CA REAL ESTATE PREP EXAM QUESTIONS AND ACCURATE SOLUTIONS ALREADY GRADED A+

CA REAL ESTATE PREP EXAM QUESTIONS AND ACCURATE SOLUTIONS ALREADY GRADED A+ "The fact that land has a number of important uses is the basis for what essential element of value? a. Demand b. Utility c. Scarcity d. Transferability - CORRECT ANSWER b. Utility Remember DUST and your essential elements of value. Demand: This means the desire to buy and an ability to pay. Utility: The item satisfies a human need or desire; such as shelter, income, or recreation. Scarcity: Limited in supply, as supply diminishes, value increases. Transferability: Able to transfer from one owner to another." "An example of functional obsolescence in real estate is a. outdated plumbing b. a house not having a pool c. a house in a lower class area d. an agent not being able to sell a property - CORRECT ANSWER a. outdated plumbing Functional obsolescence refers to the loss of property value due to an obsolete design feature. Outdated plumbing would be considered functionally obsolete because it is outdated. Who determines what is obsolete or not? Usually the buyer or homeowners. If a neighborhood is filled houses with new bathrooms and/or new plumbing, and your's isn't, It would be considered functionally obsolete." "One individual or married couple in business alone (The most common form of business structure): a. Sole Proprietorship b. Limited Partnership c. Single Co-operation d. (LLC) or Limited Liability Company - CORRECT ANSWER a. Sole Proprietorship A Sole Proprietorship is one individual or married couple in business alone. Sole proprietorship's are the most common form of business structure. This type of business is simple to form and operate and may enjoy greater flexibility of management, fewer legal controls, and fewer taxes. However, the business owner is personally liable for all debts incurred by the business. A sole proprietor may purchase property for both personal and business use through his own name or through the name of his business. However, only personal property used in direct relation to business operations is viewed as a tax-deductible business expense." "Which of the following would MOST likely be considered a fixture? a. Window Blinds b. Toaster Oven c. Couch d. TV - CORRECT ANSWER a. Window Blinds Fixtures are personal property attached to the land to count as real property. Window blinds are screwed into the house, therefore they are considered a fixture in this example." "In common law, a deed is any legal instrument in writing which passes, affirms or confirms an interest, right, or property and that is signed, attested, delivered, and in some jurisdictions, sealed. It is commonly associated with transferring title to property. Within deeds, covenants are: a. types of property b. forms of money or payment c. agreements or promises d. property listings or values - CORRECT ANSWER c. agreements or promises Covenants are agreements or promises within deeds. For example, a warranty deed can include six forms of covenants. Those six are a series of legally binding promises and warranties to the grantee agreeing to protect the grantee against any prior claims and demands of all persons whomsoever in regards to the conveyed land." "When, if all, can an executed contract be assigned? a. Never. Under no circumstances. b. If the contract has a clause mentioning assignment. c. Only if the seller prohibits it. d. Only if the buyer prohibits it. - CORRECT ANSWER a. Never. Under no circumstances. Remember, execution means the contract is closed and cannot be assigned. Only executory contracts can be assigned." "Earnest money should be deposited into a trust account: a. In a timely manner, according to state laws. b. After the removal of all contingencies. c. At the broker's or agents discretion. d. According to MLS rules. - CORRECT ANSWER a. In a timely manner, according to state laws. Earnest money should be deposited into a trust account in a timely manner, according to state laws. While the time period varies from state-to-state its best practice to always deposit the money as soon as possible." "The cost of public services is distributed among real estate owners through what? a. Personal property tax b. Real property tax c. Special assessment d. Sales tax - CORRECT ANSWER b. Real property tax Property tax is an ad valorem tax assessed on real estate by a local government and paid by the property owner. Public services for real estate owners are paid by real property tax." "What is an item on a property that is installed by the tenant, and is related to the tenant's business classified as? a. fixtures b. trade fixtures c. easements d. emblements - CORRECT ANSWER b. trade fixtures A fixture is any physical property that is permanently attached to real property. Trade fixtures refer to items installed in connection with the business, such as stoves or refrigerators in a restaurant." "Which of the following best describes the acceleration clause? a. A provision in a mortgage or deed of trust signed with the lender that states that the borrower must pay the mortgage in full before the borrower can transfer the property. b. A contract provision that requires a borrower to repay all of an outstanding loan if upon a breach of the contract. c. The statement that a lender can penalize a borrower if the borrower pays off the mortgage much sooner than usual. d. A contract provision in real estate that establishes the order of priorities of financial claims. - CORRECT ANSWER b. A contract provision that requires a borrower to repay all of an outstanding loan if upon a breach of the contract. The acceleration clause is a contract provision that requires a borrower to repay all of an outstanding loan if upon a breach of the contract." "In California, redlining is prohibited by which state specific law? a. Transfer and Settlement Act b. Unruh Civil Rights Act c. Fair Housing Act d. Holden Act - CORRECT ANSWER d. Holden Act In California, the Holden Act prohibits discrimination related to housing financing. The Holden Act is state specific. Within this Act are additional requirements that licensees who provide financing services post a fair lending notice within public view and also provide a copy of that notice to financing applicants." "Which type of property would an appraisal use a depth table to estimate the property value? a. Government owned property b. Commercial property c. Special-use property d. Residential property - CORRECT ANSWER b. Commercial property A depth table is used to estimate the value of commercial properties. A depth table is a table used by real estate appraisers to show land values in percentages based on variations in the depth of the lot." "Market value is a. the price set by the homeowner. b. the price set by the home purchaser. c. the price set by an agent using the house history to determine its worth. d. the price the property is sold for or an estimate of the present property plus future potential. - CORRECT ANSWER d. the price the property is sold for or an estimate of the present property plus future potential. You'll hear a lot of people use the word Market Value or Market Price. This just means the actual selling price of the property. So if your home sells for $250,000. Its market value is $250,000." "A buyer was negotiating the purchase of a lot to build a new family house, the seller indicated that the land was firm enough to support the construction of a building when, in fact, the seller knew it was not. The contract is a. voidable by the seller because of the mistake. b. voidable by the buyer because of fraud. c. valid. d. void. - CORRECT ANSWER b. voidable