Minnie Lush, BA, GRI, ABR

SIXTH EDITION
SA
CALIFORNIA REAL ESTATE EXAM GUIDE
M
PL
E
 California Real Estate
Exam Guide
SA
M
PL
E
Minnie Lush, BA, GRI, ABR

Sixth Edition

CA_RE_Exam_Guide_6E.indb 1 11/13/2013 11:44:51 AM

 This publication is designed to provide accurate and authoritative information
in regard to the subject matter covered. It is sold with the understanding that the
publisher is not engaged in rendering legal, accounting, or other professional
advice. If legal advice or other expert assistance is required, the services of a
competent professional should be sought.

President: Dr. Andrew Temte

SA
Chief Learning Officer: Dr. Tim Smaby
Executive Director, Real Estate Education: Melissa Kleeman-Moy
Development Editor: Christopher Kugler

CALIFORNIA REAL ESTATE EXAM GUIDE SIXTH EDITION

©2014 Kaplan, Inc.
Published by DF Institute, Inc., d/b/a Dearborn Real Estate Education
332 Front St. S., Suite 501
La Crosse, WI 54601
M
All rights reserved. The text of this publication, or any part thereof, may not be
reproduced in any manner whatsoever without written permission from the
publisher.

Printed in the United States of America

PL
ISBN: 978-1-4754-2051-7 / 1-4754-2051-X
PPN: 1970-0707
E
CA_RE_Exam_Guide_6E.indb 2 11/13/2013 11:44:51 AM
 CONTENTS
SA
Acknowledgments v
Introduction vii

PART 1: SALESPERSON TOPICS 1

Hot Notes 3
Salesperson Practice Examination 1 31
Salesperson Practice Examination 2 47
Salesperson Practice Examination 3 65
Salesperson Practice Examination 4 83
Salesperson Practice Examination 5 101
Salesperson Practice Examination 6 119
Salesperson Practice Examination 7 133
M
Salesperson Practice Examination 8 149
Salesperson Practice Examination 9 163
Salesperson Practice Examination 10 177

PART 2: BROKER TOPICS 193

Hot Notes 195
Broker Practice Examination 1 207
Broker Practice Examination 2 219
PL
Broker Practice Examination 3 231
Broker Practice Examination 4 243
Broker Practice Examination 5 255
Broker Practice Examination 6 265

PART 3: ANSWER KEYS 275

Salesperson Practice Examination 1 Answer Key 277
Salesperson Practice Examination 2 Answer Key 287
Salesperson Practice Examination 3 Answer Key 297
Salesperson Practice Examination 4 Answer Key 307
Salesperson Practice Examination 5 Answer Key 317
Salesperson Practice Examination 6 Answer Key 331
Salesperson Practice Examination 7 Answer Key 343
E
Salesperson Practice Examination 8 Answer Key 355
Salesperson Practice Examination 9 Answer Key 365
Salesperson Practice Examination 10 Answer Key 375
Broker Practice Examination 1 Answer Key 385
Broker Practice Examination 2 Answer Key 391
Broker Practice Examination 3 Answer Key 397
Broker Practice Examination 4 Answer Key 403
Broker Practice Examination 5 Answer Key 409
Broker Practice Examination 6 Answer Key 415

iii

CA_RE_Exam_Guide_6E.indb 3 11/13/2013 11:44:51 AM

 ACKNOWLEDGMENTS
SA
The author extends her sincere appreciation to Leonel “Leo” Bello, MBA, Real
Estate Broker, Instructor, City College of San Francisco, for his contributions to
the development of this book.

My thanks to Duane Gomer, President, Duane Gomer Seminars, for his reviews
and suggestions. Very special thanks to Gregory Nassir, whose able assistance
greatly helped with the flow of work. To family, friends, and former students go
heartfelt gratitude for the patience and support shown for this project.
M
PL
E
v

CA_RE_Exam_Guide_6E.indb 5 11/13/2013 11:44:51 AM

 INTRODUCTION
SA
This book is designed to be studied thoroughly after completing the required real
estate qualifying courses and before taking the California real estate salesperson
or broker examination. There is an assumption that the reader has a basic under-
standing of the principles, practice, and concepts of real estate.

