Prepare for your real estate license exam with this principles study guide. This covers property rights, forms of ownership, title transfers, and real estate law.
Q: A real estate salesperson is supervised bythe buyer or seller.the seller.any licensed broker.the employing broker only
Answer: the employing broker onlyThe employing broker is held accountable for the salesperson’s conduct in performing business activities.
Q: When a real estate license expires, licensed activity must cease but the license may be renewed up totwo years later.four years later.one year later.three years later
Answer: two years laterA license that is not renewed before it expires may be renewed at any time up to two years from the expiration date. All licensed activity must cease before the license is renewed and a late renewal fee will be required.
Q: Every real estate broker must be licensed by the Bureau ofState.Housing.Corporations.Real Estate.
Answer: Real EstateThe Bureau of Real Estate licenses real estate brokers in California.
Q: Under the Real Estate Law, a real estate salesperson works for a broker as anIncorrectassociate broker.independent contractor.employee.agent.
Answer: employeeFor purposes of the Real Estate Law, a salesperson is always considered the employee of the broker.
Q: Which of the following does NOT require a real estate license?Presenting an offerSelling your own propertyTaking a listingNegotiating a lease
Answer: Selling your own propertyIt is not necessary to have a real estate license to sell your own property.
Q: Real estate licenses are renewable for a period offour years.two years.three years.one year.
Answer: four yearsThe full term on renewal of a broker’s or salesperson’s license is four years.
Q: The applicant for a real estate salesperson’s license must complete how many college-level courses before taking the licensing examination?SevenThreeOneFive
Answer: ThreeAn applicant for a real estate salesperson’s license must complete three college-level courses before taking the licensing examination.
Q: The Real Estate Advisory Commission consists of6 members.10 members.11 members.7 members.
Answer: 10 members.There are 10 members of the Real Estate Advisory Commission. They are appointed by the Real Estate Commissioner, who presides over their meetings.
Q: The Real Estate Law allows a business opportunity to be soldby a real estate licensee.by a PRLS licensee.with a special endorsement.by a financial planner.
Answer: by a real estate licenseeA real estate licensee may represent others in the purchase or sale of a business. Business brokerage is a growing area of real estate practice.
Q: California’s Real Estate Law is found in theBusiness and Professions Code.Government Code.Civil Code.Financial Code.
Answer: Business and Professions CodeCalifornia legislation has been compiled into a series of books called codes. The Real Estate Law is Division 4 of the Business and Professions Code. Part 1 covers licensing and Part 2 covers transactions.
Q: There are three principal baselines and meridians in California. The intersection of the Humboldt Baseline and Meridian is ina state other than California.southern California.central California.northern California.
Answer: northern California.The Humboldt Baseline and Meridian were established on Mt. Pierre in Humboldt County in 1853. The other two baseline and meridians were established a few years earlier.
Q: Personal property is usually transferred by abill of sale.purchase contract.deed.will.
Answer: bill of saleOwnership of real property is usually transferred by an instrument called a deed. Personal property is usually transferred by a bill of sale.
Q: Something that is used with the land for its benefit, such as a roadway or a waterway, is known asan encumbrance.a fixture.an appurtenance.personal property.
Answer: an appurtenanceAn appurtenance to land is anything used with the land for the benefit of its owners, such as a roadway, an easement, right of way, or condominium parking space.
Q: The rectangular survey system is also known as theTorrens system.lot, block, and tract system.U.S. government survey system.metes and bounds system.
Answer: U.S. government survey systemThe rectangular survey system is also called the section and township system, or the U.S. government survey system, and is used by the United States Surveyor General to survey public lands.
Q: The term real estate means the same thing asownership.personal property.real property.intangible personal property.
Answer: real propertyIn California, the term real property is synonymous with the term real estate.
Q: Real property includesland.fixtures.appurtenances to land.all of these.
Answer: all of theseThe California Civil Code definition of real property includes land, fixtures, anything incidental or appurtenant to land, and anything immovable by law.
Q: The test for a fixture does NOT includeorigin of manufacture.relationship of the parties.method of attachment.intent of the parties.
Answer: origin of manufactureThe tests for a fixture (MARIA) include the method by which the thing is affixed; adaptability of the thing for another use; relationship of the parties, intent in using the thing, and agreement of the parties.
Q: How many sections are in a township?6183624
Answer: 36In the rectangular survey system, land is measured, divided, and numbered in each direction from the point of intersection of the baseline and the meridian in townships, each of which is an area of six miles square (36 square miles) made up of 36 townships of one square mile each.
Q: Today, more than 50 percent of California land is owned by thestate government.federal government.private sector.municipalities.
Answer: private sectorOf the more than 100 million acres of California’s total area, government entities own about 49%, leaving the majority of ownership in the private sector.
Q: Under Spanish rule, land was owned primarily by themissions.conquistadors.king.peasants.
Answer: kingIn 1513, Balboa claimed all lands “washed by the Pacific Ocean” for the King of Spain.
Q: The highest form of modern land ownership is known asa real estate trust.an estate for years.a fee simple absolute.a life estate.
Answer: a fee simple absoluteThe highest (most complete) form of ownership is a fee simple absolute, in which right of possession is not restricted
Q: The four unities of joint tenancy do NOT includeinterest.possession.time.severance.
Answer: severancehe four unities of joint tenancy (TTIP) are: unity of time, title, interest, and possession.