by the buyer because of fraud. In this case, the contract would be voidable by the buyer because of fraud. Voidable contracts have the necessary elements to be enforceable, so they appear to be valid, but can be rejected by one party if the contract is discovered to have any number of defects. Fraud is the act of intentionally deceiving another party for financial or personal gain." "Which of the following would NOT be covered under a builder's new home warranty? a. Poor workmanship b. Disheveled masonry c. Dysfunctional carpentry d. Structural damage caused by flooding - CORRECT ANSWER d. Structural damage caused by flooding Weather-related issues and normal wear-and-tear are generally not included in a builder's home warranty. Other items that a builder's warranty may not cover include: Household appliances. Defects resulting from work conducted by the homeowner or anyone else after the builder's work is completed. No warranty covers damages caused by natural disasters." "Fees that the buyer pays to close the deal are called: a. seller costs b. closing costs c. broker fees d. earnest deposits - CORRECT ANSWER b. closing costs Closing is the final step in executing a real estate transaction. It is when official ownership and payment is transferred to the rightful parties. The fees that the buyer pays to close the deal are called closing costs." "Generally speaking, what happens when the supply of available houses in an area increases significantly? a. The average cost of housing goes down b. The average cost of housing goes up c. Commission rates are raised d. Commission rates are lowered - CORRECT ANSWER a. The average cost of housing goes down Think of supply and demand like a scale usually if one side raises, the other will lower or vice versa. Generally, low supply and high demand increase price. In contrast, the greater the supply and the lower the demand, the price tends to fall. So in real estate terms, when the supply of available houses in an area increases significantly the average cost of housing goes down." "Which of the following is a physical characteristic of real estate? a. Scarcity b. Improvements c. Indestructibility d. Permanence of Investment - CORRECT ANSWER c. Indestructibility Real estate has three physical characteristics that differentiate it from other assets in the economy: 1. Indestructibility, meaning land cannot be destroyed or worn out. Its appearance may be altered but it always continues to exist. 2. Immobility, meaning geographical location of the property remains the same & can never be changed, it is fixed. 3. Uniqueness or non-homogeneity, meaning no parcels of real estate are exactly alike. Scarcity, improvements and permanence of investment are all economic characteristics of real estate." "The EPA requires real estate professionals to give purchasers and tenants of residential dwelling a pamphlet about Lead-Based paint if the dwelling was built before when? a. 1968 b. 1978 c. 1983 d. 1992 - CORRECT ANSWER b. 1978 Lead-Based Paint Disclosure Rule (Section 1018 of Title X) requires that potential buyers and renters of housing built prior to 1978 receive certain information about lead and lead hazards in the residence prior to becoming obligated to buy or rent, and provides the opportunity for an independent lead inspection for buyers. Sellers, landlords, and agents are responsible for compliance." "An interest in real property which is held for the duration of the life of a designated person is called a a. Life Estate b. Fee Simple Absolute c. Fee Simple Defeasible d. Estate at Will - CORRECT ANSWER a. Life Estate A life estate is an interest in real property which is held for the duration of the life of a designated person. It may be limited by the life of the person holding it or by the life of another person. This designated person is called a life tenant." "When you buy real property, you gain several different kinds of rights. One of which are rights called "subsurface rights." What are subsurface rights? a. the rights to the natural resources lying below the earth's surface. b. the rights to use the surface of the earth. c. the rights to use any rock, soil, or hard object. d. the rights to the trees, ferns, and other plants. - CORRECT ANSWER a. the rights to the natural resources lying below the earth's surface. The surface rights are the rights to use the surface of the earth. Subsurface rights are the rights to the natural resources lying below the earth's surface. Interestingly an owner may transfer rights without transferring the subsurface rights. For example, a landowner can sell his rights to an oil and gas company in his land but still can own the land itself." "Which of the following consumers would most likely qualify and be able to derive the most benefit from refinancing their mortgage? a. A young homeowner with a low credit score whose property is free of any encumbrances. b. A young couple who wants to own a house but doesn't have a high enough credit to qualify yet. c. A middle aged couple, with high credit, whose mortgage loan has a higher interest rate than the current rate for new loans. d. A couple in their late 60s who need to tap their home equity to help cover their expenses but do not want to sell their house. - CORRECT ANSWER c. A middle aged couple, with high credit, whose mortgage loan has a higher interest rate than the current rate for new loans. In this instance age doesn't really matter. What does matter is that the middle age couple has a mortgage with a high interest rate and at the current rates at much lower. They would most likely qualify for a refinance and they would definitely derive the most value from it. Bonus tip. The rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. Generally speaking, homeowners should have a solid credit score to refinance, although there are a few exceptions in government run loan assistance programs." "It is the _____ duty to explain the purchase agreement and to not mislead any parties. a. buyer's b. seller's c. agent's d. mortgage broker's - CORRECT ANSWER c. agent's It's important the buyer and seller clearly understand the document as it becomes legally binding as soon as both parties sign. It is an agent's duty to explain to purchase agreement and not mislead both or either parties." "There are three main forms of depreciation, what are they? a. Major Obsolescence, Minor Obsolescence, and Physical Deterioration. b. Seasonal Obsolescence, Quarterly Obsolescence, and Yearly Obsolescence. c. Seasonal Obsolescence, Economic Obsolescence, and Physical Deterioration. d. Economic Obsolescence, Functional Obsolescence, and Physical Deterioration. - CORRECT ANSWER d. Economic Obsolescence, Functional Obsolescence, and Physical Deterioration. The three main forms of depreciation are : - Economic Obsolescence - Functional Obsolescence - Physical Deterioration." "Researching recently sold homes in the area and homes that haven't been sold in the area and comparing their prices. Is an example of a. a comparative market analysis. b. a research housing study. c. a home marketing plan. d. a sellers study. - CORRECT ANSWER a. a comparative market analysis. A comparative market analysis is an examination of the prices at which similar properties in the same area recently sold. Agents can use a comparative market analysis for their clients to help them determine a price when selling or buying a home." "What is the LAST requirement in the process of offer and acceptance that creates an executory contract? a. Offer b. Agreement c. Acceptance d. Communication of acceptance - CORRECT ANSWER d. Communication of acceptance Communication of acceptance, because