REAL ESTATE PRACTICE EXAM 3 EXAM QUESTIONS WITH DETAILED, VERIFIED ANSWERS

REAL ESTATE PRACTICE EXAM 3 EXAM QUESTIONS WITH DETAILED, VERIFIED ANSWERS "1) when a licensee is employed as an independent contractor, the employing broker may still have to cover the licensee for (A) unemployment insurance (B) Workers Compensation Insurance (C) errors and omissions insurance (D) all of the above - CORRECT ANSWER B the workers compensation law requires all employers to provide insurance coverage for their employees in case of injury on the job. this law may apply to real estate brokers regardless of whether the broker considers his or her sales people to be employees or independent contractors" "2) In the correct order, list the chain of events necessary to comply with the agency disclosure law (A) Confirm, disclose, elect (B) Investigate, disclose, confirm (C) Disclose, elect, confirm (D) Disclose, confirm, reconfirm - CORRECT ANSWER C Statement of fact" "3) a real estate broker hires an unlicensed assistant. Among the duties of the assistant is writing advertising for placement in the local newspaper. This would be (A) unlawful behavior for both the broker and assistant (B) legal if the seller agrees (C) legal if the broker approves the ad copy (D) illegal under any circumstances - CORRECT ANSWER C this would be legal as long as the broker either rights or proves the copy. The work being performed is similar to that of a secretary" "4) the person who would normally be responsible for routine maintenance on an apartment building would be (A) the owner (B) the resident manager (C) the property manager (D) the tenant - CORRECT ANSWER C routine maintenance would be one of the duties of the property manager" "5) the purchasing power of a dollar is measured (A) by reference to price indexes (B) by the interest paid on savings (C) by the Federal Reserve board (D) by reference to the local real estate market - CORRECT ANSWER A the value of money is measured by what a dollar will buy. Price indexes should show whether the ability to buy the same amount has increased or decreased. For example: when the Consumer Price Index goes up, the value of the dollar goes down" "6) a licensee has agreement with the owner of rental property to find a lessee for the property. The commission for the licensee would be (A) 6% of the lease amount (B) determined by a listing agreement (C) 10% of the total rent for the first year (D) 5% of the first year's rent and 3% of the remaining years, to be paid by the owner as received - CORRECT ANSWER B the commission would be determined by agreement between the licensee and the owner of the property. This is usually accomplished by a listing agreement" "7) an appraiser would be which of the following approaches in appraising a shopping center (A) comparison approach (B) capitalization approach (C) the replacement cost approach (D) the market data approach - CORRECT ANSWER B the shopping center with regularly produce income, and would be valued using the capitalization (income) approach to value" "8) in a sale leaseback, the purchaser would be least concerned with which of the following (A) the economic life remaining in the improvement (B) the sellers Book value (C) the physical condition of the Improvement (D) the type of financing available for the purchase - CORRECT ANSWER B the sellers Book value is of no interest to the buyer. The buyers basis will be his purchase price. The other three choices should be of concern to the buyer" "9) Jackson leased his home to Sullivan with a verbal agreement to sell the property to Sullivan. Jackson knows that Sullivan has been making significant improvements to the property in reliance on that verbal agreement. Jackson now declines to sell the property to Sullivan. Which of the following best describe the rights of the parties (A) Jackson must sell because he made on ostensible agreement (B) Sullivan has no right to enforce the verbal agreement (C) Jackson must sell because the doctrine of estoppel will apply in this case (D) Jackson does not have to sell because of the statute of frauds - CORRECT ANSWER C doctrine of estoppel would apply when one person allows another to rely on statements made to the detriment of that person. In this case, Jackson allowed Sullivan to rely on a verbal promise to sell and to make substantial improvements to the property. The court would stop Jackson from refusing to sell" "10) a written document to record land restrictions imposed on a subdivision for the benefit of the landowners is called (A) zoning codes (B) CC&Rs (C) Subdivision map (D) deed of restrictions - CORRECT ANSWER B this is a good description of the CC&Rs. These are the covenants, conditions and restrictions" "11) in applying the principles of Easton vs strassburger case, real estate licensees are obligated to give prospective buyers of certain real estate: (A) a list of obvious defects in functional obsolescence (B) a list of known defects and those that should be known (C) a stock strong recommendation that the buyer obtain a home inspection (D) a disclosure forcing the buyer to take the property as-is - CORRECT ANSWER B the case cited gave rise to the real estate transfer disclosure statement. It requires both the seller and the broker to review obvious defects and those which can be discovered by a reasonably diligent investigation of the accessible areas" "12) broker Ortiz takes a buyer Tom out to see several properties. They work together for about 3 weeks. A couple of weeks later, broker Davis shows Tom a house which Tom buys. The commission would be paid to (A) broker Ortiz (B) broker Davis (C) broker Davis receives the entire commission and could share with broker Ortiz if he wishes (D) none of the above - CORRECT ANSWER C broker Ortiz does not have an exclusive contract to represent the buyer. Broker Davis found the house for the buyer and put the deal together. The commission would be paid entirely to broker Davis. If you wish to share with Ortiz, he could" "13) a sublease is (A) the same as an assignment (B) less than an assignment (C) a surrender (D) always forbidden - CORRECT ANSWER B a sublease is one where the original lessee maintains an interest in the lease. It is less than an assignment. With an assignment, the entire leasehold transfers to the assignee. The assignee becomes a tenant" "14) which of the following is not deducted from gross income to determine annual net income when using the capitalization approach to appraise an income-producing property (A) electricity (B) cost of capital (C) cost of management (D) replacement Reserves - CORRECT ANSWER B cost of capitalization in debt service or interest on the trust deed. Financing is not used when we appraise property" "15) Brokers A and B each have an open listing on a property. Broker A shows the property to a buyer and carries on negotiations, but the buyer decides not to buy. Two weeks later broker B contacts the same buyer and arranges a sale of the property. The seller is obligated to pay commission as follows (A) full amount to both broker A and B (B) full amount to broker B only (C) 50% each to broker A and B (D) full amount to broker A who will have to settle with broker B - CORRECT ANSWER B in an open listing the broker who sells the property is the one who gets paid. The owner is only obligated to pay the commission to the broker who actually put the deal together (the procuring cause)" "16) when a deed contains discriminatory language or clauses (A) the deed needs to be rewritten by the owner before the property may be sold (B) the title company must rewrite the deed (C) the discriminatory words or causes are unenforceable (D) the clauses may be enforced, since they would be