California Real Estate Salesperson
Examination with Practice Questions And
Correct Answer
1. A broker allows a salesperson to act as an agent for both the buyer and seller in a
transaction without written consent from either party. Under California law, what is
the legal consequence?
A. The dual agency is voidable by either party, and the broker may face disciplinary
action.
B. The dual agency is valid if both parties are informed orally before closing.
C. The broker is entitled to a full commission as long as the transaction closes.
D. The salesperson is personally liable, but the broker is exempt from liability.
Answer: A. The dual agency is voidable by either party, and the broker may face
disciplinary action.
Rationale: California law requires written consent for dual agency; without it, the agency
is voidable and the broker can be disciplined. Oral disclosure is insufficient, and the broker
remains liable. The other options misstate consent requirements and liability.
2. A buyer obtains a 30-year fixed-rate mortgage with a 20% down payment. If the
annual interest rate is 6% and the loan amount is $400,000, what is the monthly
principal and interest payment (rounded to nearest dollar)? Use the formula for
monthly payment: M = P * [r(1+r)^n] / [(1+r)^n - 1], where r is monthly rate and n is
number of payments.
A. $2,398
B. $2,000
C. $2,500
D. $2,200
Answer: A. $2,398
Rationale: Monthly rate r = 0.06/12 = 0.005, n = 360. Plugging in: M = 400,000 *
[0.005(1.005)^360] / [(1.005)^360 - 1] $2,398. Other options are common miscalculations
or simple interest estimates.
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,3. Which appraisal principle holds that the value of a property is influenced by the
value of surrounding properties, and is best exemplified by a homeowner maintaining
their property to protect neighborhood value?
A. Principle of substitution
B. Principle of conformity
C. Principle of contribution
D. Principle of progression
Answer: B. Principle of conformity
Rationale: The principle of conformity states that value is maximized when properties in an
area are similar in use and condition. Progression refers to a lower-value property
benefiting from higher-value neighbors, while substitution and contribution address
different valuation concepts.
4. A seller lists a property with Broker A. Before closing, the seller receives a higher
offer from Buyer B and wants to cancel the listing to sell to Buyer B directly. Which of
the following is true under California law?
A. The seller may cancel the listing unilaterally without penalty if no offer has been
accepted.
B. The seller must pay Broker A a commission if Broker A procured a ready, willing,
and able buyer.
C. The seller can avoid commission if they sell to Buyer B without Broker A's
involvement.
D. The listing agreement is automatically void if the seller receives a higher offer.
Answer: B. The seller must pay Broker A a commission if Broker A procured a ready,
willing, and able buyer.
Rationale: Under California law, a broker earns a commission when they procure a ready,
willing, and able buyer on the terms set by the seller, even if the seller later refuses to sell.
Unilateral cancellation does not eliminate the obligation if the broker has performed. The
other options incorrectly suggest avoidance of commission.
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,5. A developer wants to build a mixed-use project in a coastal zone. Which California
regulatory body has the primary authority to review and approve the development's
consistency with the Coastal Act?
A. California Department of Real Estate
B. California Coastal Commission
C. Local city planning commission
D. California Environmental Protection Agency
Answer: B. California Coastal Commission
Rationale: The California Coastal Commission is the primary agency responsible for
reviewing development in the coastal zone for consistency with the Coastal Act. Local
governments may have input, but the Commission has ultimate authority. The DRE and
CalEPA do not directly approve coastal development permits.
6. In a real estate transaction, a buyer discovers a latent defect that the seller knew
about but did not disclose. The buyer wants to rescind the contract. Which legal
principle best supports the buyer's action?
A. Caveat emptor
B. Fraudulent misrepresentation
C. Statute of frauds
D. Doctrine of laches
Answer: B. Fraudulent misrepresentation
Rationale: Fraudulent misrepresentation occurs when a seller intentionally conceals a
material defect, giving the buyer grounds for rescission. Caveat emptor does not apply
when active concealment is present. Statute of frauds concerns contract enforceability, and
laches involves unreasonable delay.
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, 7. A property is subject to a mechanic's lien filed by a contractor. The owner sells the
property without disclosing the lien. What is the likely outcome for the buyer?
A. The buyer takes title free and clear because the lien was not recorded.
B. The buyer takes title subject to the lien if it was properly recorded before the sale.
C. The lien is automatically extinguished upon transfer of title.
D. The buyer can sue the contractor for fraud, but the lien remains on the property.
Answer: B. The buyer takes title subject to the lien if it was properly recorded before
the sale.
Rationale: A properly recorded mechanic's lien runs with the land, so the buyer takes title
subject to it unless the lien is cleared. The lien is not extinguished by transfer, and the
buyer's remedy is against the seller for failure to disclose. The other options misstate lien
priority and transfer effects.
8. Which of the following best describes the difference between a joint tenancy and a
tenancy in common in California?
A. Joint tenancy includes the right of survivorship, while tenancy in common does not.
B. Tenancy in common requires equal ownership shares, while joint tenancy allows
unequal shares.
C. Joint tenancy can be created without express language, while tenancy in common
requires it.
D. Tenancy in common includes the right of survivorship, while joint tenancy does not.
Answer: A. Joint tenancy includes the right of survivorship, while tenancy in common
does not.
Rationale: Joint tenancy features the right of survivorship and requires equal shares and
unity of title, while tenancy in common allows unequal shares and has no survivorship. The
other options reverse or misstate these characteristics.
