (C)
present offers to the seller’s agent only; (D) is acting illegally.

Answer 32

(B) present offers to the seller and/or seller’s agent

An agent who is the exclusive agent for the buyer may present offers to the seller and/or the seller’s agent.

Question 33

When a buyer gives an agent a postdated check to accompany an offer, it:

(A) may not be accepted by the agent; (B) must be cashed immediately; (C) must be delivered to the seller within one day; (D) may be retained but must be disclosed to the seller.

Answer 33

(D) may be retained but must be disclosed to the seller.

The agent may accept a postdated check from a buyer as deposit, but he must disclose this to the seller when presenting the offer.

Question 34

An agent who pays part of the commission to the buyer:

(A) must inform the seller; (B) is subject to criminal prosecution; (C) is subject to discipline by the Real Estate Commissioner; (D) is subject to a civil lawsuit by the seller, even if he disclosed everything to the seller.

Answer 34

(A) must inform the seller

An agent may pay part of the commission to the buyer if he informs the seller.

Question 35

A property management agreement usually arranges for payment of compensation as follows:

(A) a salary plus a percentage of the net income; (B) flat fee plus a percentage of the gross income; (C) out-of-pocket expenses plus a percent of the gross income; (D) paid only on duties performed.

Answer 35

(B) flat fee plus a percentage of the gross income

Property managers usually receive a flat fee plus a percentage of the gross income over the term of the lease.

Question 36

Which of the following best describes an acre?

(A) 4,350 sq. ft.; (B) 4,840 sq. yds.; (C) 43,500 sq. ft.; (D) 50,000 sq. ft.

Answer 36

(B) 4,840 sq. yds

An acre contains 4,840 sq. yds.