once acceptance is communicated to the offeree an executory contract is formed. Acceptance with communication does not create a contract, all parties must sign the offer to create a valid contract." "Appraiser Leo was hired to prepare a feasibility study for a 12-unit apartment complex in which the owner is considering putting in a swimming pool. Which basic principle of appraising should Leo use? a. Condemnation b. Reconciliation c. Contribution d. Closing - CORRECT ANSWER c. Contribution Leo should use Contribution. Contribution is most commonly applied to determine how renovation and property changes may affect the property's overall cost. In this case, since the owner wants a feasibility study, contribution would need to be used. Swimming pools are a common contribution example. It's worth noting the cost doesn't always equal the value to the home. For example, a pool could add $5000 to the value of a home but cost $10,000 to build." "The period over which a property may be profitably utilized is called its: a. Economic life b. Amortized life c. Income life d. Net life - CORRECT ANSWER a. Economic life Economic life is the expected period of time during which an asset remains useful to the average owner. When an asset is no longer useful to its owner, then it is said to be past its economic life. The economic life of an asset could be different than its actual physical life." "After smoking, this is the second leading cause of lung cancer in the United States. A naturally occurring gas that forms in rocks, soil, and water. a. Radon b. Chlorine c. Lead Paint d. Carbon Monoxide - CORRECT ANSWER a. Radon After smoking, this is the second leading cause of lung cancer in the United States. Radon is a naturally occurring gas that forms in rocks, soil, and water." "Which of the following is a lien? a. A novation b. A mortgage c. An easement d. An investment - CORRECT ANSWER b. A mortgage A lien is a legal claim on an asset. Mortgages are a type of lien as it provides the lender a claim over the borrower's assets and allows the lender the right to detain the assets, property or goods to secure payment." "What is the illegal action or practice of lending money at unreasonably high rates of interest? a. Forgery b. Usury c. Altercation d. Puffing - CORRECT ANSWER b. Usury Usury is the practice of making unethical or immoral monetary loans that unfairly enrich the lender. Currently, most states have usury laws in place and set a cap on the maximum amount of interest a lender can charge. These rates can vary significantly by state and may differ depending on the type of financial product you're using. Usury is a form of predatory lending." "If a contract has prepayment penalties, they can be found in which real estate contract clause? a. In the Habendum Clause b. In the Defeasance Clause c. In the Prepayment Penalty Clause d. In the Penalty and Insurance Clause - CORRECT ANSWER c. In the Prepayment Penalty Clause A prepayment penalty clause states that a lender can penalize a borrower if the borrower pays off the mortgage much sooner than usual. Lenders are required to disclose prepayment penalties at closing in the form of a prepayment penalty clause." "Which of the following can be achieved by dividing the price of the property by the rent that is produced? a. Gross Rent Multiplier b. Interest Rate c. Capitalization Rate d. The Economic Value - CORRECT ANSWER a. Gross Rent Multiplier The Gross Rent Multiplier is found by dividing the price of the property by its rent." "A seller named Joan gave a buyer named Bob an option for thirty days to purchase her property for a consideration of $750. There is no anti-assignment clause in the contract. Which of the following statements is NOT true? a. Joan is the optionor. b. Bob is the optionee. c. Bob can assign the option to a third party. d. Joan can force Bob to purchase the property. - CORRECT ANSWER d. Joan can force Bob to purchase the property. Joan is the optionor, and Bob is the optionee. And Bob can assign an option if he wants. Joan cannot force to purchase the property. Remember, a seller cannot force a buyer to buy the property with an option to purchase. It's worth noting that they can in a lease to purchase, but in the question, it specifies it's an option contract." "Which valuation method or appraisal approach involves comparing a property to other recently sold properties in the same area of similar size and condition? a. Cost Approach b. Estate Approach c. Income Approach or Summation d. Market Data Approach or Sales Comparison Approach - CORRECT ANSWER d. Market Data Approach or Sales Comparison Approach The market data approach, also known as the sales comparison approach, involves comparing a property to other recently sold properties in the same area of similar size and condition. For residential real estate, the market data approach is typically regarded as the most accurate comparison method." "According to the Do Not Call list and Established Business Relationship (EBR) Rules, how many months does a company have to call the consumer if they made an inquiry with the company? a. 18 months b. 6 months c. 3 months d. Indefinitely - CORRECT ANSWER c. 3 months In this example the answer is 3 months. Established business relationship means a relationship between a seller and a consumer based on..... " the consumer's inquiry or application regarding a product or service offered by the seller, within the three (3) months." Per 16 CFR 310.2" "Which of the following best describes the term "encroachment?" a. Another word for personal property. b. Intrusion on a person's territory or property. c. The failure to complete an agreement per agreed terms. d. A formal legislative discussion covering zoning adjustments and potential fractions. - CORRECT ANSWER b. Intrusion on a person's territory or property. Encroachment is an intrusion on a person's territory or property. For those of you who are football fans, it's pretty much the same thing as the penalty. If a tree grows over someone's property, or when a fence or another piece of your neighbor's property crosses the property lines. Those are all examples of encroachment. Encroachment can lead to some large legal issues and if there are potential encroachment owners and agents should seek a solution immediately." "The ability to buy and sell is also known as what essential element of value? a. Demand b. Utility c. Scarcity d. Transferability - CORRECT ANSWER d. Transferability Remember DUST and your essential elements of value. - Demand: This means the desire to buy and an ability to pay. - Utility: The item satisfies a human need or desire; such as shelter, income, or recreation. - Scarcity: Limited in supply, as supply diminishes, value increases. - Transferability: Able to transfer from one owner to another." "What party usually pays the loan origination fee on a Federal Housing Administration (FHA) loan? a. the bank. b. the broker. c. the borrower. d. the real estate agent. - CORRECT ANSWER c. the borrower. Typically the party who usually pays the loan origination fee on a Federal Housing Administration loan is the borrower. The origination fee covers the borrowers right to obtain FHA-backed financing, so it is traditionally a paid by the borrower. FHA Loans are mortgage issued by an FHA-approved lender and insured by the FHA which is the Federal Housing Administration. FHA loans are sought after because they require lower minimum down payments and credit scores than many conventional loans." "Generally speaking, what is the most common type of contingency? a. Financing or Home Inspection b. Sale of a Prior Home c. Lease Option d. Title Insurance - CORRECT