You will find the use of the Hot Notes to be extremely helpful because they are
based on topics whose questions are often missed on licensing exams. By studying
the Hot Notes well, along with the practice questions, and reviewing them again
a few days before your actual examination, you will increase greatly your chances
of success.

An estimated breakdown of the topics presented on the state examination is

shown on the table below. Of the percentages listed, approximately 5% of the
M
questions on the actual exam will be presented in math form.

Salesperson Broker
Subject Exam Exam
Practice of Real Estate and Mandated Disclosures 25% 25%
Laws of Agency and Fiduciary Duties 17% 17%
Financing 9% 9%
PL
Property Valuation and Financial Analysis 14% 14%
Property Valuation and Financial Analysis and Regulations 15% 15%
Transfer of Property 8% 8%
Contracts 12% 12%

■■ TIPS FOR SUCCESSFUL TEST TAKING

1. Congratulations on completing your required course work for the real
estate license exam! You are now ready to begin practice testing.
2. The average score for the salesperson applicant is approximately 45%
the first time around on the practice tests and 55% for broker applicants,
E
so don’t be discouraged. Continue taking the practice tests until you are
scoring 90% or better before taking the actual state examination.
3. Examinations are given in Fresno, La Palma (Los Angeles area),
Oakland, Sacramento, and San Diego in an electronic format. To be
admitted at any of the locations, you must be registered and show a valid
form of photo identification issued in the past five years, such as a driver’s

vii

CA_RE_Exam_Guide_6E.indb 7 11/13/2013 11:44:51 AM

 viii California Real Estate Exam Guide Sixth Edition

license or DMV identification card, U.S. military identification card, or

U.S. passport or passport issued by a foreign government.
4. You are preparing for a four-choice multiple-choice exam. The salesper-
son exam must be passed at 70% and the broker exam at 75%. Read each
question and its four choices carefully. Watch for qualifying words such
as never, except, most correct, and least correct.
5. If you are struggling with a particular question, skip it, mark the question
SA
number on your scratch pad, and continue on. Often, later questions will
give you some insight on the questions you skipped. Complete the test to
the best of your ability, but be sure to go back and work on the questions
you skipped on the first try.
6. You are allotted 3¼ hours to complete the 150-question California
salesperson exam. This breaks down to approximately 1¹⁄₃ minutes per
question. The state’s broker exam allows for five hours of actual testing
time with a 45-minute break between test periods. Each test period for
brokers covers 100 questions (200 total questions). This time allotment
breaks down to approximately 1½ minutes per question. Therefore, you
cannot spend a disproportionate amount of time on any one question.
Remember, if stuck on a question, move along to the next, keeping a run-
ning list on a scratch pad so you can return to these later. You also might
M
consider this process for math problems. Most math problems involve
properly solving a number of steps, which can be time-consuming.
7. When practice testing at home, attempt to complete each test in less
time than you will be allowed for the actual state examinations.
8. Basic calculators will be provided. If you have a special accommodation
request in taking the examination, there are forms on the Bureau of Real
Estate (BRE) website that can be downloaded, completed, and sent to
the BRE along with your application to test. Please see Form RE 407,
PL
Examination Reader and/or Writer/Marker Request and Certification,
and Form RE 413, Special Accommodation Request for Examination, at
the BRE website. You may also contact the BRE at 877-373-4542.
9. Continue to take the practice tests and reread the Hot Notes up to the
day before your actual exam. Broker applicants should study the 10 gen-
eral practice exams and their Hot Notes plus the 6 broker practice exams
and their Hot Notes.
10. The BRE publishes the Reference Book, which may be viewed online
at www.bre.ca.gov/Publications/ReferenceBook.html. For more infor-
mation on testing locations and available testing dates, please visit
www.bre.ca.gov or contact the BRE office in Sacramento, Los Angeles,
Oakland, San Diego, or Fresno.
E
11. You may wish to download Form RE 403, Examination Administration
Comment Form.