considered grandfathered into law - CORRECT ANSWER C the discriminatory words or Clauses are not enforceable. There is no law requiring that the Deeds be Rewritten" "17) Pest Control reports which contain information concerning wood destroying insects are kept on file with (A) the department of wood destroying agency (B) the structural pest control board (C) the Environmental Protection Agency (D) the United States Department of insect control - CORRECT ANSWER B the structural pest control board in Sacramento has all these reports on file. They are kept on file for 2 years and are part of public reports. Anyone may obtain a copy of one" "18) a tenant has a 3-year lease with the lessor of an apartment building. At the end of the year one, the tenant is transferred to another city. The lease between the lessor and lessee is silent on the tenants ability to sublease or sign the lease. In this case (A) the lessee may sublease, but not assign, the lease (B) the lessee may either assign or sublease the apartment, without the lessors permission (C) the lessee may assign, but not sublease the apartment (D) the tenant must have the lessors permission to either sublease or sign the lease - CORRECT ANSWER B failure to mention assignment or subleasing in a lease, allows the tenant to do either without the consent of the lessor" "19) Taylor was injured while swimming in Smith's new pool. Taylor obtained a $2,500 judgment against Smith and recorded an abstract of judgment with the County Recorder. This created (A) a voluntary lien (B) a specific lien (C) a general lien (D) an equitable lien - CORRECT ANSWER C judgment liens are general liens, they are also involuntary. It is so no such thing as a equitable lien" "20) Evans owns a new personal residence. The transportation agency is widening the street in front of his residence. This will cause Evans to lose 10 ft long front of his property which borders the street. This is an example of (A) functional obsolescence (B) economic obsolescence (C) physical deterioration (D) accrued depreciation - CORRECT ANSWER B any loss in value would be considered economic obsolescence since it is caused by a force which is outside the property lines" "21) how long does a buyer have to sue the seller of a single-family dwelling for something that was not disclosed, but should have been disclosed, after the buyer moves into the home? (A) 1 year (B) 5 years (C) 2 years (D) 7 years - CORRECT ANSWER C a lawsuit alleging a breach of a licensees Duty under this law, (Easton vs strassburger-the duty to inspect the property and not report material facts on the seller's transfer disclosure statement) must be filed within 2 years from the date of occupancy, the date of recordation of the deed to the buyer or the date of close of escrow, whichever occurs first" "22) an appraiser using the cost approach to appraise property would be least concerned about the economy in the area of the subject property when appraising (A) a department store in a residential area (B) an Industrial Park (C) an electric Assembly Plant (D) a strip shopping mall in a residential area - CORRECT ANSWER C an electric assembly plant is producing products which will not depend on the local economy. The products will be distributed naturally and / or internationally the value of the other three choices would be directly affected by the local economy." "23) a general contractor hired subcontractor to install the hardwood floors in a home under construction. The subcontractor had to file a mechanic's lien in order to get paid, the mechanics lien would date back to the date (A) work began on the house (B) work began on the hardwood floors (C) work endee on the house (D) work was completed on hardwood floors - CORRECT ANSWER A all mechanic's liens date back to the beginning of any work on the project, not the date that individual contractor performed his labor" "24) once an offer has been made and accepted, the buyer would have (A) pending title (B) Equitable Title (C) contract title (D) no title - CORRECT ANSWER D title remains in the owner (seller) until all the contingencies of the contract have been met and escrow closes. When escrow closes, legal title transfers from the seller to the buyer" "25) a buyer walks into a broker's office and ask for information on a property the broker's office has listed. The agent gives the buyers information and the buyer asks the agent to mail her more information to her house. An agency relationship has been created when (A) Buyer walks into the broker's office (B) agent gives buyer information (C) agent mails information to buyers house (D) there is no agency relationship - CORRECT ANSWER D there is no agency relationship. An agency relationship would require a contract between the buyer and the broker" "26) an agent often receives confidential information from a principal. The agent has a duty to maintain this confidentiality. This duty of confidentiality (A) terminates when the contract is completed (B) terminates when the contract is terminated (C) terminates four years after the close of escrow (D) never terminates - CORRECT ANSWER D when information is given by a principal to an agent and that information is confidential, that information must never be revealed. In a sense, agents have the same duty of confidentiality as a lawyer to a client. Confidential information is just that, confidential, and must remain such" "27) when a tenant holds possession of a landlord's property without a current lease agreement and without the landlord's approval (A) the tenant is maintaining a gross lease (B) this would be an estate at sufferance (C) the tenant has no obligation to pay rent (D) the landlord may be subject to constructive eviction - CORRECT ANSWER B at the end of the lease term, lessee is expected to vacate the premises. When the tenant remains without the permission of the owner, it is called an estate at sufferance (the landlord is suffering the tenants presents in his property), if the tenant continues to pay rent and landlord accepts the rent, it would become a periodic tenancy" "28) California counties collect a documentary transfer tax when most transfers of title are recorded. The rate is $0.55 of each $500 of consideration paid or any part thereof. If a property sold for $90,750 and the buyer assumed an existing loan of $30,000, the amount of the tax would be (A) $99 (B) $100.10 (C) $67.10 (D)$33 - CORRECT ANSWER C remember the documentary transfer tax is not charge on an assumed loan. Remember also-you must round up to the nearest $500 the tax is $1.10 per $1,000 $90,750-30,000=$60,750 61 X 1.10=$67.10" "29) which of the following would be considered an encumbrance? (A) a lease (B) a reversion (C) a fee (D) a fixture - CORRECT ANSWER A a lease is an encumbrance in that the lease does not terminate when the property is sold. The lease will remain valid until it expires. Property must be sold subject to the lease" "30) which of the following is not a test of a fixture (A) method of attachment (B) relationship of the parties (C) time article is affixed (D) agreement between the parties - CORRECT ANSWER C there are five tests of a fixture: method of attachment; adaptability; relationship of the parties; intentions of the parties and agreements between the parties. Time the article is affixed is not one of the test" "31) if an escrow officer receives signed instructions from the buyer or seller which conflict with the purchase agreement (A) the signed instructions will prevail (B) the document with the most recent date will prevail (C) escrow instructions will prevail, since they were based on the purchase agreement (D) the escrow officer must file an interpleader action - CORRECT