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Examination with Practice Questions And
Correct Answer
1. A broker allows a salesperson to act as an agent for both the buyer and seller in a
transaction without written consent from either party. Under California law, what is
the legal consequence?
A. The dual agency is voidable by either party, and the broker may face disciplinary
action.
B. The dual agency is valid if both parties are informed orally before closing.
C. The broker is entitled to a full commission as long as the transaction closes.
D. The salesperson is personally liable, but the broker is exempt from liability.
Answer: A. The dual agency is voidable by either party, and the broker may face
disciplinary action.
Rationale: California law requires written consent for dual agency; without it, the agency
is voidable and the broker can be disciplined. Oral disclosure is insufficient, and the broker
remains liable. The other options misstate consent requirements and liability.
2. A buyer obtains a 30-year fixed-rate mortgage with a 20% down payment. If the
annual interest rate is 6% and the loan amount is $400,000, what is the monthly
principal and interest payment (rounded to nearest dollar)? Use the formula for
monthly payment: M = P * [r(1+r)^n] / [(1+r)^n - 1], where r is monthly rate and n is
number of payments.
A. $2,398
B. $2,000
C. $2,500
D. $2,200
Answer: A. $2,398
Rationale: Monthly rate r = 0.06/12 = 0.005, n = 360. Plugging in: M = 400,000 *
[0.005(1.005)^360] / [(1.005)^360 - 1] $2,398. Other options are common miscalculations
or simple interest estimates.
Page 1 of 88
,3. Which appraisal principle holds that the value of a property is influenced by the
value of surrounding properties, and is best exemplified by a homeowner maintaining
their property to protect neighborhood value?
A. Principle of substitution
B. Principle of conformity
C. Principle of contribution
D. Principle of progression
Answer: B. Principle of conformity
Rationale: The principle of conformity states that value is maximized when properties in an
area are similar in use and condition. Progression refers to a lower-value property
benefiting from higher-value neighbors, while substitution and contribution address
different valuation concepts.
4. A seller lists a property with Broker A. Before closing, the seller receives a higher
offer from Buyer B and wants to cancel the listing to sell to Buyer B directly. Which of
the following is true under California law?
A. The seller may cancel the listing unilaterally without penalty if no offer has been
accepted.
B. The seller must pay Broker A a commission if Broker A procured a ready, willing,
and able buyer.
C. The seller can avoid commission if they sell to Buyer B without Broker A's
involvement.
D. The listing agreement is automatically void if the seller receives a higher offer.
Answer: B. The seller must pay Broker A a commission if Broker A procured a ready,
willing, and able buyer.
Rationale: Under California law, a broker earns a commission when they procure a ready,
willing, and able buyer on the terms set by the seller, even if the seller later refuses to sell.
Unilateral cancellation does not eliminate the obligation if the broker has performed. The
other options incorrectly suggest avoidance of commission.
Page 2 of 88
,5. A developer wants to build a mixed-use project in a coastal zone. Which California
regulatory body has the primary authority to review and approve the development's
consistency with the Coastal Act?
A. California Department of Real Estate
B. California Coastal Commission
C. Local city planning commission
D. California Environmental Protection Agency
Answer: B. California Coastal Commission
Rationale: The California Coastal Commission is the primary agency responsible for
reviewing development in the coastal zone for consistency with the Coastal Act. Local
governments may have input, but the Commission has ultimate authority. The DRE and
CalEPA do not directly approve coastal development permits.
6. In a real estate transaction, a buyer discovers a latent defect that the seller knew
about but did not disclose. The buyer wants to rescind the contract. Which legal
principle best supports the buyer's action?
A. Caveat emptor
B. Fraudulent misrepresentation
C. Statute of frauds
D. Doctrine of laches
Answer: B. Fraudulent misrepresentation
Rationale: Fraudulent misrepresentation occurs when a seller intentionally conceals a
material defect, giving the buyer grounds for rescission. Caveat emptor does not apply
when active concealment is present. Statute of frauds concerns contract enforceability, and
laches involves unreasonable delay.
Page 3 of 88
, 7. A property is subject to a mechanic's lien filed by a contractor. The owner sells the
property without disclosing the lien. What is the likely outcome for the buyer?
A. The buyer takes title free and clear because the lien was not recorded.
B. The buyer takes title subject to the lien if it was properly recorded before the sale.
C. The lien is automatically extinguished upon transfer of title.
D. The buyer can sue the contractor for fraud, but the lien remains on the property.
Answer: B. The buyer takes title subject to the lien if it was properly recorded before
the sale.
Rationale: A properly recorded mechanic's lien runs with the land, so the buyer takes title
subject to it unless the lien is cleared. The lien is not extinguished by transfer, and the
buyer's remedy is against the seller for failure to disclose. The other options misstate lien
priority and transfer effects.
8. Which of the following best describes the difference between a joint tenancy and a
tenancy in common in California?
A. Joint tenancy includes the right of survivorship, while tenancy in common does not.
B. Tenancy in common requires equal ownership shares, while joint tenancy allows
unequal shares.
C. Joint tenancy can be created without express language, while tenancy in common
requires it.
D. Tenancy in common includes the right of survivorship, while joint tenancy does not.
Answer: A. Joint tenancy includes the right of survivorship, while tenancy in common
does not.
Rationale: Joint tenancy features the right of survivorship and requires equal shares and
unity of title, while tenancy in common allows unequal shares and has no survivorship. The
other options reverse or misstate these characteristics.
Page 4 of 88