Q: In medieval England, the highest form of ownership was thefreehold estate.estate for years.life estate.leasehold estate.
Answer: freehold estateIn medieval England, the freehold estate was the highest form of land ownership and the owner could use the property in any way without being subject to the demands of an overlord.
Q: Community property isthe only form of ownership during marriage.all property acquired by the husband during marriage.all property acquired during marriage.all property acquired during marriage that is not separate.
Answer: all property acquired during marriage that is not separate.Community property is real or personal property acquired by either spouse during marriage or by registered domestic partners during that relationship. Community property cannot be sold, mortgaged, or leased for one year or longer without agreement of both spouses or registered domestic partners.
Q: Which of the following is NOT considered concurrent ownership?Community propertyTenancy in commonJoint tenancyOwnership in severalty
Answer: Ownership in severaltyConcurrent ownership is ownership by more than one person at the same time. Ownership in severalty is ownership by only one person.
Q: Someone who receives real property is known as thedevisor.grantee.mortgagee.grantor
Answer: granteeA conveyance of real estate is called a grant; the person conveying the property is the grantor, and the person receiving the property is the grantee.
Q: The right of possession is restricted under afreehold estate.fee simple subject to a power of termination.fee simple qualified.life estate with a right of reversion.
Answer: fee simple subject to a power of terminationFee simple subject to a power of termination is ownership in which the right of possession is restricted in some way by some limitation or condition.
Q: The right of the future holder of what is currently a life estate is afee simple subject to a power of termination.fee simple defensible.fee simple conditional.remainder.
Answer: remainderThe owner of a life estate has the right to possession and use of property but only as long as the life of an identified person(s). If the right of possession and use goes to a third person when the life estate ends, rather than returning to the grantor of the life estate, that person has a remainder interest while the life estate is in existence and a fee simple estate on termination of the life estate.
Q: Ownership in severalty isseparate ownership.community property.concurrent ownership.a joint tenancy.
Answer: separate ownershipOwnership in severalty, also called separate ownership or sole ownership, is ownership by one person. The property owner is the only person to receive the benefits (and responsibilities) of ownership.
Q: A holder of which of the following ownership interests can devise her share of the property to someone else?Community property with right of survivorshipTenancy in commonTenancy in partnershipJoint tenancy
Answer: Tenancy in commonA tenant in common can give away, sell, or devise (will) her share of the property to someone else. The recipient receives the share of the tenant in common and full right of possession.
Q: Private land can be conveyed for public use or ownership by all of these methods EXCEPTdeed.adverse possession.statutory dedication.common law dedication.
Answer: adverse possessionPrivate land can be transferred for public use or ownership by common law dedication, in which a landowner devotes land to a public use (such as a roadway); by statutory dedication, in which certain areas (such as an easement) are set aside for intended public use; or by transfer of fee simple ownership by deed (the preferred method of public acquisition as it preserves the public character of the land). Land cannot be acquired for public use by adverse possession.
Q: Land is torn away by the action of water in the process calledavulsion.accretion.evolution.reliction.
Answer: avulsionThe natural force of a moving body of water acting gradually or suddenly may tear away land in the process called avulsion; it is distinct from erosion, in which rainfall wears away the surface of the soil.
Q: If an owner devotes land to a public use, such as a roadway, a transfer occurs bycondemnation.escheat.common law dedication.partition.
Answer: common law dedicationA common law dedication occurs when a landowner devotes land to a public use, as when a roadway is opened to public use or described as such in the deeds to adjoining parcels.
Q: Accretion is the process of accumulating new soilalong a flowing body of water.adjacent to an ocean.close to a baseline.next to a lake.
Answer: along a flowing body of waterLand area can be increased by forces of nature; accretion is the process by which land adjacent to a flowing body of water accumulates new soil.
Q: Which type of deed would be used when the purchaser pays off a loan secured by the real estate?Grant deedReconveyance deedQuitclaim deedTrust deed
Answer: Reconveyance deedA reconveyance deed executed by the trustee is the means by which the trustee returns title to the trustor when the debt secured by the deed of trust is paid off. The beneficiary notifies the trustee that the debt has been cleared by sending the trustee a document called a request for reconveyance.
Q: In order to be valid, a grant deed does NOT requirea proper writing.recording.a granting clause.the signature of the grantor.
Answer: recordingThere is no legal requirement that a deed be witnessed, that the grantor’s signature be verified, or that the deed be recorded in the county recorder’s office; nevertheless, such steps are practical necessities to prevent problems.
Q: If a person dies without leaving a will, that person diesstatutorily.intestate.administratively.testate.
Answer: intestateA person who dies without having made a will is said to have died intestate. All states make provision by law for distribution of the property of intestate persons.
Q: Which of the following deeds is a security instrument?Quitclaim deedGrant deedTrust deedSheriff’s deed
Answer: Trust deedThe trust deed, also called a deed of trust, can be used when property serves as security for a debt, typically the loan used to purchase the property, but it can be any loan using the property as collateral to guarantee payment of the amount borrowed.
Q: A holographic will does NOT have to bewitnessed.entirely handwritten.signed.dated.
Answer: witnessedA holographic will is one written by hand, dated, and signed by the testator. It does not need to be witnessed, but it must be entirely handwritten; there can be no printed or typewritten parts of the will.
Q: The right of a government agency to take private property for a public use is calledescheat.a partition action.a quiet title action.eminent domain.
Answer: eminent domainGovernmental entities have the right to acquire title to property by eminent domain.