ANSWER C the escrow instructions will prevail since they were signed by both buyer and seller and based on the purchase agreement which also was signed by both. Usually the escrow instructions or signed after the purchase agreement and would therefore, prevail" "32) a person who has had a real estate license for 14 years but did not Renew on time (A) may continue to practice real estate because he has already renewed his license 3 times (B) is still in his grace. And may renew with two years (C) may not perform any acts which require a real estate license and must take the real estate exam again (D) if he is a broker, he is automatically renewed every 4 years - CORRECT ANSWER C a person who does not renew his license on time has a two-year grace period in which time he can renew his license without having to take the state exam. If he goes beyond that 2 years, he will have to take the state exam. The real estate license is good for 4 years. If he had the license for 14 years, he renewed three times and has allowed the grace period to expire" "33) a licensee has filed to renew his license prior to his renewal date (A) he will have to take the state exam (B) he will have to qualify through education and take the state exam (C) he has a two-year grace period to renew at the original license fee (D) he has a two-year grace period and renew his license during that time, but must pay an additional fee - CORRECT ANSWER D statement of fact" "34) an appraiser is doing a narrative appraisal report of an apartment building, using all three approaches to Value. The last step in the appraisal process would be which of the following (A) the letter of transmittal (B) a Reconciliation of values to arrive at the final Value Estimate (C) the definition of the problem (D) an averaging of the values to arrive at the final estimate - CORRECT ANSWER B reconciliation of values the last step in the appraisal process. The appraiser correlates the values, giving greatest wait to the value indication arrived at from the approach to Value which would give him the most accurate picture of value. In this case it would be the income approach. He would use the other to Value indications primarily as backup data" "35) real estate broker Joe has an exclusive agency listing with contractor Bob who is building a new subdivision. The listing is to be effective 90 days from completion of construction. Broker Joe has found a buyer who made an offer on one of the homes and contractor Bob has accepted. In order to be able to collect a commission (A) broker Joe must agree to split the commission with contractor Bob (B) the listing contract must contain a specific termination date (C) the escrow instructions must name broker Joe (D) contractor Bob does not have to pay a commission because this is an exclusive agency listing - CORRECT ANSWER B all exclusive listings must contain a specific termination date. 90 days from the completion of construction would not be a definite termination date" "36) a buyer sued broker Tom for fraud in the sale of a 4-unit apartment building. The broker was unable to pay the judgment and the recovery account agreed to pay Tom $50,000. What is the maximum amount the recovery account can pay for a single real estate agent (A) $50,000 (B) $100,000 (C) $200,000 (D)$250,000 - CORRECT ANSWER D the maximum the recovery account is now $250,000" "37) a tenant in a single family dwelling suspects that a release of a hazardous substance has occurred on or beneath the property. The tenant should (A) call the health care Department (B) notify the owner or lessor (C) file a complaint with the Bureau of Real Estate (D) file a complaint with the Department of Fair Employment and housing - CORRECT ANSWER B the tenant should report a release of a hazardous substance to the owner or lessor. It is the responsibility of the owner to have the situation corrected" "38) an accidental dual agency or unintended dual agency would most likely occur (A) with an in-house sale (B) in a 1031 tax-free Exchange (C) the sale of a mobile home (D) when a mortgage broker arranges a loan for a buyer - CORRECT ANSWER A in an in-house transaction the broker is representing both the buyer and seller. Since more than one sales person is often involved an unintended dual agency is more likely to occur in this situation than the others mentioned" "39) real estate salesperson Kelly had been negotiating with potential buyer Tom. Kelly was certain that the property meant all of Toms requirements and that the price was within his means. However, she was unable to persuade time to make an offer. This worried Kelly because the listing was to expire in one week. Kelly began to suspect that Tom had talked to the seller. She felt sure the seller agreed to wait until the listing expired and sell the property directly to Tom. This would allow the seller to save the commission, which is the seller would probably split with buyer Tom. On the last day of the listing, salesperson Kelly talked to the seller and informed the seller that she had been negotiating with buyer Tom. She further reminded the seller of the safety period in the listing which said that if the seller sells to Tom within 90 days, the seller would owe Kelly a commission. The seller sold the property to Tom - CORRECT ANSWER B in order for the safety period to be effective, the broker must give written notice to the seller. The notice must name each Buyer the agent expects to fall under that protection period." "40) Buyer John made an offer to purchase seller Pete's House. John received the seller's transfer disclosure statement before making the offer. However, during the escrow period, an amendment was made to the transfer disclosure statement and delivered in person to John by his agent. John's right in this situation would be (A) he has 3 days to rescind the contract, but he forfeits his deposit (B) he cannot resicind the contract (C) he has three days to resicind the contract and get a full refund of his deposit (D) he may resicind the sales contract but would be liable for the commission - CORRECT ANSWER C the buyer has 3 days to rescind the contract and receive a full refund when the transfer disclosure statement is amended after acceptance of the offer" “41) licensee A has out-of-town relatives come to visit and he shows them several listings. He ends up helping them rent a property with an option to purchase. He should make a disclosure to (A) the listing broker (B) the listing agent (C) the seller (D) all the above and his relatives - CORRECT ANSWER C the prospective purchase of the property by a person related to the licensee by blood or marriage must be disclosed by the seller. Failure to make this disclosure would be considered a violation of the agent's duty to disclose all material facts" "42) which of the following cannot obtain a broker license (A) S corporation (B) partnership (C) foreign corporation (D) individual with two years experience as a salesperson - CORRECT ANSWER B a partnership cannot have a broker license in the partnership name. Each person in the partnership would have to be licensed separately" "43) a person who had leased a property for three years had to move out of state before the lease expired. In reading the lease, there was no mention of either subleasing or assigning the lease. The leaseee (A) May sublease or sign the lease (B) may assign the lease only (C) must have the permission of the owner to either sublease or assign the lease (D) the lessee may not do either sublease or assign the lease - CORRECT ANSWER A failure to mention either the subleasing or signing of the lease in the original lease agreement, gives the lessee the right to do either one. The lessee does