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50 Cards in this Set
- Front
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A property owner dies testate, leaving a spouse and three children. The owner's estate is distributed: a. to their heirs by right of reversion. b. one-half to their spouse and one-half divided among the three children. c. equally among the heirs. d. in accordance with their will. |
d. in accordance with their will.(To die testate is to die with a will. The terms of the will dictate how the inheritance is divided.) |
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A(n) __________ is a broker who simultaneously represents the best interest of opposing parties in a transaction, e.g., both the buyer and the seller. a. dual agent. b. secret agent. c. subagent. d. finder. |
a. dual agent. (The dual agent is a broker who concurrently represents both principals in a single transaction, such as the buyer and seller, lessee and lessor, or borrower and lender.) |
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An American Land Title Association (ALTA) policy of title insurance goes beyond the protection afforded by a California Land Title Association (CLTA) policy in guarding against: a. existing liens and encumbrances as disclosed by the public records. b. a deed of reconveyance issued by a minor. c. the location of property lines according to a formal survey. d. an error in the sequence of recording trust deed loans. |
c. the location of property lines according to a formal survey.(Answer selection C is one of the extended benefits of an American Land Title Association (ALTA) policy.) |
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What is meant by "unadjusted basis"? a. The original cost of a property minus losses and depreciation. b. The original cost of a property plus improvements minus depreciation. c. The equity built up in a property due to amortization. d. The original cost of a property. |
d. The original cost of a property. (Be careful! The unadjusted basis is the original cost of the property. One is generally asked to identify the adjusted basis, which is the original cost of a property plus improvements minus depreciation. This value is required for capital gains tax purposes. However, this question is looking for the unadjusted basis.) |
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When a purchase agreement states the property is being sold "as is," it: a. still requires the buyer to receive a Transfer Disclosure Statement (TDS) noting any material facts which affect the property's value. b. puts the buyer on notice they should beware. c. underscores the fact that nothing is warranted. d. releases the seller of the requirement to deliver a TDS to the buyer or make any disclosures about the condition of the property. |
a. still requires the buyer to receive a Transfer Disclosure Statement (TDS) noting any material facts which affect the property's value.("As is" is a nebulous and frequently misunderstood statement in real estate practice. A Transfer Disclosure Statement (TDS) containing property information including known or suspected property defects affecting value is required to be delivered to a prospective buyer on the sale of a one-to-four unit residential property as soon as practicable on the commencement of negotiations.) |
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Seller Vega listed a vacant lot with Broker Wright for $120,000. Prospective buyer Marty submitted an offer at a purchase price of $100,000 with the offer to expire in 30 days. The next day, Seller Vega countered at $110,000. Buyer Marty rejected the counter. Three days later, Seller Vega delivered to Broker Wright a signed acceptance of Buyer Marty's initial $100,000 purchase offer. When Broker Wright told Buyer Marty of Seller Vega's acceptance, Marty stated he did not intend to buy the property. Based on the foregoing actions: a. there is no contract. b. the contract is unenforceable. c. a unilateral contract has been made. d. the buyer must submit a counteroffer. |
a. there is no contract. (When a counteroffer is made, no matter what the reason may be, the original offer is voided.) |
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A seller listed their home for sale with their broker for $400,000. The seller told their broker it was imperative that the property be sold quickly. The seller's broker showed the property to a buyer and told them the seller was financially insolvent and would accept $380,000. Based on the seller's broker's statement, the buyer submits a $380,000 offer which the seller accepts. Concerning the seller's broker's actions, which of the following is true: a. the seller's broker violated their fiduciary obligation to the seller since they acted in excess of their authority. b. when the seller accepted the offer, the broker's actions were vindicated. c. the broker's action were proper since the seller indicated they wanted an immediate sale. d. the broker interpreted the seller's wishes and produced a sale accordingly. Acceptance of the offer made the broker's actions acceptable. |
a. the seller's broker violated their fiduciary obligation to the seller since they acted in excess of their authority. (This activity is a violation of the fiduciary duty regardless of the later actions or results.) |
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All of the following are essential to creating a valid contract, except: a. lawful object. b. mutual consent. c. capable parties. d. written documentation. |