Q: Liens are classified aseasements.encroachments.encumbrances.writs of attachment.
Answer: encumbrancesAn encumbrance is anything that has an effect on the fee simple title to real estate or the use of the property. A lien is an encumbrance that makes property security for the payment of a debt or discharge of an obligation.
Q: Which of the following could NOT file a mechanic’s lien?ContractorEquipment lessorArchitectHome improvement lender
Answer: Home improvement lenderA mechanic is anyone who performs work on real property or an improvement to real property or furnishes the material used in the work. Persons entitled to a mechanic’s lien include all those who work or supply materials at the request of the property owner, or any contractor, subcontractor, architect, builder, or other person placed in charge of all or part of a project.
Q: A condition that would prohibit a property owner from transferring title to the property is known as arestriction.writ of attachment.judgment.restraint on alienation.
Answer: restraint on alienation.A restraint on alienation is any condition that prohibits a property owner from transferring title to the property and is not legally recognized. An example would be a condition that the grantor’s consent be obtained before the grantee could sell the property. Such a restraint is void—totally ineffective—and the grantee holds the property free of the restraint.
Q: A prohibition in a deed against a property use is known asan encroachment.an easement.a restriction.a condition.
Answer: a restrictionAny form of restriction is a limitation on the use of land. The most common private restrictions are the covenants, conditions, and restrictions found in a deed. Subdivision developers frequently make use of deed restrictions to ensure that the uniform appearance of the homes in a subdivision is maintained.
Q: A notice of nonresponsibility would protect an owner froma mechanic’s lien.a foreclosure.an eviction.trespassers.
Answer: a mechanic’s lienThe owner of real estate has protection if unauthorized work is begun on the property by posting a notice of nonresponsibility in a conspicuous place on the land and recording a copy of the notice with the county recorder within ten days of learning of the construction, repair, or other work. The notice must include a property description; the name, address, and property interest of the owner or other person giving notice; and a brief statement that the person giving notice is not responsible for any claims arising from the work.
Q: A promise by a property owner NOT to do something is called aprescription.restriction.restraint on alienation.covenant.
Answer: covenant.A covenant is a promise to do something or to refrain from doing something. Covenants are often used in leases (e.g., a tenant might promise to use the property only for a specified purpose). The remedy available when a covenant must be enforced will be an injunction or money damages.
Q: mechanic’s lien requiresa promissory note.a servient tenement.a deed.preliminary notice.
Answer: preliminary noticeIf a mechanic’s lien will be filed, preliminary notice of intent to file the lien must be hand-delivered or sent by first-class registered or certified mail to the property owner, general contractor (if any), and construction lender (if any).
Q: An improvement that extends onto an adjacent property without permission is anavulsion.encumbrance.encroachment.easement.
Answer: encroachmentAn encroachment occurs when part of an improvement extends over the boundary line between properties without permission. Fences and buildings are typical forms of encroachment. Even the roof eave of a building can be an encroachment if it extends into the airspace of a neighboring lot.
Q: The right of an owner of a parcel of land to travel over an adjoining parcel of land is known asan easement.a restriction.an encroachment.a covenant.
Answer: an easementThe right of use for a particular purpose or to travel over someone else’s land is called an easement. An easement usually is the right of the owner of a parcel of land to travel over an adjoining parcel.
Q: When a landowner has the right to travel over the property of an adjoining landowner, the property that benefits from the easement right is called thetenant at will.servient tenement.dominant tenemnet.life tenant.
Answer: dominant tenemnetThe land benefited by the easement is the dominant tenement. The land over which the easement runs is called the servient tenement.
Q: The Real Estate Law treats a salesperson asa general agent.an independent contractor.a dual agent.an employee of the broker.
Answer: an employee of the broker.A real estate salesperson can conduct business only as the agent of a broker and must have a written employment agreement with the broker. The Real Estate License Law always considers a salesperson to be an employee acting under the direct supervision and control of the broker. This is true even when the salesperson is treated by the broker as an independent contractor for compensation, work assignment, and tax purposes.
Q: One of the MOST important duties of agent to principal is the duty ofhard work.beneficial conduct.loyalty.salesmanship.
Answer: loyaltyOne of the most important duties the agent owes the principal is the duty of loyalty. The agent’s role in the transaction is to consider the interests of the principal first and foremost.
Q: A nonexclusive listing agreement is also known asan option listing.an open listing.an agency listing.a net listing.
Answer: an open listingAn open listing is nonexclusive and a commission is earned only if the listing broker is the procuring cause of sale. To be the procuring cause of a sale, the agent must be the one who initiates a continuing series of events that result in a completed transaction.
Q: An agent owes which of the following to a third party?Fiduciary dutiesDuty of representationDuty of disclosureDuty of trust
Answer: Duty of disclosureA real estate agent owes to a third person a duty of full disclosure of material facts that the agent knows regarding the property, unless prohibited by law from doing so. The agent bears this responsibility independent of any instruction received from the property owner. If the property owner tells the agent not to reveal certain defects, the agent must inform the principal that the agent cannot hide such information. To do otherwise would make the agent liable for money damages, and place the agent’s license in jeopardy.
Q: Real estate commission rates arenegotiable.subject to cancellation.always 4 percent.fixed by law.
Answer: negotiableIn California, real estate commissions are negotiable. There is no predetermined commission rate, and the seller and broker are free to set whatever rate they agree on.