not need permission of the landlord" "44) which of the following would not be a required payment for the lessee under a net lease (A) Janitorial (B) lease Commission (C) property taxes (D) insurance - CORRECT ANSWER B the lease commission is paid by the landlord. The other fees are included in the net lease agreement" "45) which of the following phrases in a rental ad would not be illegal (A) female roommate (B) retirees dream house (C) ideal for college students (D) family only - CORRECT ANSWER A a roommate will live with the landlord in his/her house. When the tenant will live in the landlord's house, the landlord is allowed to discriminate" "46) in the eyes of the real estate commissioner, any individual employed as a salesperson by a licensed real estate broker is considered to be (A) an independent contractor (B) an employee (C) a special agent (D) sub-agent - CORRECT ANSWER B the real estate commissioner considers a salesperson an employee of the broker. That is the reason the commissioner can hold the broker responsible for everything the salesperson says or does. The sales person is an independent contractor for IRS purposes" "47) a landlord is trying to evict a tenant and serves an eviction notice. Under what circumstances could the tenant remain in the (A) the tenant has not had hot water for months (B) unlawful entry by the landlord (C) the lessor fail to repair a weak staircase (D) all of the above - CORRECT ANSWER D all of these are examples for constructive eviction. In this case the tenant may move out without notice or get whatever is not working fixed. He would pay for it himself and give the receipt to the owner. He would deduct the repair amount from the rent. The tenant can do this up to twice in one 12-month period. The landlord cannot evict a tenant for things he did or did not do when he should have" "48) a buyer signs the offer to purchase and the seller accepts the offer. The buyer's agent delivers the signed acceptance to the buyer on with the seller's transfer disclosure statement. How long does the buyer have to resicind the contract? (A) 2 days (B) 3 days (C) 5 days (D) 7 days - CORRECT ANSWER B the buyer has three days from the delivery, in-person, of the sellers transfer disclosure has three days from the delivery, in-person, of the sellers transfer disclosure statement (5 days if mailed) 2 the rescind the contract" "49) Richard owned a vacant lot free and clear. He decided to build a home on the lot. On May 1st, lumber was delivered to the lot at a cost of $8,000. On May 2nd a First Trust deed $150,000 was recorded against the property to finance construction. September 15th, painters started work on the property with their bill totaling $3,000. The project was completed and Joe did not pay the bills for the lumber and the painting. To mechanics liens were filed for $8,000 and $3,000. The property went into foreclosure and sold for $150,000. Ignoring the expenses of sale, approximately how much did the lender on the first trust deed receive as a result of the sale? (A) $139,000 (B) $147,000 (C) $150,000 (D) nothing - CORRECT ANSWER A remember: all mechanic's liens date back to the beginning of any work. In this case work started on May 1st. The trust deed was recorded May 2nd. For that reason, the mechanic liens would have priority over the trust deed. In a foreclosure, the mechanics would be paid first. $8,000 + $3,000= $11,000 total of mechanic's liens $150,000 trust deed-$11,000 mechanic liens=$139,000 to be paid to lender." "50) the year in which Brokers became requireed to disclose asbestos is (A) 1968 (B) 1988 (C) 1986 (D) 1978 - CORRECT ANSWER C statement of fact. It is part of the transfer disclosure statement" "51) the contract where one party holds an offer open for a definite period of time is called (A) Exchange listing agreement (B) an option (C) Novation (D) deposit receipt - CORRECT ANSWER B a option is a unilateral contract in which the optionor (seller) agrees to hold an offer open for the optionee (potential buyer). The optionee does not have to exercise the option, but if the optionee decides to exercise the option, the optionor must sell" "52) the most frequently used method of land valuation is (A) allocation (B) residual (C) developmental (D) comparative - CORRECT ANSWER D the comparison or comparative approach is used to value vacant land, single-family residential property and you set rental schedules" "53) which of the following statements regarding deed restrictions is true? (A) a covenant in generally more severe than a condition (B) to be legally enforced, a private restriction must promote public health, safety, and welfare (C) the term covenant is an all-inclusive word embracing both restrictions and conditions (D) a violation of a condition is more severe than a covenant and might result in the loss of title - CORRECT ANSWER D violation of the covenant may result in an injunction (court order to stop doing something) and monetary damages. Violation of a condition may result in a loss of title which is more severe than an injunction" "54) FHA will, but VA will not, provide loans for (A) agricultural land (B) farming equipment (C) duplex purchase for rental (D) business - CORRECT ANSWER C FHA has programs which will allow a buyer to purchase a one to 4 unit dwelling to be used as a rental, VA does not" "55) in purchasing a home, the purchaser generally gives a note secured by a first deed of trust to a lending institution. In addition, he may give the seller cash and a note secured by a second deed of trust on the property. A request for notice would be filed for the benefit of the (A) mortgagor (B) holder of the second (C) trustor (D) holder of the first - CORRECT ANSWER B a request for a notice of default is filed with the county recorder when the second trust deed is recorded. If there is a default on the first trust deed, the recorder will send a copy of the notice of default to the holder of the second. This gives the holder of the second time to reinstate the first and begin foreclosure of the second" "56) in which of the following ways is fraud different from misrepresentation (A) a misrepresentation is a deliberate attempt to deceive, while fraud is not (B) fraud is a deliberate attempt to deceive, while a misrepresentation is not (C) there is no difference between fraud and misrepresentation (D) a misrepresentation cannot result in discipline and fraud will always involve discipline - CORRECT ANSWER B fraud involves a deliberate attempt to deceive, misrepresentation does not. A licensee may be disciplined for either fraud or misrepresentation" "57) Jack leases a single family dwelling property from Mr. Michaels. After the lease agreement is signed and Jack moves in, Mister Michaels insists that Jack sign a contract agreeing to make substantial capital improvements to the property. This requirement by the landlord would render the lease contract (A) valid (B) voidable by lessor (C) voidable by Lessee (D) void - CORRECT ANSWER C his contract would be voidable on the part of the lessee, not by lessor. The lessor cannot change the contract or add to the lease contract after it is signed" "58) valuable, adequate, good, sufficient in a contract would refer to (A) performance (B) just compensation (C) consideration (D) a bilateral contract - CORRECT ANSWER C these words describe consideration-the something of value which binds the contract" "59) The statement of purpose section of a narrative appraisal report would contain which of the following (A) the type of value being given (B) the method of appraisal approach (C) the reconciliation of values (D) the valuation - CORRECT ANSWER A the type of value being given is stated in the statement of