d. written documentation. (This is an EXCEPT question. An oral contract may be valid, and thus D. written documentation is the correct answer. A valid contract requires four elements be present: capable parties, consideration, legal object and mutual consent.) |
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Which of the following is regarded as real property? a. Growing crops that have been mortgaged. b. Crops that have been sold but have not been harvested. c. Riparian rights. d. Trade fixtures. |
c. Riparian rights. (Riparian rights go with the land and are appurtenant to it.) |
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All of the following are included in the laws governing the government power of eminent domain, except: a. the right of the government to take property from the owner for a legitimate public use. b. a condemnation action in court. c. compensation at fair market value (FMV). d. the exercise of zoning authority. authority. |
d. the exercise of zoning authority.(Eminent domain has no specific relevance to zoning. The consideration that must be paid to the owner is the fair market value (FMV) of the property which is determined as the price a willing buyer would pay to a willing seller when the property has had adequate exposure on the market and neither party is under any duress.) |
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What is contained in all purchase agreements that states the existence or nonexistence of each broker's fiduciary agency with the various parties to the transaction? a. Agency confirmation provision. b. Broker liability agreement. c. Attorney fee provision. d. Hold harmless agreement. |
a. Agency confirmation provision. (The agency confirmation provision discloses the agency of each broker in the transaction and is contained in all purchase agreements and counteroffers.) |
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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. court approval is required. (A sale from an estate involves a court and will therefore require court approval.) |
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The value of unimproved property is best estimated by which of the following appraisal approaches? a. The income approach. b. The sales comparison approach. c. The cost approach. d. Capitalization rate (cap rate). |
b. The sales comparison approach. (The sales comparison is always the preferred appraisal approach when comparable sales are available. For unimproved property, the cost approach is not possible as the property does not contain existing improvements. Answer choices A and D both require a rental income stream which is not stated in the question and unlikely for an unimproved property.) |
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Under which one of the following listing contracts must an owner pay a commission, regardless of who sells the property? a. An exclusive agency listing. b. An exclusive right to sell listing. c. A net listing. d. An open listing. |
b. An exclusive right to sell listing.(Similar to Question 24, an exclusive right to sell listing agreement guarantees a commission will be paid to the broker regardless who sells it.) |
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A seller's agent listed a ranch for sale under an exclusive right to sell listing. A buyer's agent,working through the local multiple listing service (MLS), presented an offer which the seller accepted. During escrow, the seller's agent discovered the buyer had recently purchased many similar ranches in the area at a far higher cost per acre than had been offered in this transaction. What should the seller's agent do? a. Do nothing because the deal is in escrow. b. Disclose all information to the seller and let the seller decide what to do. c. Cancel the escrow on behalf of the seller and try to resell the property for a higher price. d. Inform the seller, but insist the deal must stay in escrow. |
b. Disclose all information to the seller and let the seller decide what to do. (The listing agent's fiduciary duty requires them to disclose all material facts to their client, including the existence of the other transactions.) |
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A standard policy of title insurance does not cover: a. unrecorded liens. b. easements and liens on the property not revealed by the public records. c. rights of parties in possession. d. All of the above. |
d. All of the above. (Only the American Land Title Association (ALTA) policy covers these items. Recognize how information in this question can make it possible to answer other questions regarding alternative title insurance policies.) |
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A real estate broker acts from a position of trust for the seller or buyer they have been contracted to represent. This relationship is legally described as a(n): a. attorney-in-fact. b. ostensible agent. c. fiduciary relationship. d. independent contractor relationship. |
c. fiduciary relationship. (The name of the agency relationship between the broker and the client is called fiduciary.) |
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To determine the accrued depreciation for a property, a buyer's best resource is a(n): a. county recorder representative. b. accountant. c. appraiser. d. real estate broker. |
c. appraiser. (An appraiser is the individual who is most helpful in estimating accrued depreciation.) |