Q: A real estate broker works for theprincipal.Bureau of Real Estate.real estate board.third party.
Answer: principalAn agency agreement is a form of employment contract and can be structured in several ways. The principal is the employer, but the agent may act as either an employee or an independent contractor. The main difference is in the type of control the principal exercises over the agent.
Q: For tax purposes, a salesperson can work for the broker asan independent contractor.a subagent.a partner.a dual agent.
Answer: an independent contractorAn independent contractor usually has great flexibility in accomplishing the task undertaken and will receive a commission based on completed transactions, instead of a salary, with no payroll deductions.
Q: An agent is authorized to act in place of the principal by apurchase contract.listing agreement.power of attorney.multiple listing clause.
Answer: power of attorneyAn attorney-in-fact is an agent who has been granted a power of attorney by a principal. A power of attorney authorizes an agent to act in the capacity of the principal.
Q: The MOST commonly used form of listing agreement is theexclusive agency.open agreement.net agreement.exclusive right to sell.
Answer: exclusive right to sellThe most commonly used form of agreement is the exclusive authorization and right-to-sell listing, by which the broker is entitled to a commission no matter who sells the property, even if the owner finds a buyer without the broker’s assistance.
Q: When an agent represents both the buyer and seller in the same transaction, this action isan example of subagency.prohibited by the MLS.known as dual agency.against the law.
Answer: In a dual agency, the same agent represents two principals in the same transaction. A dual agency places the agent in the precarious position of carrying out agency responsibilities to two principals whose interests are in opposition. Any agent who acts on behalf of both parties to a transaction is required by law to inform both parties and obtain their written consent to the dual representation.
Q: A contract that has no legal effect from its inception is aquasi contract.valid contract.void contract.voidable contract.
Answer: void contract
Q: Failure to perform a contract obligation is known as anovation.breach.rescission.release.
Answer: breachA contract may be discharged by a breach of contract. A breach occurs when one of the parties fails to perform all or part of the obligations required by the contract. The nonbreaching party who is injured by the breach is entitled to legal relief.
Q: When both parties to a contract agree to substitute a new agreement for the present one, this is known as arelease.rescission.breach.novation.
Answer: novationBy a novation, the parties substitute a new agreement for the original one, discharging the original agreement. If the new agreement falls within the statute of frauds, it must be written.
Q: To be enforceable, real estate sales agreements mustbe in writing.contain a granting clause.be acknowledged.be recorded.
Answer: be in writingA valid contract for the sale of real estate must be written. An oral contract to purchase real estate is unenforceable, no matter what its terms, because it is oral and not written.
Q: The typical real estate purchase agreement isan implied contract.a unilateral contract.a voidable contract.a bilateral contract.
Answer: a bilateral contractThe typical real estate purchase contract is bilateral. One party promises to transfer the right of ownership or use of real estate, and the other party promises to pay some form of compensation for that right.
Q: Performance of a contract may be excused if a party can prove which of the following?Lack of negotiating skillImpracticability of performanceA better deal elsewhereNovation
Answer: Impracticability of performancePerformance may be excused in the event of impracticability of performance (commercial frustration). If changed circumstances make a purchase uneconomic, there may be an excuse for nonperformance (e.g., a buyer’s financial downturn such as an extreme drop in market value of the buyer’s company’s stock), so that the purchase, although not impossible, would impose extreme financial hardship.
Q: Which of the following is NOT a way to terminate a contract?NovationVerificationReleaseRescission
Answer: VerificationRescission, release, and novation are all methods to terminate a contract. Verification is a method of confirming the accuracy of a description of a property or contract elements.
Q: Both parties agree to cancel a contract in the process ofrescission.reformation.novation.release.
Answer: rescissionIf both parties agree, they may take back (rescind) the contract in the process called rescission.
Q: A contract that has yet to be performed is known as animplied contract.express contract.executed contract.executory contract.
Answer: executory contract.A contract is said to be executory when some future contract obligation is yet to be performed. A listing agreement is executory, because the real estate broker must find a buyer for the listed property in order to earn the compensation promised by the seller. Until the sale is closed, a real estate purchase contract also is executory.
Q: A contract that is a promise for a promise is known as avoidable contract.void contract.bilateral contract.unilateral contract.
Answer: bilateral contractIn a bilateral contract, both parties make a promise to do something or to refrain from doing something and both are obligated to perform.
Q: The federal agency that insures savings accounts is theFNMA.FHA.FDIC.FHLMC.
Answer: FDICThe Federal Deposit Insurance Corporation (FDIC) was created by Congress in 1933 to insure individual accounts in participating banks and (as of 1989) savings and loan associations, up to $250,000 per depositor, per insured bank, for each ownership category.
Q: Money is a medium of exchange as well as a measure ofvalue.intrinsic worth.investment potential.credit.
Answer: valueMoney is a medium of exchange as well as a measure of value. In exchange for our work efforts, we earn income in the form of money.
Q: A provision that gives the lender the right to demand full payment of a mortgage upon a sale of the property isa notice-of-salean escalator clause.a partition clause.a due-on-sale clause.
Answer: a due-on-sale clause.A due-on-sale clause is an acceleration clause in a real estate financing instrument granting the lender the right to demand full payment of the remaining indebtedness upon a sale of the property.
Q: The cost of using money BEST describesan open market.interest.credit.a free market.