purpose. Appraisals are used for various reasons-loans, insurance, taxation or public acquisition. This would be made part of the statement of purpose" "60) when a buyer purchases a home using the Cal Vet program, title to the home is held by (A) the veteran (B) the Veterans Administration (C) the Department of Veterans Affairs (D) the trustee - CORRECT ANSWER C read these carefully. The Department of Veterans Affair is part of the California state government. Title to the property is held by the Department of Veterans Affairs and not by the Veterans Administration" "61) an estoppel is a (A) Plumbing fixture (B) trade fixture (C) notice to terminate tenancy (D) document confirming tenants rights and landlords responsibilities - CORRECT ANSWER D a purchaser of rental property might have the existing tenants execute estoppel statements acknowledging their obligation to pay the proper amount of rent according to the specified terms of their leases." "62) a qualified veteran may receive a federal VA loan for (A) $30,000 (B) one hundred percent of the CRV (C) 80% of the property's appraised value (D) 100% of his entitlement - CORRECT ANSWER B VA set no maximum loan amount. However, the VA does have a limit that cannot exceed the appraised value of the property (the certificate of reasonable value). In effect the maximum VA loan limit is established by the highest dollar amount of VA loans that the secondary markets, Fannie Mae and Freddie Mac, are willing to purchase. The maximum loan amount available on a specific property is based on the purchase price or the VA appraised value, whichever is less" "63) why are housing prices so heavily weighted when calculating the Consumer Price Index? (A) increasing down payment amounts contribute significantly to inflation (B) the most significant portion of the CPI is building costs (C) housing prices and the associated interest cost form the bulk of most homeowners Financial outlay (D) all of the above - CORRECT ANSWER C the Consumer Price Index (CPI) is designed to measure the change in the average level of prices paid for consumer goods and services by all private households. In measuring CPI, not all goods and services are treated equally or, in other words, given the same weight. Since housing prices and associated interest cost form the bulk of most homeowners outlay, changes in mortgage interest rates are heavily weighted by calculating the CPI" "64) The practice of charging discount points on fha-insured loans is because the lender desires to (A) equalize the yield of FHA Loans to the yield of conventional loans (B) create a competitive environment between FHA loans and conventional loans (C) close the gap between FHA loans and conventional loans for sale on the secondary Market (D) all of the above - CORRECT ANSWER D Lenders would not be willing to make FHA Loans if they could not receive the same yield on FHA Loans as they do on conventional loans. The secondary Market would not be willing to purchase FHA Loans if the yield was lower than on conventional loans. If the secondary Market would be willing to purchase the loans, the yield to the lender would be less than on conventional loans. In order to solve these problems and to make these loans available to buyers, the discount points are charged. They may be paid by either the buyer or seller" "65) in what year did the requirement for disclosure of lead-based paint become effective (A) 1976 (B) 1980 (C) 1996 (D) 2000 - CORRECT ANSWER C statement of fact. The law applies to owners, lessors and real estate licensees. It became effective in 1996. This law requires that the owner or lessor of dwelling units built before 1978, to provide buyer or lessee with the federal booklet entitled, protect your family from lead in your home" "66) a season's alone is one with a steady history of payments made on time by the borrower. How long does it take to season a loan? (A) 12 months (B) 25 months (C) 31 months (D) 37 months - CORRECT ANSWER A it takes 12 months to season a loan" "67) an advertisement by a mortgage company that is solictingting real estate loans must include the (A) name of the broker / mortgage company (B) address of the broker or mortgage company (C) telephone number of the brokers mortgage company (D) name and license number of the broker or mortgage company - CORRECT ANSWER D a mortgage loan broker must put both the name of the broker (Mortgage Company) and license number in any ad" "68) conditions affecting interest rates and the availability of low on funds vary overtime. When would it be advantageous for a lender to waive a prepayment penalty clause contained in a promissory note (A) when the Federal Reserve board lowers the discount rate (B) in a tight money market where there is a lack of funds available for real estate loans (C) in a deflationary economy where home prices are failing (D) when money is readily available for real estate loans - CORRECT ANSWER B In a tight money market with little money available for financing, the interest goes up. There fore, the lender will be able to make a new loan with a higher interest rate. he wants to get the old loan paid off" "69) When a buyer made an offer on a home, he was given a lead based paint disclosure by the agent. The buyer decided to have an inspection made of the property and lead based paint was discovered. The buyer requested the seller have the necessary repairs be made. Does the seller have a legal obligation to correct the situation: (A) Yes, because lead is a known hazard (B) Yes, if the buyer has children under the age of 13 (C) No, lead is no longer considered a hazard (D) No, but the existence of lead can be used as a negotiating point in the purchase - CORRECT ANSWER D The seller is under no obligation to correct a situation created by lead based paint. The buyer may certainly try to negotiate a change in price as a result of the possibility of lead based paint" "70) where would you most likely see the term Consumer Price Index (CPI) used in real estate contractual agreements (A) In a lease agreement which contains an option to purchase (B) any commercial lease agreement (C) in a residential lease agreement (D) In a novation - CORRECT ANSWER B the Consumer Price Index is often used in commercial leases as a method of increasing rent, usually annually. The rent will be adjusted according to changes in the Consumer Price Index" "71) what is considered real property? (A) stock in a mutual water company (B) unharvested crops (C) crops sold with the property (D) All the Above - CORRECT ANSWER D stock in a mutual water company is appurtenant to the land, therefore it is considered part of the real property and would transfer when the property is sold. Crops growing in the ground are always considered real property while in the ground. Ownership of the cops would be in question, but not the fact that they are real property while still growing" "72) a homeowner took a $30,000 loss on his property. For federal income tax purposes, he can declare (A) $10,000 (B) 40% of the loss is deductible (C) the capital gain less the loss as deductible (D) nothing is deductible - CORRECT ANSWER D although capital gains on the sale of the owner's principal place of residence may be taxed if the game exceeds a statutory amount, losses on the sale of a principal place of residence are not deductible" "73) which of the following would not be a valid reason for a seller to terminate a listing? (A) the broker's license was revoked (B) The seller declared bankruptcy (C) the broker was declared mentally incompetent prior to the listing (D) the broker was declared mentally incompetent after the signing of the listing - CORRECT ANSWER B if the broker's license is