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The cost of a capital improvement and its effect on market value are: a. always the same. b. never the same. c. generally the same. d. rarely the same. |
d. rarely the same. (The cost of an improvement and its effect on value are rarely the same. The contribution of the improvement is usually less than the cost. An appraiser is most often concerned with the added value –contribution – of the improvement.) |
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Which of the following is not considered ethical behavior? a. A broker who approves of a pocket listing policy among their staff that is done for personal gain, not to benefit the client. b. Keeping complete records of all sales and listings. c. Resolving disputes between brokers through mediation. d. Disclosing agency relationships to all interested parties. |
a. A broker who approves of a pocket listing policy among their staff that is done for personal gain, not to benefit the client. (This is a NOT question. The pocket listing is inappropriate since, for the agent's personal gain, the property is not being exposed in the multiple listing service (MLS). The alternative answer selections are all positive ethical decisions, and thus cannot be correct. If the NOT in the question was missed, it may be difficult to choose between the remaining incorrect answers.) |
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Which of these actions does not create an agency relationship? a. Subornation. b. Implication. c. Ratification. d. A verbal agreement. |
a. Subornation. (This is a NOT question. Subornation is a legal matter, to induce someone to perform 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.) |
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A dispute over ownership rights and interests held in real property may be settled by: a. a quiet title action. b. a partition action. c. a declaratory relief action. d. a lis pendens. |
a. a quiet title action. (Quiet title is a court action to clear clouds on a property's title.) |
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Regulation Z (Reg Z) of the Federal Truth-in-Lending Act (TILA) gives the borrower a 3 day right of rescission when the loan is: a. a purchase money loan secured by a deed of trust on commercial property. b. a loan to refinance the borrower's personal residence. c. a Federal Housing Administration (FHA) or Veterans Administration (VA) loan to purchase a single family, owner occupied residence. d. a loan to purchase a commercial building. |
b. a loan to refinance the borrower's personal residence. (Regulation Z (Reg Z) of the Federal Truth-in-Lending Act (TILA) applies to one-to-four unit residential properties, therefore answer selections A and D do not apply. Further government loans have their own restrictions.) |
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A seller enters into an exclusive right-to-sell listing with an agent but does not receive a copy of the signed agreement. The seller, believing this relieves them of any obligations, personally sells the property while the listing is in effect. What is the outcome? a. The listing is invalid and the broker is liable to be disciplined. b. The broker did nothing wrong. c. The listing is valid and enforceable, but the broker is liable to be disciplined. d. The broker may be disciplined only if they accept the commission. |
c. The listing is valid and enforceable, but the broker is liable to be disciplined. (The failure to deliver a copy of any signed document is a violation of agency law that may warrant disciplinary action by the Department of Real Estate (DRE). However, the signed listing contract is still valid and enforceable against the seller.) |
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Failing to provide financing in certain communities is called: a. redlining. b. redevelopment. c. panic selling. d. subordination. |
a. redlining. (This is an example of redlining. Panic selling is similar to blockbusting.) |
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A federally chartered bank charges an additional $200 fee on loans made to non-English speaking borrowers. This fee is: a. permitted if the fee is justified by the additional cost of translating contracts and hiring an interpreter. b. in violation of the Holden Act. c. not in violation of the any Fair Housing laws or regulations. d. prohibited under the Statute of Frauds. |
b. in violation of the Holden Act.(The California Holden Act makes it unlawful to discriminate in real estate financing by charging additional fees only to a certain group of people.) |
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A broker may never: a. accept a commission from the buyer and the seller. b. sell their own property to a customer. c. act as an escrow. d. None of these. |
d. None of these. (All of those are legal actions for a broker.) |
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In a general plan, what is the method of enforcement used by the planning commission? a. Escheat. b. Prescriptive easement. c. Eminent domain. d. Zoning. |
d. Zoning. (Enforcement of the general plan by the planning commission is accomplished through zoning laws.) |
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Which of the following is not a part of the cost approach appraisal method? a. Unit-in-place. b. Capitalization. c. Quantity survey. d. Index method. |
b. Capitalization. (Capitalization is an income approach method. Unit-in-place is a sub-element of construction. The index method is for historic cost valuations. Quantity survey is the most detailed method used by sub-contractors when making bids on projects.) |