Answer: interestA purchaser of real estate who defers part or all of the purchase price uses some form of credit. When the purchaser receives credit from the seller, the cost of that credit is usually the rate of interest charged to the purchaser.
Q: The security instrument of choice in California is thedeed of trust.grant deed.quitclaim deed.mortgage.
Answer: deed of trustThe deed of trust is the preferred security instrument in California.
Q: The repayment of a loan in equal installments that include both interest and principal reduction is referred to asa mortgage loan.an amortized loan.a straight loan.a hard money loan.
Answer: an amortized loanIn an amortized loan, payment is by installments that include both interest and principal.
Q: An instrument by which property is hypothecated to secure the payment of a debt or obligation is known asa reconveyance deed.a sheriff’s deed.an encroachment.a mortgage.
Answer: a mortgageThe security instrument by which real estate serves as assurance that a debt will be repaid usually is referred to as a mortgage, even when it is a deed of trust.
Q: RESPA regulates loans for which of the following?One- to four-unit family dwellingsCommercial propertyLand subdivisionsMultiple family dwellings
Answer: One- to four-unit family dwellingsThe Real Estate Settlement Procedures Act (RESPA) requires certain disclosures by lenders in federally related mortgage loans involving the sale or transfer of residences of one to four dwelling units.
Q: Real estate loans generally include a promissory note and agrant deed.security instrument.purchase contract.
Answer: security instrumentReal estate loans in California generally are made using two instruments. The promissory note is the borrower’s promise to pay the amount borrowed and is evidence of the debt. The security instrument, typically a deed of trust, transfers title to the real estate to a third party until the loan is repaid.
Q: Which of the following is NOT an institutional lender?savings and loan.thrift.insurance company.mortgage company.
Answer: mortgage company.In California, a mortgage company is a mortgage banker licensed by the California Department of Business Oversight and subject to the California Residential Mortgage Lending Act.
Q: Which of the following generally does NOT require a down payment?FHA-insured loanVA-guaranteed loanCalVet loanLoan from a conventional lender
Answer: VA-guaranteed loanAs long as the estimate of reasonable value does not exceed the amount of the VA loan guarantee, the VA does not require a down payment, although the lender may. The VA loan guarantee can never be more than the estimate of reasonable value, but a higher purchase price may be negotiated if the veteran pays the difference between the reasonable value and the purchase price in cash at the closing.
Q: An installment sales contract is also called avoidable contract.terminable contract.temporary contract.land contract.
Answer: land contract.The land contract (also referred to as a contract for deed or installment sales contract) is a form of seller financing in which the buyer takes possession of property and makes payments on its purchase but does not receive legal title to the property for at least one year from the date of possession.
Q: On default of a VA-guaranteed loan, the VA will pay theproperty’s market value.down payment.lender’s loss on the amount guaranteed.remaining mortgage balance.
Answer: lender’s loss on the amount guaranteed.The Department of Veterans Affairs (VA) guarantees payment of remaining mortgage indebtedness, up to a maximum amount. If the borrower defaults, the VA will pay the lender’s net loss up to the amount of the guarantee, which is decreased proportionately as the loan amount is repaid.
Q: The credit extended by seller to buyer is aconventional loan.mechanic’s lien.secondary market loan.purchase money mortgage.
Answer: purchase money mortgage.The purchase money trust deed or purchase money mortgage is given by buyer to seller at the time of purchase to secure all or part of the purchase price. The purchase money may come from a third party (such as an institutional lender) or take the form of credit from the seller.
Q: The Federal Housing Administration insures payment ofloan points for the lender.a broker’s commission.loan principal.a discount.
Answer: loan principalThe Federal Housing Administration (FHA), a division of the Department of Housing and Urban Development (HUD), does not make loans, but it insures loans made by approved lending institutions.
Q: The transfer of existing mortgages between investors is theCorrectgrowing equity program.extended credit program.primary mortgage market.secondary mortgage market.
Answer: secondary mortgage marketThe sale and purchase of mortgages secured by real estate take place on the secondary mortgage market.
Q: A payment to FHA at closing is theescrow fee.recording fee.loan interest rate.mortgage insurance premium.
Answer: mortgage insurance premium.The FHA up-front mortgage insurance premium is paid to FHA at closing. It is not considered an acquisition cost in computing down payment. The premium may be paid by the borrower or someone else, or it may be included in the loan amount.
Q: RESPA requirements do NOT apply toconventional loans.commercial loans.FHA-insured loans.VA-guaranteed loans.
Answer: commercial loansSettlement statements detailing transaction costs to buyers and sellers of dwellings of one to four units are required by the Real Estate Settlement Procedures Act (RESPA). Commercial (non-residential) loans are not subject to RESPA.
Q: Which of the following documents is used with a CalVet loan?Sheriff’s deedLand contractGrant deedTrust deed
Answer: Land contractCalVet loans are administered by the California Department of Veterans Affairs (CDVA), which authorizes, processes, funds, and services the loans. No outside lenders are involved, because the program is totally self-supporting. CDVA buys the selected property from the seller and resells the property to the veteran on a land contract. CDVA holds title until the veteran has repaid the amount owed, although the veteran has the right to possession of the property as her personal residence.
Q: The interest rate on CalVet loansdepends on the CPI.may change annually.never changes.changes monthly.
Answer: may change annuallyThe interest rate on all loans may change annually, depending on the cost of bonds to fund the program. Monthly loan installments will increase to cover additional interest charges.