CA_RE_Exam_Guide_6E.indb 8 11/13/2013 11:44:51 AM

SA
Part 1
Salesperson Topics
M
PL
E
1

CA_RE_Exam_Guide_6E.indb 1 11/13/2013 11:44:51 AM

SA
HOT NOTES
■■ REAL PROPERTY LAW
M
1. A grant deed transfers title. Do not confuse with a trust deed (financing),
which is a security device.
2. A notary public is the party who witnesses the acknowledgment. The
grantor acknowledges by signing in the presence of the notary.
3. To alienate means to transfer (or convey) title.
4. Riparian rights refer to those by a watercourse (river or stream).
PL
5. The three degrees of flood hazard are inundation, sheet overflow, and
ponding. Inundation is the first degree.
6. Stock in a mutual water company is real property.
7. Fee simple is the greatest interest one can have in the land.
8. An estate of inheritance is an estate in fee.
9. Fee simple defeasible is also known as a determinable fee and has conditions
of ownership.
10. When a life estate terminates and the interest is to pass to one other
than the original grantor, it is known as an estate in remainder. If interest
reverts to the original owner, it is an estate in reversion.
E
11. Less-than-freehold is known as leasehold.
12. An estate for years is a lease agreement (for a definite amount of time).
13. The lessee (tenant) has the covenant of quiet enjoyment and possession,
which goes with every lease agreement.
14. A lease for one year or less may be by oral agreement; more than one year
must be in writing.

CA_RE_Exam_Guide_6E.indb 3 11/13/2013 11:44:52 AM

 4 California Real Estate Exam Guide Sixth Edition

15. A triple-net lease is one wherein the tenant pays a stated rent plus prop-
erty taxes, insurance, and maintenance of the property.
16. A percentage lease is usually based on a percentage of the tenant’s monthly
gross income.
17. A lessee can grant an easement over the property leased, but only for the
term of the lease.
18. Rent is consideration paid for the use of the property and is legally due at
SA
the end of the term.
19. To sublease is less than an assignment of a lease.
20. The security deposit for an unfurnished residential unit is two months’
rent maximum; for furnished, the deposit maximum is three months’
rent.
21. The legal action for removal of a defaulting tenant is an unlawful detainer
action.
22. A grant deed must be signed by the grantor, not the grantee.
23. A grant deed requires only an adequate description for its validity.
24. A grant deed is presumed delivered when it is recorded or the grantee has
possession of the document; it requires a “granting clause.”
M
25. First to record a grant deed is first in right, with the exception of posses-
sion of property.
26. A witnessed will requires three signatures.
27. Customarily, the court confirms a probate sale and sets the broker’s
commission.
28. An administrator is not a party to a will.
29. Separate property without a will is divided one-third to the surviving
PL
spouse and two-thirds to the two or more children.
30. Pur autre vie means “for another’s life.” This expression is sometimes used
in a life estate.
31. The minimum number of days for an eviction is 15. Eviction can occur
after the 15th day by court order.
32. Neither an estate for years nor an estate at sufferance requires a notice to
terminate.
33. An example of avulsion would be 150 feet of beachfront property being
torn away by a flood.
34. The opposite of avulsion is accretion.
E
35. The opposite of alienation is retention.
36. Be alert to the correct spelling of the term “encumbrance.”
37. A lien is a money encumbrance.
38. All liens are encumbrances, but not all encumbrances are liens.
39. A judgment is an example of a general lien.
40. A general lien affects all property of the debtor.