revoked, he cannot contract with the general public, therefore the wasting would be terminated. A contract becomes void when one of the parties is judicially declared incompetent. The fact that the seller declared bankruptcy could make the sale harder, but would not be grounds for terminating the listing agreement" "74) a broker has a management contract on an apartment building complex. He collects rents and deposits them in his trust fund bank account. He also acts as a broker on other transactions and puts buyer deposits in the same trust fund bank account. Which of the following is correct regarding this practice: (A) it is legal as long as he keeps records of beneficiary transactions (B) it is legal as long as he is bonded for the maximum amount of the trust fund bank account (C) is legal as long as he does not deposit more than $30,000 (D) this is never legal - CORRECT ANSWER A A real estate broker me operate a property management company and a real estate sales office with his or her broker license. Clients trust funds from both activities may be placed in one trust account. It is not necessary for the broker to maintain separate trust accounts for each activity" "75) subdivisions are controlled by (A) the city (B) the City and the county (C) federal government (D) the city, county and state governments - CORRECT ANSWER D the subdivision map act gives the local governing authorities control over development of subdivisions with their jurisdiction. The subdivided lands act gives the real estate commissioner the authority to approve new subdivisions." "76) a broker acted in good faith on information given to him by the seller, but the information turned out to be fraudulent. If the buyer finds out, which of the following is correct? (A) broker gets commission and is indemnified against liability to the buyer (B) the broker would be entitled to half of the commission (C) the broker would be entitled to his out-of-pocket expenses only (D) no Commission - CORRECT ANSWER A the hold harmless clause in the listing agreement protects the broker from material facts known by the seller, but not disclosed. Broker is entitled to the full commission and the seller is liable for the misrepresentation" "77) the purpose of the Equal Credit Opportunity Act is to (A) standardized minimum requirements for loan eligibility (B) standardized down payment amounts (C) to discourage discrimination in lending based upon race, religion, and sex (D) all of the above - CORRECT ANSWER C the main purpose of the Equal Credit Opportunity Act is to prohibit lenders from discriminating on the basis of race, color, religion, national origin, age, sex, family size, handicapped, martial status or on the grounds of receipt of income from public assistance" "78) recording gives (A) actual notice (B) constructive notice (C) legal notice (D) no notice - CORRECT ANSWER B constructive notice is knowledge the law presumes a person has about a particular fact regardless of whether the person knows about the fact or not. Examples of constructive notice would include proper recording of a deed in the public records or the physical possession of property by owner or tenant" "79) illegal act to bring about a trust deed foreclosure sale can be (A) judicial (B) judicial or trustee's sale (C) trustee's sale (D) public taking - CORRECT ANSWER B a mortgage without a power of sale can only be foreclosed judicially (IE, by owner proceeding). a mortgage or deed of trust which expressing provides for a power of sale maybe foreclosed judicial or by trustee's sale. California trust Deeds normally have a power of sale given by a trustor to trustee for the benefit of the beneficiary" "80) one might normally expect to find reference to the CPI (consumers Price Index) in which of the following (A) lease agreements for single-family residences (B) commercial leases (C) deposit receipts (D) listing contracts - CORRECT ANSWER B changes in the Consumer Price Index often result in adjustments to the rent charge in commercial leases" "81) which of the following does not directly affect the level and movement of mortgage interest rates (A) the demand for funds (B) the supply of funds (C) the rate of unemployment (D) the inflation rate - CORRECT ANSWER C the rate of unemployment has no direct effect on interest rates" "82) FHA will, but VA will not, provide loans for (A) agricultural lands (B) duplex purchased for rental (C) business (D) farming equipment - CORRECT ANSWER B FHA has programs which allow the purchase of rental property. VA does not" "83) when Computing the net income of an office building, an appraiser would consider, as a management expense, one of the following (A) salary paid to a manager (B) the owner acting as his own manager (C) a tenant performing as manager in lieu of rent (D) all of the above - CORRECT ANSWER D all of these are management expenses" "84) an architect often draws a plot plan for the purpose of (A) showing the details of the foundation Construction (B) guiding building construction (C) showing exterior sides of the house (D) guiding placement of construction and related land improvements - CORRECT ANSWER D statement of fact" "85) owner Hall added a patio to his personal residence. For federal income tax purposes, this will be (A) added to his basis of the property (B) taken as a deductible expense in the year of installation (C) of no tax consequence because it is his personal residence (D) depreciated over the life of the Improvement - CORRECT ANSWER A a patio is a capital Improvement and may be added to basis" "86) an appurtenant easement is (A) an interest in land incapable of transfer (B) an interest in land capable of transfer (C) a possessory interest in the land of another person (D) personal to the holder and incapable of transfer - CORRECT ANSWER B an appurtenant easement would transfer with the transfer of the dominant tenement" "87) real estate licensees are prohibited from using blind ads. A blind ad would be one of which does not identify the (A) broker (B) location of the property (C) seller (D) listed price - CORRECT ANSWER A a blind ad is one which does not have the broker's name in the ad" "88) a flood hazard exists when an area floods (A) once a year (B) once in five years (C) twice in 10 years (D) three times in ten years - CORRECT ANSWER C a flood hazard is an area that floods twice in 10 years" "89) A broker, under authority of an exclusive authorization and right to sell listing, collected a $20,000 cash deposit on a selling price of $250,000. Through no fault of the seller, the purchaser failed to complete the transaction, and the owner declared the deposit to be forfeited. The buyer agreed to the forfeiture of the deposit. Under these circumstances, the broker (A) Could retain no part of the deposit (B) Would deduct from the deposit any amount of actual out of pocket expenses incurred by the broker (C) On residential property, retain no more than 3% of the selling price as liquidated damages (D) Would be entitled to the entire deposit - CORRECT ANSWER C As per the "Offer of purchase and receipt for deposit". liquidated damages on owner occupied one to four unit dwellings are limited to 3% of the purchase price" "90) a deed of trust and a note given to a seller to finance the purchase of vacant land on which the buyer intends to place a short-term construction loan would most likely contain (A) an alienation clause (B) an or more clause (C) a subordination clause (D) a prepayment clause - CORRECT ANSWER C a subordination clause allows a future loan (recorded second) to have priority over it. The first one recorded slips into second position" "91) which of the following are ways in which the government has control