Q: Escrow officers usually base their prorations ona full calendar year.a 30-day montha monthly basis.business days
Answer: a 30-day monthIn most prorations as part of the closing of a transaction, a 30-day month is used.
Q: Which of the following provides the BEST protection?Certificate of titleTitle insurance policyAbstract of titleGuarantee of title
Answer: Title insurance policyTitle insurance can be for the benefit of either property owner or lender and takes effect as of the day of closing.
Q: One of the main responsibilities of the seller is toorder fire insurance.review the title reportsign escrow instructions.obtain a new loan.
Answer: sign escrow instructions.One of the main responsibilities of the seller is to sign the escrow instructions.
Q: With title insurance, the buyer ALWAYS receivesan extended coverage policy.an abstract of title.a regular coverage policy.a preliminary report.
Answer: a preliminary report.After the title insurance policy is ordered and before the sale closes, the title insurer submits a preliminary report of the condition of the property title to the purchaser through the escrow holder.
Q: A real estate broker can handle an escrow when the brokeris the agent or a party to the transaction.is acting for another broker.is not a party to the sale.charges a fee.
Answer: is the agent or a party to the transaction.A real estate broker can act as an escrow only in transactions in which the broker acts as an agent or party and is subject to special rules.
Q: In northern California, escrows are typically held byescrow companies.banks.real estate brokers.title insurance companies.
Answer: title insurance companies.In Northern California, escrow typically is handled by a title insurance company. In Southern California, separately licensed escrow companies often are used, and financial institutions also perform many escrows.
Q: What does the escrow officer file when the buyer and seller are unable to resolve a dispute which prevents the closing of escrow?An interpleader actionA quiet title actionA writ of possessionAn estoppel agreement
Answer: An interpleader actionIf the parties cannot agree on terms, the escrow holder can bring a legal action known as interpleader to have a court determine the rights of the parties.
Q: The escrow officer acts for both the buyer and seller asa single agent.an impartial third party.a general agent.a special agent.
Answer: an impartial third party.The escrow officer is responsible only for the duties related to the escrow process. The escrow officer will make the required distributions once all the preconditions have been met. This will protect both the buyer and the seller.
Q: Which of the following could NOT be an escrow holder?Listing brokerEscrow partnershipSelling brokerEscrow corporation
Answer: Escrow partnershipIn California, an escrow company must be a corporation licensed to perform escrow services. An escrow company cannot be a partnership.
Q: For a valid escrow, there must be a binding agreement and conditional delivery of thetitle insurance.instruments of transfer.home warranty.property insurance.
Answer: instruments of transfer.To create a valid escrow, there must be a binding contract and conditional delivery of instruments of transfer to the escrow holder.
Q: The person responsible for determining assessed values is thecounty assessor.county supervisor.county tax collector.sheriff.
Answer: county assessor.The county assessor is the elected official responsible for determining assessed values and preparing the tax roll.
Q: Taxes charged in direct relation to property value areillegal.paid upon a sale only.ad valorem taxes.paid annually.
Answer: ad valorem taxes.Property taxes usually are ad valorem taxes, which means they are charged in relation to the value of the property taxed.
Q: Real property taxes become a lien onNovember 1.January 1.February 1.July 1.
Answer: January 1.On January 1, when the assessment roll takes effect for the next tax year, a lien is placed on all assessed real property in the amount of the tax due.
Q: The first property tax installment of the tax year is due onFebruary 1.April 1November 1.July 1.
Answer: November 1.The property tax year runs from July 1 through the following June 30. Property tax is payable in two installments due November 1 and February 1.
Q: Unless an extension is given, a federal income tax return must be filed for the preceding tax year byAugust 15.May 15.October 15.April 15.
Answer: April 15A federal income tax return must be filed by April 15 for the preceding calendar year if adjusted gross income is high enough or federal income tax has been withheld and a refund is due. Both individuals and corporations are taxed.
Q: A principal residence must be occupied for how long to take advantage of the maximum exclusion of profit from taxable income?Two yearsOne yearFive years18 months
Answer: Two yearsAs of August 5, 1997, homeowners are allowed an exclusion from federal income taxation of up to $250,000 (for single taxpayers) or $500,000 (for a couple married at the time of sale) of the profit on the sale of the principal residence. The exemption is allowed if the home was owned and occupied for two of the last five years prior to the sale.
Q: The second property tax installment is delinquent afterDecember 10.April 10.May 16.February 1
Answer: April 10.The property tax year runs from July 1 through the following June 30. Property tax is payable in two installments due November 1 and February 1. The February payment is delinquent after 5:00 pm on April 10.
Q: The purpose of the property tax assessed value is toinsure all counties are equal.equalize property taxes.establish the base value.create the transfer tax rate.
Answer: establish the base value.The base value of a property is its full cash value (market value) as of February 28, 1975, or the date of a subsequent reassessment event. Assessed value, for property tax purposes, is the property value to which the tax rate is applied.
Q: In California, the inheritance and gift taxes have beencombined.reduced.increased.abolished.
Answer: abolishedProposition 6 repealed the California inheritance and gift taxes.
Q: A personal residence and business equipment are consideredcapital assets.real property.intangible property.personal property.
Answer: capital assets.A capital asset is all property except business inventory or other property held for sale in the ordinary course of one’s business.
Q: To transfer use of an entire property, but not ownership, the property owner would usea lease.an easement.a quitclaim deed.a trust deed.