CA_RE_Exam_Guide_6E.indb 4 11/13/2013 11:44:52 AM

 Hot Notes 5

41. Mechanics’ liens take priority over all other liens except taxes and spe-
cial assessments but are on parity with each other.
42. The date that a mechanic’s lien takes is the date the project began
because of parity (equal basis).
43. An architect and drayman (truck driver) can file a mechanic’s lien if
unpaid.
44. When a completion bond is posted, the insurance company has ultimate
SA
responsibility for completing the job if the contractor cannot.
45. A Notice of Nonresponsibility is to be recorded and posted by an owner
within 10 days of notice of work performed.
46. An attachment is a prejudgment action, is good for three years, and does
not terminate on the death of the property owner.
47. A judgment is good for 10 years in the county where it is recorded.
48. A lis pendens action tells of a pending lawsuit affecting the title to land
and clouds the title until a final judgment is rendered or until the matter
is dismissed or removed.
49. Private restrictions on the use of land are usually created by the origi-
nal subdivider but may be created by written agreement or general plan
restrictions in subdivisions as well.
M
50. Covenants, conditions, and restrictions are usually found and recorded
on a document called the declaration of restrictions.
51. Violation of a covenant can be stopped by an injunction.
52. Only some covenants “run with the land,” whereas all conditions “run
with the land.”
53. Violation of a condition can bring loss of title (defeasance clause, mean-
ing title may be defeated or lost). Courts abhor conditions and often
PL
interpret conditions as covenants.
54. If a zoning change of a single lot is being requested, such action is a vari-
ance when it is for the owner’s benefit.
55. If public restrictions (zoning) and private restrictions (CC&Rs) differ,
the more stringent or rigid will prevail.
56. An appurtenant easement goes with the land, whereas an easement in gross
goes to a person (e.g., a man gives a woman the right to cross over his
property, but the woman does not own any property; she has been given
an easement in gross).
57. Typically, a utility company holds an easement in gross to service prop-
erty owners.
E
58. A license allows one to use the property of another but only for the peri-
ods or conditions set by owner, and such permission can be revoked by
the owner at any time.
59. Easement by prescription establishes use, whereas adverse possession
may establish title claim.
60. A spouse can file a homestead declaration on the separate property of the
other, if all other requirements are met.

CA_RE_Exam_Guide_6E.indb 5 11/13/2013 11:44:52 AM

 6 California Real Estate Exam Guide Sixth Edition

61. A homestead declaration is effective if recorded before the recording of

a judgment.
62. The usual methods for termination of homestead are the sale of property
or the filing of a declaration of abandonment.
63. An unlocated easement is valid (e.g., old utility company easements that
are difficult to precisely locate).
64. An encroachment is the unlawful intrusion onto the adjacent owner’s
SA
land (e.g., a fence built over the property line onto a neighbor’s lot).
The landowner has three years from discovery or encroachment to take
action for its removal.
65. A homestead declaration is not an encumbrance.

■■ PROPERTY OWNERSHIP AND LAND USE CONTROLS AND

REGULATIONS
1. A grant deed signed by a single person under 18 is void.
2. Commission split agreements between brokers may be by oral agreement.
You can pay a commission to an out-of-state broker.
3. Infill redevelops property for mixed use.
M
4. Executory means something is to be performed at a later date. Executed
means a document has been signed.
5. The statute of limitations on a judgment is 10 years.
6. An exclusive agency listing allows the owner to sell the property during the
listing period and not pay a commission.
7. All exclusive listings must have a definite termination date.
8. On an open listing, only the agent who is the procuring cause earns the
PL
commission.
9. A net listing is legal but not recommended.
10. Expansion and contraction of available spaces is influenced mainly by
the elasticity of demand.
11. A kiosk is a small freestanding building used for information purposes,
often found in shopping centers.
12. Demography is the study of the population.
13. A megalopolis is a very large city.
14. If a zoning change of a single lot is being requested, such action is a vari-
ance when it is for the owner’s benefit.
E
15. Installation of a septic tank must be at least five feet away from the
improvements.
16. The term setback describes the distance between the street and the front
of the improvements that must remain unimproved to comply with
the ordinance. There are front, side, and rear yard setbacks in most
communities.
17. The purpose of the Franchise Investment Law is to protect the franchisee.