over real property? (A) VA and FHA policies (B) real estate commissioner (C) building and zoning regulations (D) all of the above - CORRECT ANSWER D there are many government controls like County and city building codes and zoning; as well as through the subdivision map act. VA and FHA exert control by requiring minimum property requirements before guaranteeing or ensuring loans. The Real Estate Commission has the authority to approve new subdivisions" "92) if an appraiser was making an appraisal of a special-purpose property, which approach to Value would he use (A) Market data (B) cost approach (C) substitution (D) all of the above - CORRECT ANSWER B the cost approach is used when appraising a special-purpose property. Special-purpose properties are churches, schools, libraries, Etc. These properties cannot be valued by the comparison (Market data) method because there are no comparables. They cannot be valued by the income approach because they produce no income. The only appropriate approach is the cost approach" "93) a broker is acting as the agent of the seller in a transaction in which the seller carry back a second trust deed. The broker must cause the deed of trust to be recorded or advise a seller to record the trust deed (A) within one week after the close of escrow (B) one business day after the close of escrow (C) 30 days after the close of escrow (D) none of the preceding, as this is not the responsibility of the Agent - CORRECT ANSWER A within one week of closing of a transaction, the broker must cause a deed of trust to be recorded with the County Recorder, or cause it to be delivered to the beneficiary with a written recommendation that it be recorded forthwith, unless written instructions not to be recorded are received from the beneficiary. If the transaction is closed through escrow and the deed of trust is delivered to the escrow holder within one week, that shall be deemed compliance on the part of the broker." "94) the California state contractors of all applies to all of the following except (A) work done for less than $500 (B) work for less than $600 (C) an owner building or improving his own property which he agrees to sell within one year (D) working for relatives - CORRECT ANSWER A California state contractor's license law does not apply to minor work not exceeding $500" "95) when a broker keeps records on a computer, how often does he have to back the records up (A) weekly (B) monthly (C) daily (D) whenever he thinks it is necessary - CORRECT ANSWER C Brokers must backup files daily. When he uses paper he must file documents when they're used" "96) mr. and mrs. Lee sell their house and agree to carry back a second trust deed from the buyer to help complete the financing for the sale. This is most likely due to (A) the First Trust deed is a VA loan (B) the money market is tight (C) the buyer has no cash (D) the sellers don't need the immediate cash - CORRECT ANSWER B when the FED takes steps to implement a tight money market, it usually means an increase in interest rates and a decrease in available funds. The sales volume of the existing homes decrease and borrowers have more difficulty in obtaining loans. The net effect is that sellers are forced to take back 2nd trust deeds to sell their homes. Although the other choices could be true, B is the best answer" "97) a licensee becomes the agent of the seller when both the seller and broker sign the (A) purchase agreement (B) transfer disclosure statement (C) agency disclosure statement (D) listing agreement - CORRECT ANSWER D the listing agreement creates the agency relationship between the broker and seller" "98) a real estate investor who wishes to operate using the principle of Leverage would (A) uses personal funds in so far as possible (B) use borrowed funds and personal funds on an equal basis (C) use borrowed money to the maximum extent possible (D) invest in real properties with value that are declining - CORRECT ANSWER C Leverage is the use of borrowed funds. Investor wanting to use leverage would use borrowed funds to the maximum extent possible" "99) if clark sold his property to Baker and carried back a note and deed of trust as a junior loan, it would indicate (A) a tight money market (B) a VA loan (C) a conventional loan (D) none of the above - CORRECT ANSWER A Tight money market would indicate difficulty in getting loan money. For that reason, the seller might have to carry back a second trust deed" "100) Henry purchased a home for $380,000 with a 10% down payment. The market price was listed at $390,000. The County showed the assessed value as $370,000. For income taxation purposes, what is the cost basis of the property? (A) $360,000 (B) $370,000 (C) $380,000 (D)$390,000 - CORRECT ANSWER C the cost basis is what the buyer actually paid for the property. The buyer paid $380,000, so that is the basis for income tax purposes" "101) a property owner would have the least protection against mechanics liens if he filed a (A) notice to quit (B) notice of non responsibility (C) notice of cessation (D) notice of completion - CORRECT ANSWER A there is no such thing as a notice to quit. Do not confuse this with a 3 day notice to quit or pay rent. The other three choices would protect the owner against mechanic's liens" "102) a contract for the purchase of a commercial building which is conditioned upon the buyers obtaining satisfactory leases, is (A) illusory (B) an enforceable contract (C) both a bilateral and unilateral contract (D) unenforceable under the statute of limitations - CORRECT ANSWER B this is just a contract with conditions. It is perfectly valid and enforceable" "103) according to the real estate law, a broker is one is (A) a trustee who sells a property under a trust deed sale (B) an officer in a corporation buying and selling property for themselves (C) one who collects rents (D) all of the above - CORRECT ANSWER C this is one of the things a broker is qualified to do" "104) if there is a default on a mortgage and the mortgagee decides to foreclose on the mortgage, the mortgagee (A) file an attachment (B) record a notice of default and then wait 3 months before publishing a notice of sale (C) notify the trustee (D) file an action in court - CORRECT ANSWER D mortgages are foreclosed in court. A one year equity of redemption would apply" "105) which of the following is a cost of home ownership (A) amneity value (B) land appreciation (C) appreciation and improvements (D) loss of interest on owner's equity - CORRECT ANSWER D if a person takes money out of the bank to purchase a house, the money cannot be in the bank earning interest. Loss of interest on the owner's equity is a cost of home ownership" "106) if an appraiser is appraising a special-purpose property he would probably use the (A) Market data approach (B) income data approach (C) cost approach (D) land residual approach - CORRECT ANSWER C the cost approach is used for special-purpose properties in new properties" "107) a landlord does not have to file a notice to vacate when tendency is (A) estate for years (B) estate for year-to-year (C) periodic (D) estate at sufferance - CORRECT ANSWER A an estate for years is a name for a lease. When the lease expires alisi is expected to move out period. Notice is not required" "108) when a man bought a property, he was not sold about the septic tank installation. The buyers right would be to (A) sue the broker for disciplinary action (B) rescind the contract (C) demand the seller pay for percolation test (D) file a report with the local Health Department - CORRECT ANSWER B this is a material fact. The buyers right would be to rescind the contract" "109) broker Cox security 90-day in an exclusive listing