ANSWER a. Financing or Home inspections Home inspection contingencies are one of the most common home buying contingencies. According to NAR, around 80% of homebuyers include a home inspection contingency in their purchase agreement. Financing is right behind it, as it allows the buyer to terminate the contract if they cannot obtain a loan." "Which of the following is NOT a main element of a valid real estate contract? a. The contract must have monetary consideration. b. The contract must be legal or hold a legal purpose. c. The contract must hold mutual consent or be agreed upon by both parties. d. The party must be the legal age of 18 or older and deemed legally competent. - CORRECT ANSWER a. The contract must have monetary consideration. This is a bit of a trick question. There are four main elements of a valid real estate contract: The party must be the legal age of 18 or older and deemed legally competent. The contract must be legal or hold a legal purpose. A clear and specific consideration must be included in the agreement. The contract must hold mutual consent or be agreed upon by both parties. Monetary consideration is optional. Consideration is a main element, but it doesn't necessarily have to be money. Remember, consideration is anything of legal value, it could be a promise or promise to perform an action." "Who funds the California Consumer Recovery Account? a. California Taxpayers b. Californian Real Estate Agents c. The Active California Governor d. The Active California Legislature - CORRECT ANSWER b. Californian Real Estate Agents California's Bureau of Real Estate and the Consumer Recovery Fund do not receive funding from the general state budget. Instead, the Consumer Recovery Account is funded from a portion of the fees paid by real estate licensees." "A property owner acquired the ownership of land that was deposited by a river running through his property by what? a. Succession b. Accretion c. Reliction d. Avulsion - CORRECT ANSWER b. Accretion In real estate, the increase of the actual land via a stream, lake or sea by the action of water which deposits soil upon the shoreline is accretion." "A broker's listing on a house expired. The next day it was listed with another broker and offered in the MLS. A week later, a third licensee called the first broker and asked for the key to show the home. The broker should inform the caller that: a. He is no longer the listing agent. b. The house is currently off the market. c. He will leave the key under the doormat. d. He will set up an appointment for showing the home. - CORRECT ANSWER a. He is no longer the listing agent. Don't overthink this. He is no longer the listing agent, he MUST inform the caller that information. Anything else would be deemed unethical and potentially illegal." "When a furnishing company creates materials for the construction of a house and is subsequently not paid, it may file a(n): a. mechanic's lien. b. furnishing lien. c. financial lien. d. bank lien. - CORRECT ANSWER a. mechanic's lien. A mechanic's lien also called a construction lien is a lien placed on your property for nonpayment for work you had done on the property. It is a claim made against a property by a contractor or other professional who has supplied labor or materials for work on that property. They are designed to protect professionals from the risk of not being paid for services. A mechanic's lien is involuntary and specific." "What is the maximum paid out (per judgment) from the California Consumer Recovery Account? a. $25,000 for each transaction; and $100,000 for any one licensee. b. $25,000 for each transaction; and $200,000 for any one licensee. c. $50,000 for each transaction; and $250,000 for any one licensee. d. $70,000 for each transaction; and $300,000 for any one licensee. - CORRECT ANSWER c. $50,000 for each transaction; and $250,000 for any one licensee. Per California License law the maximum paid out of the Real Estate Recovery Fund is $50,000 for each transaction; and $250,000 for any one licensee." "What is the proper procedure for changing a contract that already has become binding? a. Sign a separate amendment b. Replace the old contract with a new one c. Write the changes in the original contract d. Write the changes in the original contract, date, and initial the changes. - CORRECT ANSWER a. Sign a separate amendment The proper procedure for changing a contract that has already become binding is to sign a separate amendment. Remember, separate amendments are used to modify or change executory contracts." "A mortgagor is also known as the: a. Borrower b. Lender c. Finance Specialist d. Mortgage Broker - CORRECT ANSWER a. Borrower A borrower is a mortgagor while the lender is the mortgagee. A mortgagee is an entity that lends money to a borrower (also known as a mortgagor) for the purpose of purchasing real estate." "When a home is purchased using an adjustable rate mortgage or ARM, the monthly loan payment on the mortgage will: a. be adjusted automatically to ensure that profitability occurs. b. rise slightly in each adjustment period until the cap is reached. c. be based on a very low interest rate, but will rise to the market rate at the first adjustment. d. vary over the life of the loan depending on fluctuations in the interest rate to which the loan is referenced. - CORRECT ANSWER d. vary over the life of the loan depending on fluctuations in the interest rate to which the loan is referenced. When a home is purchased using an adjustable rate mortgage or ARM, the monthly loan payment on the mortgage will vary over the life of the loan depending on fluctuations in the interest rate to which the loan is referenced. A variable-rate mortgage, adjustable-rate mortgage, or tracker mortgage is a mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets." "The execution date or date executed is the day a contract is signed. The effective date is what? Choose the best answer. a. The day the contract goes into effect. In some cases the execution date and effective date are the same. b. The day the contract goes into effect. In ALL cases the execution date and effective date are the same. c. The day the contract begins its extension. d. The day the contract ends officially. - CORRECT ANSWER a. The day the contract goes into effect. In some cases the execution date and effective date are the same. The execution date or date executed is the day the contract is signed. The effective date is the day the contract goes into effect. Both dates can both be found in a contract. In many instances, the execution and effective dates are the same; however, that is not the case in some circumstances. You might sign a lease today to move into an apartment, but you won't be able to move in until the following week. The execution date might be today, but the effective date will be when you move into your brand new home. Many times, the execution date and effective date are the same, but again not always." "During the listing agreement a commission of 6% is established. The house is sold for $250,000. What is the commission? a. 1500.0 b. $15,000.00 c. $20,000.0 d. 30,000.0 - CORRECT ANSWER b. $15,000.00 The formula for finding commission is pretty simple. Just times whatever percentage you have by the total price of the house. So in this case take $250,000 and multiply it by .06 or 6%. Doing the math that gives you $15,000.00." "b.Which business structure traditionally features a board of directors? a. Partnership b. Sole Proprietorship c. Cooperative d. Corporation - CORRECT ANSWER d. Corporation Corporations may be formed for profit or nonprofit purposes. A corporation is managed and operated