California Real Estate Broker
Examination with Practice Questions And
Correct Answers (Ve
1. A broker represents a seller under a listing agreement that includes a 'seller reserve'
of $500,000. A buyer submits a full-price offer of $520,000 with a 45-day escrow. The
seller instructs the broker to counter at $540,000 without disclosing the reserve. Which
of the following best describes the broker's obligation?
A. The broker must disclose the reserve to the buyer because it materially affects the
buyer's decision.
B. The broker must follow the seller's instruction and counter at $540,000, as the reserve
is confidential.
C. The broker must withdraw from the transaction due to a conflict of interest.
D. The broker must inform the buyer that the seller has a reserve price higher than the
offer.
Answer: B. The broker must follow the seller's instruction and counter at $540,000, as
the reserve is confidential.
Rationale: The seller's reserve price is confidential and not a material fact that must be
disclosed to the buyer; the broker owes the seller confidentiality and must follow lawful
instructions. Disclosing the reserve would breach fiduciary duty. Options A and D are
incorrect because the reserve is not a required disclosure; C is unnecessary as no conflict
exists.
Page 1 of 87
,2. Which of the following scenarios most clearly constitutes an unlawful real estate
broker activity under California Business and Professions Code Section 10131?
A. A licensed salesperson negotiating a lease on behalf of a broker.
B. An unlicensed assistant hosting an open house and quoting price terms to a
prospective buyer.
C. A broker referring a client to a mortgage lender for a fee.
D. A salesperson soliciting listings under the supervision of a broker.
Answer: B. An unlicensed assistant hosting an open house and quoting price terms to a
prospective buyer.
Rationale: Unlicensed assistants may perform clerical tasks but cannot discuss price,
terms, or conditions of a property, which constitutes brokerage activity. Option A is lawful
under supervision; C is allowed if disclosed; D is a standard supervised activity.
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,3. A broker is managing a property and receives a security deposit from a tenant.
Under California law, which of the following best describes the broker's obligation
regarding the deposit?
A. The broker must deposit the funds into the broker's general business account.
B. The broker must place the deposit in a trust account and provide the tenant with a
receipt.
C. The broker may commingle the deposit with personal funds if a separate ledger is
maintained.
D. The broker must forward the deposit to the landlord within 24 hours.
Answer: B. The broker must place the deposit in a trust account and provide the
tenant with a receipt.
Rationale: California law requires security deposits to be held in a trust account and the
tenant must receive a receipt. Commingling is prohibited; forwarding to the landlord may
be per agreement but not within 24 hours automatically.
4. A broker is evaluating a commercial property with a net operating income (NOI) of
$120,000 and a capitalization rate of 8%. What is the estimated value using the income
approach?
A. $1,200,000
B. $1,500,000
C. $960,000
D. $1,440,000
Answer: B. $1,500,000
Rationale: Value = NOI / Cap Rate = $120,.08 = $1,500,000. Other options result
from miscalculations: A multiplies by 10 incorrectly; C multiplies NOI by 0.08; D uses
12% cap rate.
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, 5. Under California's Transfer Disclosure Statement (TDS), which of the following
defects must be disclosed by the seller?
A. A death on the property from natural causes.
B. A neighborhood noise issue that the seller is aware of.
C. A leaking roof that the seller has repaired.
D. A pending divorce of the sellers.
Answer: C. A leaking roof that the seller has repaired.
Rationale: Material defects affecting the property's value or desirability must be disclosed,
including past repairs that may recur. Deaths from natural causes and neighborhood noise
are generally not required unless they affect value; divorce is not a property defect.
6. A broker is acting as a dual agent in a transaction. Which of the following is a
required disclosure under California law?
A. The broker must disclose all offers to both parties.
B. The broker must obtain written consent from both parties after disclosing the dual
agency.
C. The broker must represent only the seller in the transaction.
D. The broker must reduce their commission by half.
Answer: B. The broker must obtain written consent from both parties after disclosing
the dual agency.
Rationale: Dual agency requires written consent from both parties after full disclosure.
Disclosing all offers is not required and may breach confidentiality; representing only
seller is not dual agency; commission reduction is not mandated.