contract from owner Andrews. Broker Cox located in perspective buyer named Bains who made an offer on the property. The offer was rejected by Andrews as Andrews believe the offer was too low. After the listing expired, owner Anndrews listed the property with another broker named Johnson. Broker Johnson was contacted by prospective buyer Bains and Bains made another offer on the property that was accepted by Andrews. When Cox received the word of the sale, immediately contacted the owner and demanded a commission. Under these circumstances, broker Cox is entitled to (A) a full commission (B) one half of the commission (C) no Commission (D) the same amount of commission paid to Johnson - CORRECT ANSWER C this was a non-exclusive listing. There is no protection for the original broker. The second broker was the procuring cause of the sale" "110) the owner of the condominium unit in which the owner resides, May deduct which of the following expenses on his personal return? (A) repairs to the condominium unit (B) fire insurance on the project (C) interest payments on the units mortgage (D) maintenance expenses on the common areas - CORRECT ANSWER C a condominium owner is treated exactly as any other residential owner. The mortgage interest and property taxes would be deductible" "111) The termination of a power of attorney can occur by the (A) death of the attorney in fact (B) incapacity of the parties to the power of the attorney (C) revocation by the principle (D) All the Above - CORRECT ANSWER D death of either party, incapacity of either party or revocation by principal would terminate a power of attorney" "112) contracts entered into by a person during a period of time in which the person develops mental health problems would become statutorily void when the person (A) visits a psychiatrist twice a week, stays at home and cannot hold down employment (B) voluntarily commit sin sell for herself into a mental institution (C) is committed to a mental institution against his or her wishes (D) is legally adjusted insane and for whom a conservatory has been appointed by the court filing a conservatory hearing - CORRECT ANSWER D a person must be declared insane by the courts in order to lose legal capacity" "113) the value of improved land is (A) value of the land and the improvements (B) the difference between the scheduled gross income and the contract rent (C) the present value of income received in the future (D) the cost of replacement mine is the depreciation and the improvements - CORRECT ANSWER A by definition" "114) an agreement between a lender and a builder where by the lender agrees to advance certain sums to the builder in the future, best describes which of the following (A) interim (B) standby (C) backup (D) incremental - CORRECT ANSWER A a construction loan is an interim loan" "115) When a lender loans a borrower 100% of the purchase price of a house, and the loan is not government-related, the lender would be best protected by (A) a low interest rate (B) low monthly payments (C) appreciation (D) a downturn in the economy - CORRECT ANSWER C appreciation and value would increase the equity of the borrower and lower the loan-to-value ratio for the lender" "116) when using the market data method of appraising a single family residence, the unit of comparison is the (A) gross multiplier (B) cubic feet (C) entire property (D) capitalization rate - CORRECT ANSWER C in the market data method one entire property is compared against another entire property" "117) if a private property owners property was damaged by public works in the area, in order to recover any financial loss, he might initiate an action called (A) a counter condemnation (B) reverse escheat (C) inverse condemnation (D) file an insurance claim - CORRECT ANSWER C inverse condemnation would involve a suit to compel the government to purchase the property; it travels inversely to the normal process, where the government's sues to require the private individual to convey title to the government" "118) An adequate legal description is one that describes with certainty a particular parcel of land. A legal description that uses monuments and describing a particular parcel would be least satisfactory and could be defective because (A) there is a possibility of the destruction of the monuments (B) title companies will not insure title to parcels of land in which the description is based on monuments (C) there is no external evidence of range line designations (D) appurtenances may not be in the proximity of the improvements - CORRECT ANSWER A statement of fact" "119) a real estate broker advertises that he will give a television valued at $500 to any buyer who purchases aproperty listed for sale with his office. This type of advertising is considered to be (A) legal only if the gift value is $100 or less (B) legal if the seller is mailed a copy of the advertisement (C) legal if proper disclosure is made to all interested parties (D) illegal even a full disclosure is made to all interested parties - CORRECT ANSWER C a broker can give gifts to buyers, but must inform seller" "120) currently, residential income property is depreciable over (A) 31 years (B) 39 years (C) 27.5 years (D) 29.5 years - CORRECT ANSWER C statement of fact as of 1986" "121) in order to be effective and to transfer title, a deed must (A) be acknowledged (B) be executed on a day other than Sunday (C) have an adequate description of the property (D) contain the phrase to have and to hold - CORRECT ANSWER C Deeds must have an adequate (not legal) description. The others are not required" "122) easements cannot be terminated by (A) prescription by the owner of the servient tenement (B) release by the owner of the dominant tenement (C) revocation by the owner of the servient tenement (D) merger of the dominant and servient tenement - CORRECT ANSWER C the servient tenement is income encumbered by the easement. It cannot be released or revoked by servient tenement, only the dominant tenement" "123) the promise to list a property for sale in exchange for a promise to perform is called a (A) consideration (B) option (C) executed agreement (D) unilateral contract - CORRECT ANSWER A a promise for a promise is consideration and binds a contract" "124) a woman purchased a property at 20% less than the listed price and sold it for the original price. The percentage of the profit was (A) 10% (B) 20% (C) 25% (D) 40% - CORRECT ANSWER C 25%. LEARN THIS ANSWER!! example: 100 (listed price) x 80%=80 (paid) 100-80=20 (profit) 20 / by 80=.25 (read of profit) or 25%" "125) the majority of money used for home loans comes from (A) individual savings account (B) Federal reserve's (C) government bonds (D) Insurance Reserves - CORRECT ANSWER A statement of fact" "126) an appraiser would Define depreciation as (A) recapture that has been realized (B) lost in value from any cause (C) where in tear of the improvements (D) a loss in value of the lands - CORRECT ANSWER B statement of fact. LEARN THIS" "127) the first and last months rent payments were collected by the lessor, who leased a single family residence. The prepaid rent would be reported (A) (all) in year received (B) split between year received and year in which last month would occur (C) all in year in which last month occurs (D) would not need to be reported because they were prepaid - CORRECT ANSWER A prepaid rents must be reported in the year received" "128) a footing is which of the following (A) a masonry course upon which the mudsill is fastened (B) square blocks of concrete placed under floor joists (C) a slab of concrete in the rear yard area used for recreational purposes (D) a heavy concrete course placed in the ground upon which the conc