CA_RE_Exam_Guide_6E.indb 6 11/13/2013 11:44:52 AM

 Hot Notes 7

18. Discretionary funds are used to purchase a franchise.

19. A bulk sales notice must be published by a transferee (a buyer) at least
12 business days before the sale. The notice only has to appear once and
is designed to alert the creditors. This is under the Uniform Commercial
Code.
20. A buyer should obtain a clearance receipt from the State Board of Equal-
ization to avoid successor’s liability.
SA
21. A bill of sale transfers title to personal property.
22. A bill of sale requires the seller’s signature.
23. The Department of Alcoholic Beverage Control regulates liquor
licensing.
24. To be exempt from the permit aspect of the Franchise Investment Law, a
franchisor must have a net worth of $5 million with at least 25 franchises
operating continuously in the five years preceding the offering.
25. A common test for water pressure is to turn on all faucets and flush the
toilets.
26. Toxic waste affects the value of property near a gasoline station.
27. Title VIII of the Civil Rights Act of 1968 (federal) also prohibits dis-
M
crimination in the membership of real estate boards and the multiple
listing service. Title VIII is also called the federal Fair Housing Act.
28. “As is” refers to observable defects.
29. Under California fair housing laws, an owner of a single-family residence
may take in one boarder to live in the home and is exempt from this act.
30. The Unruh Civil Rights Act controls businesses and prohibits
discrimination.
PL
31. Under the Unruh Civil Rights Act, both actual and punitive damages
are possible.
32. Steering, panic selling, and blockbusting are examples of illegal and unethi-
cal practices by a real estate licensee.
33. Redlining is discrimination by a financial institution.
34. The purpose of federal fair housing laws is to provide fair housing for all
persons in the United States.
35. Legal action based on alleged violations of fair housing laws can be
brought in both federal and state courts.
36. The landmark U.S. Supreme Court case Jones v. Mayer in 1968 barred
racial discrimination in property matters in the United States.
E
37. As of 1987, a Real Property Transfer Disclosure Statement is required of
sellers or transferors of one-unit to four-unit dwellings. Even if seller sells
“as is,” the statement is still required. A broker cannot fill in seller’s por-
tion of the form. A broker must make a competent visual inspection of
the accessible areas and disclose. This is based on Easton v. Strassburger.
38. A written Agency Disclosure Statement, as of 1988, is required to be
given by agents to sellers and buyers of one to four dwelling units.

CA_RE_Exam_Guide_6E.indb 7 11/13/2013 11:44:52 AM

 8 California Real Estate Exam Guide Sixth Edition

39. A fiduciary relationship refers to loyalty, integrity, and utmost care.

40. There are three base and meridian lines in California: Humboldt,
Mt. Diablo, and San Bernardino.
41. Do not confuse the term miles square (which means shape) with square
miles (which means area or content). For example, a township is a
six-mile square, containing 36 square miles. How many townships are
there in a 36-mile square? The answer is 36 (36 × 36 = 1,296 ÷ 36 sec-
SA
tions to a township = 36).
42. There are 36 sections to a township. Each section contains 640 acres. A
section is a one-mile square.
43. The orientation of range lines is north and south (as a memory jogger,
there are five letters each in range, north, and south).
44. The orientation of base lines (or township lines) is east and west (there
are four letters each in base, east, and west).
45. There are 43,560 square feet to an acre. There are 208.71 feet on each
side of a square acre. There are 4,840 square yards to one acre.
46. There are 5,280 feet to a mile.
47. There are 320 rods to a mile, 16½ feet to one rod, and 4 rods, or 66 feet,
to one chain.
M
48. There are nine square feet to a square yard.
49. A brownfield site is a contaminated abandoned parcel that may be com-
plicated to develop.
50. The term side yard setback describes the distance between the property
line and the edge of the improvements. Be sure to deduct any side yard
setback from both sides.
51. If “setback” dimensions are given in a problem, be sure to deduct the
PL
setbacks from the total lot area to arrive at buildable square feet.
52. The term contiguous indicates lots that abut each other, at any point of
contact.
53. The metes-and-bounds method of land description is based on angles
and directions from a north and south line, used mostly in rural areas.
54. The metes-and-bounds method is the most complex method of land
description.
55. The recorded map, lot, block, and tract system is the most commonly
used, due to its simplicity.
56. To find the cost of property, add percentage of profit made to 100%, then
E
divide sales price by total percentage.
57. To find sales price, subtract percentage of profit to be made from 100%,
then divide the cost by the remainder.
58. The nominal rate stated on any note (financing) is the interest rate
stated in the note itself.
59. To change a fraction to a percentage, divide the top number by the bot-
tom number and then convert to the percentage form (e.g., ¹⁄₈ = 12.5%).

