California Real Estate Exam Correct Questions & Answers

The maximum commission a broker may charge for the sale of residential property is: (a) set forth in the Real Estate Law. (b) determined by the broker's contract with his principal. (c) six percent of the total sales price of a residence. (d) determined by local custom. - ANSWERB There is currently no law which controls what amount may be charged by the broker. Therefore, it is set by agreement between the parties. The Statute of Frauds, outlines what contracts must be in writing to be enforceable through court action. Which of the following contracts would be enforceable? (a) A verbal lease for one year or less (b) A verbal listing to secure a loan of $1,500 (c) An exclusive listing taken orally by a broker to sell a single-family residence (d) An oral agreement to pay a broker a commission for the negotiation of an exchange of two businesses - ANSWERA The Statute of Frauds is state law that requires certain contracts to be in writing and signed by the party to be charged (or held) to the agreement in order to be legally enforceable. The Statute of Frauds generally requires that all contracts for the sale of land or any interest herein be in writing. Oral leases for a period not exceeding one year, however are generally valid and enforceable. All of the following are usually treated as credits on the seller's closing statement EXCEPT: (a) prepaid taxes (b) prepaid insurance (c) Standard Policy of title insurance (d) none of the above - ANSWERC It is important to understand that this can change based on geographic region and custom. Who pays for title insurance is ultimately a negotiable item. A disadvantage for the buyer under a Land Contract is: (a) If the seller dies during the contract term, litigation may be necessary to obtain clear title. (b) Financial institutions consider land contracts unsatisfactory collateral. (c) Transfer of vendee's interest may be restricted by covenants. (d) All of the above - ANSWERD The disadvantages of a Land Contract to the buyer are several, chiefly: Covenants or restrictions of assignment or transfer of the land contract may hamper or prevent the transfer of buyer's interest therein. The buyer may not be aware of these problems until the time to transfer title. A prevailing opinion among financial institutions that a Land Contract is poor collateral because it is subject to a more rapid termination in the event of default. After full performance, the buyer may receive defective title or no title at all, although normally the contract will require delivery of a policy of title insurance. The buyer may have to pay the premium for this. Lack of assurance that the seller has good title at the time the contract is made, coupled with the fact that prior to full performance by the buyer, the buyer may not rescind the contract on these grounds. If during the contract term the seller should go bankrupt or die and title passes to heirs or be declared incompetent or have a conservator appointed, the buyer can at the very least anticipate time consuming, frustrating, and expensive litigation before obtaining a deed and policy of title insurance. How would an appraiser define the boundaries of a residential neighborhood? (a) by social conformity (b) geographically (c) by traffic patterns (d) by economic status - ANSWERA A neighborhood is defined as a contiguous area showing common social characteristics. Each tenant of a proposed conversion of their building from residential property to a condominium has the right to: (a) vacate the premises. (b) cancel their lease. (c) purchase their unit. (d) extend their lease. - ANSWERC Each tenant of a proposed co