Answer: a lease.A lease is a contract that conveys an interest in real property from one person to another. Most frequently, a lease transfers the use of property without transferring outright ownership.
Q: When a residential tenant vacates, the landlord must mail the tenant either the entire security deposit or an itemized list of deductions, plus a check for any remaining balance within14 days.21 days.7 days.30 days.
Answer: 21 days.Within 21 days after the tenant has vacated the premises, the landlord must mail the tenant the amount of the security deposit or a written itemized statement of the basis for the disposition of the security deposit and any remaining amount.
Q: Which of the following is NOT considered a tenant?LesseeLodgerHotel guestBoarder
Answer: Hotel guestThe California Civil Code, beginning at Section 1940, governs situations in which a person hires real property. Tenants, lessees, boarders, lodgers, and others (but not guests at hotels) are included in those provisions.
Q: Which of the following is NOT considered a valid reason for the landlord to enter the tenant’s unit?The landlord needs to make agreed-on repairs.The landlord wants to leave a gift for the tenant.A person needs help.There is a gas or water leak.
Answer: The landlord wants to leave a gift for the tenant.The California Civil Code permits the landlord a right of entry in an emergency; when the tenant has abandoned the premises; pursuant to a court order; so that the landlord can make necessary or agreed-on repairs or perform other required services; and so that the landlord can show the property to prospective tenants, mortgagees, purchasers, workers, or contractors.
Q: The legal proceeding to evict a tenant isa notice to vacate.a quiet title action.an unlawful detainer.a 30-day notice.
Answer: an unlawful detainer.If the tenant fails to comply after notice to pay or quit has been given, the landlord can request an order of eviction from the court by a legal proceeding called unlawful detainer.
Q: An estate which has a definite termination date is known asan estate at will.a periodic estate.a freehold estate.an estate for years.
Answer: an estate for years.An estate for years is a leasehold created by landlord and tenant for a particular period of time.
Q: Historically, a leasehold was considered alife estate.fee simple interest.real property interest.personal property interest.
Answer: personal property interest.Historically, a leasehold estate was considered personal property. Today, for certain purposes a leasehold estate is considered real estate.
Q: A rent control ordinance that allows market rent to be charged a new tenant hasbase rent stabilization.vacancy control.vacancy decontrolvoluntary rent control.
Answer: vacancy decontrolIf an ordinance contains a vacancy decontrol provision, when a unit becomes vacant, there is no restriction on the rent set for a new tenant.
Q: If a landlord’s interest in leased property is transferred, the security deposit paid by the present tenantis returned to the tenant along with a notice of eviction.is returned to the tenant immediately.may be kept by the landlord.must be transferred to the new owner.
Answer: must be transferred to the new owner.The security deposit paid by a tenant is transferred to a new owner of the leased property.
Q: What is the maximum amount of security deposit a landlord can collect in advance for an unfurnished residential unit?Two months’ rentThree months’ rentOne month’s rentAny amount the owner justifies
Answer: Two months’ rentThe maximum amount of a security deposit is two months’ rent for an unfurnished residential property or three months’ rent for a furnished residential property.
Q: The BEST method for valuing residential property is usually thecapitalization approach.income approach.sales comparison approach.cost approach.
Answer: sales comparison approach.The method that usually is the most significant in appraising residential property is the sales comparison approach.
Q: A loss in value from any cause is known asinherent loss.equity loss.capitalization.depreciation.
Answer: depreciation.Depreciation is a loss in value from any cause.
Q: A real estate appraiser’s opinion of property value is usually valid only forsix months.the date given.the tax assessor.a lender.
Answer: the date given.Most often, the value conclusion is the appraiser’s opinion of the property’s market value as of the date of the property inspection. An appraisal can provide an opinion of value as of some other date, however, such as the date property was taken in a condemnation proceeding.
Q: An exact replica of a structure being appraised determinesreplacement cost.objective review.reproduction cost.subjective review.
Answer: reproduction cost.Reproduction cost is the cost of a new building of exactly the same design and materials as the subject property.
Q: A property’s most probable price on the open market under normal circumstances in an arm’s-length sale is known as itsactual price.book value.selling price.market value.
Answer: market value.The market value of real estate is the most probable price it would bring in an arm’s-length transaction under normal conditions on the open market.
Q: By which principle will the value of a nonconforming building be enhanced if surrounding buildings are of a higher value?RegressionProgressionContributionCompetition
Answer: ProgressionThe value of a building is enhanced if buildings around it have a higher value, typically because they are better maintained, better quality construction, larger, or a combination of such factors.
Q: The MOST profitable, physically possible, and legally permissible use of real property is referred to by appraisers as itssubjective value.inherent value.highest and best use.capitalization.
Answer: highest and best use.The highest and best use of real estate is its most profitable, physically possible, and legally permissible use. A highest and best use study can be made of a vacant site or a site to be redeveloped.
Q: The unit-in-place method is usedas an appraisal method.to find highest and best use.to calculate reproduction cost.by lenders only.
Answer: to calculate reproduction cost.The unit-in-place method makes use of the construction cost per unit of measure of each of the component parts of the subject property, such as walls, plumbing units, and heating units.
Q: An important step at the beginning of the appraisal process is todetermine highest and best use.gather the data.estimate land valueidentify the scope of work.
Answer: identify the scope of workThe appraisal process begins by identifying the scope of work necessary to perform the appraisal.
