Unit 1: The Business of Real Estate

Question 1

Caveat Emptor

Answer 1

Let the buyer beware (doesn’t apply to real estate in the same way. Seller must disclose. Agents have a duty to visually inspect.)

Question 2

Business and Professions Code

Answer 2

All real estate laws are found in the Business and Professions Code (B&P)

Question 3

California Bureau of Real Estate

Answer 3

Administers the Real Estate Law in California

Question 4

Real Estate Commissioner

Answer 4

1) Appointed by the Governor
2) Screens applicants for licensure
3) Investigates complaints against licensee (fraud, theft forgery, etc. Not commission disputes).

Question 5

Business Structures for Brokerages

Answer 5

1) Corporation
2) Sole Proprietorship
3) Partnership

Question 6

Corporation

Answer 6

One officer of the corporation is a licensed broker and is designated the responsible broker-officer.

Question 7

Partnership

Answer 7

Between 2 brokers, a broker and a salesperson, or a broker and someone who is unlicensed. Unlicensed partners cannot do anything requiring a license.

Question 8

Sole Proprieter

Answer 8

Real estate activities can be carried out under a licensed broker. The owner has all liability. For business liability and tax purposes, most brokerages choose to incorporate.

Question 9

A salesperson cannot

Answer 9

Work for more than one broker at a time.

Question 10

The license of any salesperson working for the broker must:

Answer 10

Be available for inspection at the broker’s main office.

Question 11

For compensation purposes, salespeople are:

Answer 11

Independent Contractors

Question 12

For work hour requirements, salespeople are:

Answer 12

Independent Contractors

Question 13

For tax purposes, salespeople are:

Answer 13

Independent Contractors

Question 14

From a liability perspective, salespeople are:

Answer 14

Employees

Question 15

What can you do with Real Estate License

Answer 15

-Residential Real Estate
-Commercial Real Estate
-Manufactured/Mobile Homes
-Mortgage Loan Transactions
-Mineral, Oil, and Gas Transactions
-Property Management
-Selling Business Opportunities (not real estate transactions. Personal property transferred using a bill of sale). Bill of sale for the business, deed for the property.
-

Question 16

Pre-paid rental listing service license (PRLS)

Answer 16

• Sell a list of available rental property.
• Only good for 2 years (Real Estate 4 years)
• Requires $10,000 surety bond per location

Question 17

Exemptions from real estate licensing requirements

Answer 17

• A person who deals only with his/her own property
• Anyone holding a duly executed power of attorney from the owner of the property.
• A trustee selling under a deed or trust.

Question 18

One reason you might get denied a license in the state of California

Answer 18

Back child support. You may get a temporary 150-day license to make it right.

Question 19

One thing they don’t check in your background

Answer 19

Credit

Question 20

2 criteria for a brokers license

Answer 20

• Experience- two years of a full-time salesperson
• Education- bachelor’s degree or higher in real estate.
• 8 college-level courses

Question 21

70/30 rule

Answer 21

If you’re over 70 and have over 30 years of experience, no more educational requirements for renewals.

Question 22

The Real Estate License Number

Answer 22

CalBRE requires that the real estate licensee’s identification number appear on materials used to solicit consumers, including Business cards, Stationary, Websites owned, promotional, or advertising flyers.

Question 23

Business Opportunities

Answer 23

Need a real estate license but it is purchased using a bill of sale, not a deed.

Question 24

The Real Estate Law is found in

Answer 24

The Business and Professions Code

Question 25

The Real Estate Commissioner reports to

Answer 25

The Governor

Question 26

A salesperson owns 25% of the outstanding shares of Rollo Realty, Inc., and the broker owns the remaining shares. This division of ownership is:

Answer 26

Acceptable

Question 27

A salesperson is part owner of Rollo Realty, Inc. In the broker’s absence, the salesperson frequently reviews the work of sales associates. This is:

Answer 27

Prohibited

Question 28

A real estate business that is a partnership can have more than one office location, provided

Answer 28

A broker partner obtains an additional license for each location.

Question 29

The sale or transfer of goods ordinarily held for sale in the course of business is governed in California by

Answer 29

the Uniform Commercial Code.

Question 30

An officer of Ajax Corporation, who is not a real estate licensee, successfully negotiated the purchase of the Smith Widget Plant on behalf of Ajax. The officer received a commission on the sale in addition to his normal salary. The officer of Ajax Corporation:

Answer 30

Should have had a real estate license

Question 31

If a real estate license is NOT renewed before it expires, the licensee

Answer 31

Must cease all real estate activities.

Question 32

A real estate licensee can offer a mobile home for sale that is:

Answer 32

In a location where it can legally remain for one year.

Question 33

A couple desperately wants to move to Pine Bend, and they like the Seller’s house, which is listed with the Broker. The couple tells the broker they will “make it worth his while” if he can persuade the sellers to accept their offer, and they send an expensive food basket to the broker as a sign of their good faith. The broker neglects to mention this to the sellers. This practice is:

Answer 33

Prohibited

Question 34

A broker routinely places earnest money deposits in his personal account for overnight safe keeping. This practice is:

Answer 34

Prohibited

Question 35

A broker has an exclusive listing agreement with a property owner. The listing will terminate “when the parties agree.” This practice is:

Answer 35

Prohibited

Question 36

When a broker exercised his option to buy Whiteacre, he presented to the owner of Whiteacre a written statement of his expected profit in the transaction. The seller agreed in writing to proceed with the sale. This conduct is:

Answer 36

Mandated

Question 37

The broker-officer of XYZ Realty, Inc., does not like the overly aggressive sales tactics of XYZ’s salespeople but has not reprimanded them because business is so good. The broker’s conduct is:

Answer 37

Discouraged

Question 38

A broker wants to help out his neighbor’s son, who recently acquired a B.A. in history from Back East University. The broker hires the graduate to show property to prospective buyers. Because the new employee has no real estate license, the broker handles all the negotiating. This practice is:

Answer 38

Prohibited

Question 39

A salesperson is selling the Greenacre Estate. An offer has been accepted, and the closing will take place in two weeks. While the owners are out of town, the buyer asks if the closing can be put off for one day. The salesperson agrees on behalf of the owners, for she is sure they will not object. The salesperson’s conduct is:

Answer 39

Prohibited

Question 40

A house is for sale following a murder in the house six months earlier. A salesperson, showing an out-of-town prospect through the house, decides to keep information about the murder to himself. The salesperson’s conduct is:

Answer 40

Prohibited

Question 41

A broker is so busy that he never has the time to return the phone calls of his principals. He prefers to spend his time in the field making sales and acquiring new listings. This practice is:

Answer 41

Discouraged