by a board of directors. A corporation has certain rights, privileges, and liabilities beyond those of partnerships. Doing business as a corporation has its advantages and disadvantages. Because a corporation is a legal entity, it can purchase property. One large disadvantage especially when it comes to corporations is when owning income producing property they experience double taxation. Since its a legal entity they must pay taxes on profits. Dividends from the remaining corporate profits are then distributed to the shareholders and then taxed again as part of the shareholder's income." "After paying off a loan, the lender files what to release the lien? a. Disclosure Agreement b. Satisfaction of Mortgage c. Mortgage Dispersion Form d. Release of Mortgage Form (ROMF) - CORRECT ANSWER b. Satisfaction of Mortgage A satisfaction of mortgage is a document that confirms a mortgage has been paid off and details the provisions for the transfer of collateral title rights." "What is the key difference between a Less than Freehold Estate and a Freehold estate is a. Money b. Rights c. Time d. Location - CORRECT ANSWER c. Time Estates can be divided into two different sections: freehold estates, and less than freehold estates(or leasehold estates).The key difference between a leasehold estate and a freehold estate is the limitation of time. A freehold estate is an estate in which you have exclusive right to enjoy the possession of a property for an undefined length of time, while a leasehold estate is an estate held by one who rents or leases property for a period of time. Read More Here" "When you buy real property, you gain several different kinds of rights. One of which are rights called "surface rights." What are surface rights? a. the rights to the natural resources lying below the earth's surface. b. the rights to use the surface of the earth. c. the rights to use any rock, soil, or hard object. d. the rights to the trees, ferns, and other plants. - CORRECT ANSWER b. the rights to use the surface of the earth. The surface rights are the rights to use the surface of the earth. Subsurface rights are the rights to the natural resources lying below the earth's surface. Interestingly an owner may transfer rights without transferring the subsurface rights. For example, a landowner can sell his rights to an oil and gas company in his land but still can own the land itself." "If a leased premises becomes uninhabitable deliberately in an attempt to remove the tenant. What is this action called? a. Condemnation b. Actual eviction c. Constructive eviction d. Abandoning lease property - CORRECT ANSWER c. Constructive eviction Constructive eviction is a term used in the law of real property to describe when a landlord sidesteps the formal, legal eviction process, and instead attempts to force the eviction of the tenant by rendering the property uninhabitable. A tenant who is constructively evicted may terminate the lease and seek damages." "Who dictates trust accounts and when to deposit earnest money or other trust funds? a. State Specific License Law b. The Brokerage Firms c. Federal Law d. County Law - CORRECT ANSWER a. State Specific License Law Each state determines the rules for brokerage firm trust accounts and how earnest money must be deposited." "An elderly man in a nursing home, has no family and is suffering from Alzheimer's. Because of his Alzheimers, he doesn't remember much. Eventually, he passes away in his sleep. There is no will for the man, and again he has no family. So what happens to the money left in his savings account and his old farm that has been left untouched since he entered the nursing home? a. Escheat b. Eminent Domain c. Adverse Possession d. Inverse Condemnation - CORRECT ANSWER a. Escheat Instead of being handed down to his family(since he has none), his assets (farm included) are going to go to the government in the process called escheat. Escheat is the government's right to take ownership of unclaimed real estate or assets." "During your time as agent you will run into many different types of people from areas across the world. Closing is called many names depending on which region of the U.S you are from. Which of the following is NOT a legal name for closing? a. settlement and transfer b. exchange and transfer c. passing papers d. closing - CORRECT ANSWER b. exchange and transfer Closing is known by many names. Some areas of the country may call it settlement and transfer some may call it passing papers. The textbook name is for closing is closing." "Which of the following is an economic characteristic of real estate? a. Scarcity b. Immobility c. Uniqueness d. Indestructibility - CORRECT ANSWER a. Scarcity Real estate has three physical characteristics that differentiate it from other assets in the economy: 1. Indestructibility meaning land cannot be destroyed or worn out. Its appearance may be altered but it always continues to exist. 2. Immobility meaning geographical location of the property remains the same & can never be changed, it is fixed. 3. Uniqueness or non-homogeneity meaning no parcels of real estate are exactly alike. An economic characteristic of real estate is scarcity meaning the total supply is fixed." "A couple owns an older home in a neighborhood that is becoming a commercial area. Because of the change in the use of the land, the couple can expect the value of their parcel to increase at some future time. This is an example of the principle of a. Highest and Best Use b. Contribution c. Anticipation d. Balance - CORRECT ANSWER c. Anticipation The principle of anticipation in appraisal is the principle that the value of property today is the present value of the sum of anticipated future benefits. It's also worth noting that the principle of anticipation doesn't always refer to monetary gain. It could also be emotional or mental gain." "Who administers real estate law in California? a. The California Senators b. The California House Members c. The California Department of Labor d. The California Department of Real Estate (DRE) - CORRECT ANSWER d. The California Department of Real Estate (DRE) The California Department of Real Estate (DRE) is a California state agency focused on safeguarding and promoting the public interest in real estate matters through licensure, regulation, education, and enforcement." "Which of the following real estate contract clauses is typically seen in blanket mortgages and allows for the freeing of all or part of a property from a claim through a proportional or full amount of the mortgage being paid off? a. The Release Clause b. The Defeasance Clause c. The Alienation Clause d. The Prepayment Penalty Clause - CORRECT ANSWER a. The Release Clause A release clause is a contract provision (typically in a blanket mortgage) that allows for the freeing of all or part of a property from a claim through a proportional or full amount of the mortgage being paid off." "Any loss in the value of a property over time from any cause. a. Deliverance b. Decreasement c. Depression d. Depreciation - CORRECT ANSWER d. Depreciation Depreciation is any loss in the value of a property over time from any cause. There are three main forms of depreciation: - Economic Obsolescence - Functional Obsolescence - Physical Deterioration" "In real estate, a deed is best defined as: a. a written will signed by a lawyer. b. a written promise to one person from another. c. a declaration or assurance that one will do a particular thing or that a particular thing will happen. d. a written legal document by which ownership of real estate is conveyed from one party to another. - CORRECT ANSWER d. a written legal document by