Page 4 of 87
Examination with Practice Questions And
Correct Answers (Ve
1. A broker represents a seller under a listing agreement that includes a 'seller reserve'
of $500,000. A buyer submits a full-price offer of $520,000 with a 45-day escrow. The
seller instructs the broker to counter at $540,000 without disclosing the reserve. Which
of the following best describes the broker's obligation?
A. The broker must disclose the reserve to the buyer because it materially affects the
buyer's decision.
B. The broker must follow the seller's instruction and counter at $540,000, as the reserve
is confidential.
C. The broker must withdraw from the transaction due to a conflict of interest.
D. The broker must inform the buyer that the seller has a reserve price higher than the
offer.
Answer: B. The broker must follow the seller's instruction and counter at $540,000, as
the reserve is confidential.
Rationale: The seller's reserve price is confidential and not a material fact that must be
disclosed to the buyer; the broker owes the seller confidentiality and must follow lawful
instructions. Disclosing the reserve would breach fiduciary duty. Options A and D are
incorrect because the reserve is not a required disclosure; C is unnecessary as no conflict
exists.
Page 1 of 87
,2. Which of the following scenarios most clearly constitutes an unlawful real estate
broker activity under California Business and Professions Code Section 10131?
A. A licensed salesperson negotiating a lease on behalf of a broker.
B. An unlicensed assistant hosting an open house and quoting price terms to a
prospective buyer.
C. A broker referring a client to a mortgage lender for a fee.
D. A salesperson soliciting listings under the supervision of a broker.
Answer: B. An unlicensed assistant hosting an open house and quoting price terms to a
prospective buyer.
Rationale: Unlicensed assistants may perform clerical tasks but cannot discuss price,
terms, or conditions of a property, which constitutes brokerage activity. Option A is lawful
under supervision; C is allowed if disclosed; D is a standard supervised activity.
Page 2 of 87
,3. A broker is managing a property and receives a security deposit from a tenant.
Under California law, which of the following best describes the broker's obligation
regarding the deposit?
A. The broker must deposit the funds into the broker's general business account.
B. The broker must place the deposit in a trust account and provide the tenant with a
receipt.
C. The broker may commingle the deposit with personal funds if a separate ledger is
maintained.
D. The broker must forward the deposit to the landlord within 24 hours.
Answer: B. The broker must place the deposit in a trust account and provide the
tenant with a receipt.
Rationale: California law requires security deposits to be held in a trust account and the
tenant must receive a receipt. Commingling is prohibited; forwarding to the landlord may
be per agreement but not within 24 hours automatically.
4. A broker is evaluating a commercial property with a net operating income (NOI) of
$120,000 and a capitalization rate of 8%. What is the estimated value using the income
approach?
A. $1,200,000
B. $1,500,000
C. $960,000
D. $1,440,000
Answer: B. $1,500,000
Rationale: Value = NOI / Cap Rate = $120,.08 = $1,500,000. Other options result
from miscalculations: A multiplies by 10 incorrectly; C multiplies NOI by 0.08; D uses
12% cap rate.
Page 3 of 87
, 5. Under California's Transfer Disclosure Statement (TDS), which of the following
defects must be disclosed by the seller?
A. A death on the property from natural causes.
B. A neighborhood noise issue that the seller is aware of.
C. A leaking roof that the seller has repaired.
D. A pending divorce of the sellers.
Answer: C. A leaking roof that the seller has repaired.
Rationale: Material defects affecting the property's value or desirability must be disclosed,
including past repairs that may recur. Deaths from natural causes and neighborhood noise
are generally not required unless they affect value; divorce is not a property defect.
6. A broker is acting as a dual agent in a transaction. Which of the following is a
required disclosure under California law?
A. The broker must disclose all offers to both parties.
B. The broker must obtain written consent from both parties after disclosing the dual
agency.
C. The broker must represent only the seller in the transaction.
D. The broker must reduce their commission by half.
Answer: B. The broker must obtain written consent from both parties after disclosing
the dual agency.
Rationale: Dual agency requires written consent from both parties after full disclosure.
Disclosing all offers is not required and may breach confidentiality; representing only
seller is not dual agency; commission reduction is not mandated.
Page 4 of 87