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A broker's fiduciary obligation to protect a seller's confidential information continues: a. after the term of the listing agreement. b. for the term of the listing agreement. c. until the close of escrow. d. for two years after the close of escrow. |
a. after the term of the listing agreement. (Confidential financial information needs to be protected indefinitely.) |
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On the transfer of real property, a previous grant of an unlocated easement is: a. valid. b. void upon transfer. c. voidable by the servient tenement if not used for five years. d. voidable by the servient tenement since a deed cannot be the instrument used to create an easement. |
a. valid. (An easement created by deed cannot be voided by nonuse. None of the alternative answer selections are reasonable — a servient tenement has no authority to void an easement.) |
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A disclosure which warns a buyer they may be liable for additional tax obligations after the close of escrow is the: a. supplemental tax bill disclosure. b. title insurance notice. c. military airport expansion disclosure. d. methamphetamine contamination notice. |
a. supplemental tax bill disclosure. (Supplemental taxes are those which cover the remaining portion of the year after escrow closes. Property taxes are levied from July to June of the following year. If an escrow closed on April 1st, the buyer is obligated for the final quarter of the year. If the transfer price is higher than the assessed value, the supplemental bill will be ¼ of the annual tax expense for the additional value.) |
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When a broker employs a salesperson, 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. exercise reasonable supervision over the activities performed by the agent.(The broker needs to exercise reasonable supervision over their sales staff, including independent contractors. Real estate salespersons 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.)c. establish a retirement program for the agent. |
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When Jack sells his home, he wants to be relieved of the primary liability for payment of the existing loan. He needs to find a buyer who is willing to: a. take the property subject to the existing loan. b. assume the existing loan. c. execute a land contract. d. make a large down payment. |
b. assume the existing loan. (The buyer's assumption of the loan is the only answer selection offered that will relieve the seller of the primary responsibility for the underlying debt. Though the obvious answer would be for the seller to pay off the loan, that answer selection is not provided and therefore cannot be selected.) |
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When using the market comparison approach to appraise a single family residence (SFR), property comparisons are based on: a. the gross rent multiplier (GRM). b. price per cubic foot. c. the rental income the property generates. d. the entire property. |
d. the entire property. (When making property comparisons for the market approach, the appraiser considers the entire property and the immediate area, including its location, schools and other off-site elements that affect value. Answer selections A and C are related to the income approach, not the market comparison approach. Answer selection B is used for the cost approach and is employed only for specific types of properties, such as warehouses.) |
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Ethics is most nearly defined as: a. a broker's responsibility to the public, their principal and other brokers. b. honesty. c. sincerity. d. fiduciary. |
a. a broker's responsibility to the public, their principal and other brokers.(Given the choices offered, answer selection A. a broker's responsibility to the public, their principal and other brokers is the best description of ethics in real estate. Each of the alternative answer choices may seem appropriate, but not sufficiently inclusive.) |
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If a newspaper advertisement run by a licensee fails to identify their name or license number,this is referred to as: a. misleading conduct. b. a violation of the Truth-in-Lending Act (TILA). c. a blind ad. d. unethical behavior. |
c. a blind ad.(A blind ad is marketing material that fails to alert the reader to the fact that the advertisement was placed by a licensed real estate agent or broker.) |
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If a newspaper advertisement for the sale of a condominium states only the annual percentage rate (APR): a. the number of payments needs to be included. b. the down payment amount needs to be included. c. the total financing charges need to be included. d. no other disclosures are required. |
d. no other disclosures are required.(The annual percentage rate (APR) may stand alone as financial information without providing additional financial information in a newspaper advertisement.) |
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A subdivider needs to give a copy of the Real Estate Commissioner's public report to: a. anyone who is likely purchase one or more lots. b. anyone upon request. c. only bona fide purchasers who have signed a purchase contract. d. the salespeople they employ. |