which ownership of real estate is conveyed from one party to another. For a deed to be legal it must include the identification of the grantor and grantee, and the adequate description of the property." "A contract agreed to and signed under duress is what? a. Void b. Valid c. Voidable d. Executed - CORRECT ANSWER c. Voidable The contract was established under duress, fraud, deception, or coercion making it voidable. A voidable contract is a legal agreement between two parties that may be unenforceable for any number of reasons. Voidable contracts have the necessary elements to be enforceable, so they appear to be valid, but can be rejected by one party if the contract is discovered to have any number of defects." "The fifth and fourteenth amendments of the U.S. Constitution permit the government to exercise its power of eminent domain. Eminent Domain is commonly used for: a. Infrastructure b. Property Tax Deflation c. Financing Loans (Mortgages) d. Development of Privately Owned Property - CORRECT ANSWER a. Infrastructure Eminent Domain is a term used to describe the right of the government to takeover privately owned real estate usually despite the owners' wishes. This often happens for land that is required for infrastructure like highways, major pipelines, railroads etc. The fifth and fourteenth amendments of the U.S. Constitution permit the government to exercise its power of eminent domain." "What is the procedure used by a public or private entity with the powers granted to take privately owned real estate? a. Escheat b. Condemnation c. Eminent Domain d. Inverse Condemnation - CORRECT ANSWER b. Condemnation Condemnation is the procedure used by a public or private entity with the powers granted from eminent domain to take privately owned real estate. eminent domain is the right which grants the government to take privately owned land from someone while condemnation is the action of taking that land." "Holding earnest money without depositing it, is what? a. Always illegal b. Legal with written authority c. Legal with verbal authority d. Legal if held by a broker - CORRECT ANSWER b. Legal with written authority Holding earnest money is only legal with written authorization, and even then it's best to deposit it as soon as possible. Having verbal authority is not good enough, and in many states is considered illegal." "An example of an antitrust violation is a. selling more than one hundred houses in a taxable year b. buying a house in another state c. an equity loan d. price fixing - CORRECT ANSWER d. price fixing Fixing is the practice of setting the price of a good or service to make a particular price a standard. So in our terms, real estate fixing is when competing agents meet up and agree on the same commission rates. Typically agencies set their commission rates depending on the price of the property. Any agreement even if it just implied with other brokerages to set a standard commission rate is a violation of the antitrust laws." "Most real estate sales contracts include contingency clauses, making them what? a. Void b. Valid c. Voidable d. Executed - CORRECT ANSWER c. Voidable Most real estate sales contracts include contingency clauses, making them voidable. A voidable contract is a legal agreement between two parties that may be unenforceable for any number of reasons. If a contract has a contingency it's voidable. It still can be considered valid but only after the contingencies are met or no longer exist." "The increase of value with the passage of time is best described as: a. Depreciation b. Appreciation c. Return of investment d. Return on investment - CORRECT ANSWER b. Appreciation Appreciation, in general terms, is an increase in the value of an asset over time. The increase can occur for a number of reasons, including increased demand or weakening supply, or as a result of changes in inflation or interest rates." "A non licensed buyer negotiated the purchase of a house. During a conversation with the seller, the seller agreed to include both the washer and the dryer, in the sale, and this was included in the sales contract. In this situation, if the seller takes the appliances, what recourse (if any) does the buyer have? a. The buyer can declare the principle of performance, and trade any assets he has for the assets he wants. b. The buyer has no recourse because he negotiated the sale himself. c. the buyer may sue the seller for specific performance. d. The buyer may sue the seller for partial performance. - CORRECT ANSWER c. The buyer may sue the seller for specific performance. Specific performance: is an equitable remedy in the law of contract, whereby a court issues an order requiring a party to perform a specific act, such as to complete performance of the contract. In our instance since the washer and dryer were included in the contract, the buyer may sue the seller for specific performance." "What is the act of mixing the client's funds with the broker's own funds? This can be both legal and illegal depending on the state and circumstance. a. Amalgamation b. Puffing c. Circulation d. Commingling - CORRECT ANSWER d. Commingling In real estate, commingling refers to the act of mixing the client's funds with the broker's own funds. Commingling can be both legal and illegal depending on the state and circumstance. Typically, from an agent's perspective, commingling should be avoided at all costs. Commingling can be legal in some circumstances, but in most cases, as an agent or a broker, it's best to avoid it." "When calculating the amount of real estate taxes owed, calculations are based on what type of value? a. Assessed value b. Implied value c. Market value d. Appraised value - CORRECT ANSWER a. Assessed value The assessed value is a property's determined valuation to calculate the appropriate tax rates." "Most states, including California have abolished which of the following? a. Dower and Curtesy Law b. The Fair Housing Act c. The Thirteenth Amendment d. The Comprehensive Environmental Response, Compensation, and Liability Act - CORRECT ANSWER a. Dower and Curtesy Law Dower and Curtesy was an old law. Oftentimes, back in the day, real property owned by a husband was typically not inherited by the wife nor was the wife's property inherited by her husband. Instead, the property would either go to the children or some other member of the husband or wife's line. Since the late 1800's the law has been largely abolished, however some states still hold the law true. Today most states (Calirfornia included) abolished dower and curtesy and generally provide the same benefits regardless of sex." "A real estate commission is usually based on the: a. Listing price b. Selling price c. Earnest deposit d. Amortization percentage - CORRECT ANSWER b. Selling price Commissions paid to real estate agents are negotiable, while many people believe that commission is always 6% it varies. That percentage is a percentage of the sale price of the home, also known as the selling price." "Which of the following is NOT a type of depreciation used in the cost approach? a. Functional Obsolescence b. Physical Deterioration c. Economic Obsolescence d. Intangible Deterioration - CORRECT ANSWER d. Intangible Deterioration There is no such thing as intangible deterioration. All the others are forms of depreciation." "Mrs. Jackson signs an open listing on her home with three different brokers. In this case: a. each broker has an opportunity to earn the entire commission. b. the owner must pay a full commission to all three brokers if it sells. c. the owner must pay the first broker to take the listing when it sells. d. the brokers will split the commission three ways regardless of who sells it. - CORRECT ANSWER a. each broker has an opportunity to earn the entire commission. Remember, an open listing is truly open. Each broker has an opportunity to earn the entire commission if they can come up with a buyer." "Mrs. Jane lives in a small residential neighborhood. 