Q: The basis of MOST residential real estate appraisals is the principle ofconformity.contribution.substitution.change.
Answer: substitution.The principle of substitution states that value tends to be determined by the cost of acquiring an equally desirable property.
Q: The MOST luxurious floor plan gives each bedroomdirect access to the kitchen.its own adjoining bathroom.an outside door.ceramic tile flooring.
Answer: its own adjoining bathroom.The most luxurious plan gives each bedroom its own adjoining (en suite) bathroom.
Q: The placement of a house on a site is called itsfooting.foundation.orientation.design.
Answer: orientationThe placement of a house on a site is called its orientation. Depending on geographic location, orientation is generally best when the greatest window expanse faces south.
Q: Most California houses are built withouta garage.an attic.a rear yard.a basement.
Answer: a basement.Most California single-family dwellings do not have basements (rooms that are partly or entirely below ground level).
Q: For earthquake safety, California building codes require that the foundation be connected to the sill usinganchor bolts.posts and beams.joists.girders.
Answer: anchor bolts.Since 1931 California building codes have required the use of anchor bolts through the sill and into the foundation wall as an earthquake safety measure (the sill is the wood member that is placed directly on the foundation wall).
Q: An architectural style that features a distinctive gambrel roof and dormers, and has 1½ or 2½ stories isSpanish.Dutch Colonial.Victorian.French Colonial.
Answer: Dutch Colonial.The Dutch Colonial architectural style has 1½ or 2½ stories, distinctive gambrel roof, and dormers.
Q: The highest point of construction of a wood frame building is theceiling joist.bridging.ridge board.frieze board.
Answer: ridge board.The rafters of a roof meet at the ridge board, the highest point of construction of a frame building.
Q: The effectiveness of various kinds of insulation is measured bythe thickness of the drywall.their R-value.heat control.environmental controls.
Answer: their R-value.The effectiveness of various kinds of insulation is expressed by their R-value.
Q: Parallel wooden members that support floors and ceilings arestuds.joists.baseboards.ridge boards.
Answer: joistsJoists, along with girders, are parallel wood beams that are part of the foundation and support the floor and ceiling of a wood-frame house.
Q: When you divide the capacity of an air conditioner in BTUs by the number of watts of electricity required to run it, you get itsconservation ratio.EER.heat ratio.120 v. 220 watt ratio.
Answer: EER.The energy-efficiency ratio (EER) is found by dividing an air conditioning unit’s capacity measured in British Thermal Units (BTUs) by the number of watts of electricity needed to run it.
Q: Interior walls can be finished with plasterboard, also calleddrywall.building paper.filler.wallpaper.
Answer: drywallInterior walls can be finished with plasterboard, also referred to as drywall or wallboard.
Q: The federal Fair Housing Act provides for age-restricted housing when all residents of an adult community are at LEAST age55.50.62.65.
Answer: 62The act exempts adult communities in which all residents are at least age 62.
Q: Minimum parcel size, building height limitations, and required setbacks are covered in amaster plan.general plan.specific plan.zoning ordinance.
Answer: zoning ordinance.A zoning ordinance typically covers permitted land uses, minimum parcel size, building height and lot coverage limitations, required setbacks, and maximum density.
Q: A long-range plan for local development is commonly known asthe design plan.CC&Rsthe general plan.zoning.
Answer: the general plan.Community development goals are set out in the general plan, which is required by state law for every city and county within California.
Q: Federal fair housing protections do NOT include the category ofsex.handicap.economic status.familial status.
Answer: economic status.The federal Fair Housing Act (Title VIII of the Civil Rights Act of 1968), as amended, prohibits discrimination based on race, color, religion, sex, national origin, ancestry, handicap, or familial status.
Q: The government’s police power can be used for all of the following purposes EXCEPTgeneral welfare.safety.taxation.public health.
Answer: taxationTaxation is not a police power. Police power enables government bodies to regulate private activity by enacting laws that benefit the public health, safety, and general welfare.
Q: The federal Fair Housing Act is enforced bystate agencies.HUD’s Office of Equal Opportunity.the Justice Department, through the Attorney General.FHA.
Answer: HUD’s Office of Equal Opportunity.An individual has one year in which to file a complaint alleging discrimination with HUD’s Office of Equal Opportunity (OEO) or two years in which to file a lawsuit in federal or state court.
Q: Land use controls that benefit the public health, safety, and general welfare are possible because of the government’shealth and safety laws.police power.regulations.restrictions.
Answer: police power.Land-use controls are possible because of the government’s police power, which enables governing bodies to regulate private activity by enacting laws that benefit the public health, safety, and general welfare.
Q: The procedure for filing a subdivision plan when property is divided into two or more parcels is found in thezoning regulations.Subdivided Lands Law.Subdivision Map Act.building codes.
Answer: Subdivision Map Act.The Subdivision Map Act (found in the Government Code) establishes a statewide procedure for filing a subdivision plan when property is divided into two or more parcels.
Q: Rejecting real estate loans because of location is calleddistortion.steering.redlining.blockbusting.
Answer: redliningRedlining is the illegal practice of rejecting real estate loan applications because of the location of the property involved.
Q: The Subdivided Lands Law can be found in theBusiness and Professions Code.Penal Code.Civil Code.Health and Safety Code.
Answer: Business and Professions Code.The Subdivided Lands Law (found in the Business and Professions Code) describes the forms of ownership allowed in a subdivision of five or more parcels on up to 160 acres of land.