b. anyone upon request. (A public report issued by the Real Estate Commissioner has to be made available to anyone who requests it. The report contains all material facts regarding the subdivision, including financial matters and items of record such as CC&R's.) |
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In the appraisal of a residential property, when is the cost approach most appropriate? a. For a new property. b. For a property constructed 15 years ago. c. For a property constructed over 30 years ago. d. For an income-producing multi-family property. |
a. For a new property. (New properties are the most appropriate for cost approach appraisals due to the challenge of calculating accrued depreciation on older properties.) |
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The placement of a house upon the lot is referred to as its: a. preference. b. zoning classification. c. orientation. d. location. |
c. orientation. (The placement of a house on its lot is called its orientation. This is also used to describe a direction such as “oriented toward the southern exposure.” Other than location, the alternative answer selections can be easily eliminated.) |
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The promissory note and mortgage are signed by: a. the mortgagee. b. the lender. c. the trustee. d. the mortgagor. |
d. the mortgagor. (Real estate mortgages are secured by property. Thus, the property owner (mortgagor) signs the promissory note and mortgage.) |
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A property owner intending to sell their property wants to add specific instructions to the listing specifying the property is not to be offered to anyone who is not a Caucasian. The broker is to: a. take the listing anyway and wait to see if anyone complains. b. tell the owner it is unlikely that a minority member would want to move into the neighborhood. c. refuse to take the listing and explain to the owner that this discriminatory activity violates both state and federal laws. d. explain to the owner that a licensed broker cannot discriminate, but a private owner can. |
c. refuse to take the listing and explain to the owner that this discriminatory activity violates both state and federal laws.(The broker has a fiduciary duty to their client to inform them of the legal ramifications of discrimination. All the alternative selections are clear violations of fair housing laws.) |
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The Fair Employment and Housing Act defines housing accommodations as improved or unimproved real property used or intended to be used as a residence by the owner and which consists of not more than: a. four residential units. b. ten residential units. c. one single family residence (SFR). d. five or more residential units. |
a. four residential units.(Fair housing laws are always based on one-to-four unit residential properties. This is true for lending under The Real Estate Settlement Procedures Act (RESPA) as well as rental and purchase arrangements handled by a licensed agent.) |
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The Federal Truth-in-Lending Act (TILA) defines the annual percentage rate (APR) as: a. the total of only the direct costs of credit paid by a borrower. b. the total of all costs which the borrower needs to pay in order to get the loan. c. the relative cost of credit expressed in percentage terms. d. the difference between the 10-year Treasury Note and the 3-month Treasury Bill. |
c. the relative cost of credit expressed in percentage terms.(The annual percentage rate (APR) is stated as a percentage and represents the total cost of credit including the prepaid interest costs (points).) |
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The charging by a private lender of more than the maximum amount of interest allowed by law is known as: a. unearned increment. b. leverage. c. usury. d. onerous. |
c. usury. (Usury is the term that describes an interest rate that exceeds the legal limit.) |
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Personal property may not: a. become real property. b. be hypothecated. c. be alienated. d. None of the above. |
d. None of the above. (BEWARE of question construction phrased in the negative, "may not." Here, you need to identify the answer selection that does not correctly complete the question. As personal property may undergo any of the activities referenced in all of the answer selections, None of the above is correct.) |
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When damages resulting from a breach of the contract are not adequate, each of the following may request specific performance, except the: a. purchaser. b. broker. c. attorney-in-fact for one of the principals. d. seller of a parcel of land. |
b. broker.(The parties to an escrow do not include the broker. Thus, the damages described do not include the broker's fee nor would the broker have any authority to demand specific performance.) |
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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. Disclose, elect, confirm. (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.) |
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The purpose of the Real Estate Law is to: a. prevent fraud. b. protect the public. c. keep track of all real estate transactions. d. limit competition. |
b. protect the public. (Most laws and regulations are designed to protect the public. Preventing fraud may be part of the goal, but the total reach of the Real Estate Law is far broader than that.) |