100-year-old trees surround her home, and her neighbor Mr. Joe claims the trees are on his property and is planning on cutting them down. Mrs. Jane tries to reason with Mr. Joe, but he refuses to listen. Mrs. Jane files a lawsuit that includes a court order for Mr. Joe to stop his actions until they can work something out. What type of court order is this? a. A temporary protective order b. An authorized dispute order c. An injunction d. An easement - CORRECT ANSWER c. An injunction If a dispute is pending, the court will likely issue an injunction preventing Mr. Joe from cutting down the trees until they are entirely resolved. Injunctions can be used to protect interests in real property. A court ordered injunction can be used to prevent a harmful action, stop ongoing or repeated conduct, or force a defendant to take action to prevent harm." "What is a written supplement or amendment to an existing will such as one affecting the transfer of real estate upon death? a. Novation b. Treaty c. Codicil d. Option - CORRECT ANSWER c. Codicil Codicil (pronounced kaa-duh-sl) is a written supplement or amendment to an existing will such as one affecting the transfer of real estate upon death. In plain terms it's an addendum of any kind to a will." "What best describes an agency relationship where an agent has legal authority to act on behalf of the principal? a. A special agency b. A general agency c. A universal agency d. An exclusive agency - CORRECT ANSWER c. A universal agency A universal agent in real estate is an agent who can act on behalf of a principal. This form of agency has unlimited power." "Which of the following situations would a percentage lease be most commonly used in? a. Apartments b. Townhouses c. Shopping centers d. Government owned properties - CORRECT ANSWER c. Shopping centers Percentage lease which pertains to commercial real estate. A Percentage lease is a rental that is based on a percentage of the monthly or annual gross sales made on the premises. Percentage leases are common with large retail stores, especially in shopping centers." "Which of the following statements does NOT correctly describe a fiduciary? a. a fiduciary must conform to the principal's legal instructions b. a fiduciary owes loyalty to the principal c. a fiduciary is a neutral third party d. a fiduciary is an agent - CORRECT ANSWER c. A fiduciary is a neutral third party A fiduciary is NOT a neutral third party. Fiduciary is a term that refers to a legal relationship that is confidential between two parties. The fiduciary responsibility is to protect the privacy of the client and to keep all of the client's information confidential. An example of a neutral third party is an escrow agent is a person or entity that holds property in trust for third parties while a transaction is finalized or a disagreement is resolved." "What is Ginnie Mae's primary responsibility? a. To create FHA and VA loans. b. To guarantee the security of loans. c. To maintain an active secondary market for mortgages. d. To manage and liquidate previously acquired mortgages. - CORRECT ANSWER b. To guarantee the security of loans. Ginnie Mae exists to solely guarantee the security of the loan. Ginnie Mae is a government agency that guarantees securities backed by loans issued under other government agency programs, such as the VA and FHA. Fannie Mae, is a private corporation that buys loans from private lenders, assembles them into mortgage-backed securities to maintain an active secondary market." "Compliance with zoning ordinances is monitored through the issuance of a. buffer zones b. CCR's c. covenants d. zoning permits - CORRECT ANSWER d. zoning permits Compliance with zoning ordinances is monitored through the issuance of zoning permits; where the property owner or developer cannot substantially alter the use of the property without getting a zoning permit, which will not be issued unless the proposed development conforms to the zoning ordinance. Zoning permits are usually required before building permits can be issued." "How many miles does a township contain? a. 6 miles b. 9 miles c. 36 square miles d. 81 square miles - CORRECT ANSWER c. 36 square miles Each square, six miles by six miles, is called a township. Since each township is six miles by six miles, townships contain 36 square miles, each one forming a section." "Under the Federal Fair Housing Law, which of the following is considered discriminatory advertising? a. Seniors welcome. b. Military discount. c. Catholic preferred d. Nonsmoker preferred. - CORRECT ANSWER c. Catholic preferred. Cathlotics preferred would be discrimination since its catholicism is relgion. Religion is protected under Federal Fair Housing Law." "Three identical properties in a suburban neighborhood were listed at the same time in a market where demand was constant. According to the law of supply and demand, which property would have sold for the lowest price? a. The first property sold b. The second property sold c. The third property sold d. The properties would all sell for the same price. - CORRECT ANSWER a. The first property sold. According to the law of supply and demand, the first property sold would have sold for the lowest price. Remember generally speaking, when the supply of houses goes down, the price goes up, and vice versa." "Which of the following is a common example of real estate police power? a. parking tickets b. speeding tickets c. zoning d. ballooning - CORRECT ANSWER c. zoning Real estate police power is the constitutional authority and inherent power of a state to adopt and enforce laws and regulations to promote and support the public health, safety, morals, and general welfare. The most common example of real estate police power is zoning." "A lease agreement where the tenant has the right to buy the property within a specified period of time is called what? a. Purchase Option b. Option Contract c. Lease Option d. Option Lease - CORRECT ANSWER c. Lease Option A lease option is when a lease is combined with an option contract." "A parcel of land that is subject to an easement is best described as: a. A Servient Estate b. A Dominant Estate c. An Estate in Sufferance d. An Estate in Tenement - CORRECT ANSWER a. A Servient Estate By definition, a servient estate is a parcel of land that is subject to an easement." "Requires public accommodations to remove barriers in existing buildings such as adding braille markings to elevator buttons, is a requirement of which law? a. Regulation Z b. Fair Housing Act c. Equal Credit Opportunity Act d. American with Disabilities Act - CORRECT ANSWER d. American with Disabilities Act The Americans with Disabilities Act (ADA) became law in 1990. The ADA is a civil rights law that prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places that are open to the general public." "Who or what determines the amount of an earnest money deposit? a. The agreement between the parties b. The state real estate licensing statutes c. The broker's or agents' preference on the matter d. The minimum percentage via the sales tax comparison formula (purchase price divided by tax rate) - CORRECT ANSWER a. The agreement between the parties It is customary but not required for a buyer to provide a deposit when making an offer to purchase. This deposit is referred to as earnest money. The amount is completely up to the