CA_RE_Exam_Guide_6E.indb 8 11/13/2013 11:44:52 AM

 Hot Notes 9

60. Convert any monthly or quarterly returns on investment to the annual

figure before proceeding with calculating the problems.
61. The reciprocal of an 8% capitalization rate is 12.5. This tells us we have
to receive our 8% return 12.5 times to equal our initial investment.
62. There are 66 feet to one chain. One hundred chains equal 6,600 feet and
is longer than one mile (5,280 feet).
63. Nonconforming use is allowed to continue because it was legal before a
SA
zone change, and comes under a grandfather clause.
64. A square parcel of one-half mile by one-half mile describes 160 acres, or
a quarter of a section.
65. Avulsion describes a sudden violent action, such as a dam that breaks
and washes the land away.
66. Frequent flooding occurs twice in 10 years.
67. An estate has two uses: fee simple and leasehold.
68. Escheat is not a way for an individual to receive title to property. It refers
to the way the state might receive title.
69. Eminent domain is a form of involuntary conversion.
70. The county recorder is required to maintain index books.
M
71. An owner of property cannot be prohibited from placing a For Sale sign
on property.
72. Developers are mainly concerned with the purchasing power of the sur-
rounding population.
73. Section 7 has 80 acres valued at $500 per acre for a total of $40,000.
Section 6 has 40 acres valued at $800 per acre for a total of $32,000. The
difference in value of these two sections is $8,000.
PL
74. A parcel that has 3,960 linear feet at its frontage with 1,980 feet on one
side and 3,960 feet on the other side because the parcel is bisected by a
river contains 270 acres.
75. A mechanic’s lien takes priority over all other liens, except taxes and
special assessments, such as the 1911 Street Improvement Bond. It also
takes priority over a trust deed that is recorded after the mechanic’s lien.
76. R-3 zoning is used for three or more units.
77. Flood hazard zones are based on a 100-year history.
78. The footing is the base or bottom of a foundation wall, pier, or column.
79. If the interior side of an exterior wall feels the same as the outside tem-
perature, then heat and air are being lost through wall outlets.
E
80. If the interior side of a partition wall feels the same as the room tempera-
ture, then the insulation in the building is sufficient.
81. Wallboard is nailed to studs.
82. If there is no Notice of Completion of work filed (done by the owner
of property), then there are 90 days to file a mechanic’s lien (remember
n-n-n for no, notice, and ninety, making it easy to recall 90 days to file a
mechanic’s lien when no Notice of Completion is filed).

CA_RE_Exam_Guide_6E.indb 9 11/13/2013 11:44:52 AM

 10 California Real Estate Exam Guide Sixth Edition

83. Police power includes the government’s right to enforce land use con-
trols, such as zoning, municipal codes, rent control, and subdivision
codes, without compensation to property owners. Remember it is emi-
nent domain that requires compensation, not police power.
84. A joint tenancy may be severed by conveying it to another party (by
sale or gift). The most distinguishing characteristic of joint tenancy is its
right of survivorship.
SA
85. The Federal Emergency Management Agency (FEMA) provides maps
delineating areas of special flood zones where flooding occurs at least
once every 100 years.

■■ PROPERTY VALUATION AND FINANCIAL ANALYSIS

1. An appraisal may be by oral or written means.
2. According to the Uniform Standards of Professional Appraisal Practice
(USPAP), members cannot base their fee on a percentage of the final
estimate of value and must disclose any interest in the property being
appraised.
3. The first step in the appraisal process is to define the problem. The last
step is to state the estimated value.
M
4. Amenity-type properties are single-family residences.
5. The market data or sales comparison approach is used on residential
property and vacant land.
6. Land is always appraised separately as if vacant and available for highest
and best use.
7. The methods used to appraise land are market data (sales comparison),
land residual, development method, or allocation, not equity.
PL
8. Location is the most important factor influencing value.
9. The south and west sides of the street are preferred for retail business.
10. Depth tables are used to appraise vacant lots. The percentage of value is
estimated according to the depth of the lot.
11. Orientation refers to the placement of a structure on a lot to gain the
best advantage to the elements (wind, sunlight, etc.).
12. A cul-de-sac is a dead-end street.
13. Ad valorem means “according to value.”
14. Productivity is a direct function of use.
15. The most often used method for land or site valuation is sales comparison.
E
16. Economic rent refers to the going market rate for rent of a given unit and
is used for the appraisal of income property.
17. Contract rent refers to the actual lease amount of a unit and could be
above or below market rate (economic rent).
18. The average economic life of a residence is 40 years.