agreement between the parties. There is no law stating an earnest deposit has to be a certain amount." "Which of the following are the main participants in real estate markets? a. Users, owners, renters, developers, renovators, and facilitators b. Players, buyers, sellers, renovators, and facilitators c. Buyers, sellers, investors, and facilitators d. Buyers, sellers, and investors - CORRECT ANSWER a. Users, owners, renters, developers, renovators, and facilitators. Users, owners, renters, developers, renovators, and facilitators are the main participants in real estate markets." "Complete the following statement. The rescission of a contract occurs when: a. a contract is signed. b. a contract is classified as unenforceable and is terminated. c. one party wants waive all the remaining duties and wants to terminate the contract. d. there is an agreement between the contracting parties to waive all the remaining duties and to terminate the contract. - CORRECT ANSWER d. there is an agreement between the contracting parties to waive all the remaining duties and to terminate the contract. The rescission of a contract occurs when there is an agreement between the contracting parties to waive all the remaining duties and to terminate the contract. Basically, it would be returning the parties to the same legal position they were in before entering into the contract." "The best way to determine fair value. a. Divisional Contractors b. 28/36 Rule c. Appraisal d. Gross Rent Multiplier - CORRECT ANSWER c. Appraisal Appraisals are the best way to determine fair value. The overall appraisal process is based on a number of factors, such as its cost, the income it generates or its fair market value as compared to similar assets." "Real property can be converted to personal property by a. Inference b. Severance c. Accession d. Changement - CORRECT ANSWER b. Severance Severance is the opposite of attachment. Severance is taking an item that is attached to the land and removing it as personal property." "Used in connection with CERCLA and the creation of The Superfund; Retroactive liability means: a. all previous owners are not held accountable for the hazardous waste site. b. all previous owners also can be held accountable for the hazardous waste site. c. the last two previous owners also can be held accountable for the hazardous waste site. d. the last three previous owners also can be held accountable for the hazardous waste site. - CORRECT ANSWER b. all previous owners also can be held accountable for the hazardous waste site. The term retroactive liability is used in connection with CERCLA and the Superfund. It means that all previous owners also can be held accountable for the hazardous waste site." "A legal way to dissolve the relationship when the parties don't voluntarily agree to its termination is called a. disbursement b. divorce c. partition d. parceling out - CORRECT ANSWER c. partition Partition is a term used in real estate to describe an act, by a court order, to divide up a concurrent estate into separate portions representing interests of the owners of a property." "Mortgage points, also known as discount points, are a. discounts on interest rates granted from the government. b. discounts on down payments granted from the government. c. fees paid directly to the lender at closing exchange for a reduced interest rate. d. fees paid directly to the lender at closing in exchange for a reduced down payment. - CORRECT ANSWER c. fees paid directly to the lender at closing exchange for a reduced interest rate. Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. The interest rate decreases not the down payment. They are a great option for someone who knows they will be owning a specific property for a long time. Mortgage points are directly paid to the lender or bank at closing." "What form of legal land description consists of principal meridian lines that cover most states in the US, running north to south and baselines running east to west? a. Lot and block b. Metes and bounds c. Public square system d. Rectangular survey system - CORRECT ANSWER d. Rectangular survey system The rectangular survey system consists of principal meridian lines that cover most states in the US, running north to south and baselines running east to west. These principal meridian lines are named or numbered to identify their location. Using those lines for references, quadrangles are formed, which are smaller squares identifiable by where they are located near the principal meridian and baseline. This process continues, creating a smaller and smaller grid that can be used to identify the specific location of any property." "Steve (a real estate agent of five years) was at his local coffee shop with some agents from other offices. The subject of commissions came up, and agents began to compare their commission rates. What should Steve do? a. Excuse himself from the discussion, as this could constitute a violation of the Fair Housing Act. b. Excuse himself from the discussion, as this could constitute a violation of The Equal Credit Opportunity Act. c. Advise the other agents this could constitute a violation of the Sherman Antitrust Act. d. Listen carefully so he can be more competitive in the market. - CORRECT ANSWER c. Advise the other agents this could constitute a violation of the Sherman Antitrust Act. Steve should advise the other agents this could constitute a violation of Sherman Antitrust Act. The Sherman Antitrust Act prohibits price-fixing. Real estate agents and brokers should understand that any discussion about commission could constitute a violation of the laws even if only implied." "What is the document that defines the relationship between the broker and the seller? a. listing agreement b. exclusive agency contract c. purchase contract d. disclosure statement - CORRECT ANSWER a. listing agreement Disclosure statements, purchase contracts, and exclusive agency contracts are all legal documents but it is the listing agreement that clearly defines the relationship between the broker and seller." "Typically a warranty deed contains how many covenants? a. two to three b. three to four c. five to six d. eight to nine - CORRECT ANSWER c. five to six A warranty deed can include six forms of covenants for title. A warranty deed is a type of deed where the grantor (seller) guarantees that he or she holds clear title to a piece of real estate and has a right to sell it to the grantee (buyer). The general warranty deed offers the grantee the most protection. With this type of deed, the grantor makes a series of legally binding promises (called covenants) and warranties to the grantee agreeing to protect the grantee against any prior claims and demands of all persons whomsoever in regards to the conveyed land. Typically a warranty deed has five to six covenants." "On which of the following dates do California real property taxes become a lien on the subject property? a. January 1 st b. April 1st c. July 1st d. October 1st - CORRECT ANSWER a. January 1st Annually, whoever owns taxable property on January 1 (the lien date) becomes liable for a tax calculated at 1 percent of the "taxable" value of the property." "Buyer Dan is considering buying a lot to build a single family residence. Dan hires an appraiser to appraise the lot. Which approach to value would the appraiser choose to complete the task? a. Cost Approach b. Estate Approach c. Income Approach or Summation d. Market Data Approach or Sales Comparison Approach - CORRECT ANSWER d. Market Data Approach or Sales Comparison Approach The Market Data Approach is also commonly called the sales comparison approach. The Cost Appr