CA_RE_Exam_Guide_6E.indb 10 11/13/2013 11:44:52 AM

 Hot Notes 11

19. In a narrative appraisal, the type of “appraised value” being given is

found in the “statement of purpose” section of the letter of transmittal.
The narrative is most comprehensive.
20. In the cost approach, replacement means a similar building with the same
utility; reproduction means a replica.
21. Net operating income divided by a capitalization rate equals value.
22. The higher the risk, the higher the capitalization rate and the lower the
SA
value.
23. A fee appraiser is an independent contractor.
24. Functional utility is a main concern of an appraiser.
25. Marketability is the ultimate test of functional utility.
26. Business opportunities are appraised on net income.
27. A commercial strip center is a string of neighborhood stores.
28. Commercial property: As the depth of the lot decreases, the front-foot
value decreases, and the square-foot value increases.
29. Always adjust comparable properties to subject property. If a comparable
sale is less than subject property, adjust it upward.
30. The cost per square foot to build a two-story house is less than the cost
M
per square foot to build a single-story house of the same square footage.
31. The major cause of depreciation is obsolescence. Depreciation is a loss
in value from any cause. Accountants deal with book appreciation.
Appraisers deal with actual depreciation.
32. An appraiser uses the cost approach on special properties, including a
medical building. The income approach is used on a shopping center or
a restaurant.
PL
33. An investor in commercial property is interested in net income.
34. Cost equals value when the improvements are new and of highest and
best use.
35. If current highest and best use is to change, current use is called interim
use.
36. A civil engineer could verify soil compaction.
37. Accrued depreciation is accumulated age depreciation with an allowance
for property condition based on the property’s effective age (physical
condition and appearance).
38. The cost approach uses separate values to arrive at cost (value of depreci-
ated improvements and land value).
E
39. Economic rent (realistic market rate) is used for the appraisal of income
property.
40. The definition of value to an appraiser includes value of a commodity to
be exchanged for another commodity and desirability to someone else.
Value is closely related to worth.
41. The purpose of the land residual technique by an appraiser is to estimate
the value of only the land (the building value is known).

CA_RE_Exam_Guide_6E.indb 11 11/13/2013 11:44:52 AM

 12 California Real Estate Exam Guide Sixth Edition

42. The purpose of the building residual technique by an appraiser is to esti-

mate the value of only the building (the land value is known).
43. The purpose of the property residual technique is to estimate the value of
the total property as a single unit.
44. Use the gross rent multiplier rule: sales price divided by gross rent equals
the gross rent multiplier. Property valued at $90,000 with a monthly rent
of $600 ($600 × 12 months = $7,200 annual rent) has a multiplier of
SA
12.5 ($90,000 ÷ $7,200 = 12.5). If the monthly rent is increased to $640
($640 × 12 months = $7,680), then $7,680 annual rent × 12.5 = $96,000
new value.
45. An appraisal is valid for a specific date. It is usually the date of property
inspection and report (or contract date).
46. In order to appraise a commercial property that’s value exceeds $250,000,
the appraiser must be a certified general licensee.
47. If interest rates increase, the value of property decreases. If rental income
increases, the value of the property increases.
48. Effective gross income is scheduled gross income minus vacancy and col-
lection losses.
49. Assemblage (buying up small adjoining lots to create one large lot)
M
anticipates plottage increment (higher value).

■■ FINANCING
1. The U.S. Department of Housing and Urban Development (HUD),
a federal agency, is the overseer of all housing matters in the United
States, including fair housing. Discrimination complaints may be filed
with HUD, and with the state and federal courts.
PL
2. Insurance companies make large commercial loans and “participation”
loans, usually charging lower interest rates due to lower servicing costs.
3. Savings associations make the bulk of home loans.
4. Commercial banks rely heavily on customer relations and past business
experiences with a borrower as a consideration for granting loans.
5. Mortgage bankers “warehouse” (hold) their loans and then sell their
portfolios to investors in the secondary mortgage market.
6. The largest source of junior mortgage loans is private individuals.
7. The Federal Reserve System (the Fed) controls the flow of money. When
selling bonds from its portfolio, the Fed effectively pulls money out of the
market, thereby slowing down economic activity.
E
8. An insurance company is the least likely source to refinance an existing
home loan.
9. Fannie Mae is currently the largest investor in the secondary mortgage
market.
10. Fannie Mae, Ginnie Mae, Freddie Mac, mortgage companies, and pri-
vate individuals deal in “pass-through” securities.

CA_RE_Exam_Guide_6E.indb 12 11/13/2013 11:44:52 AM

 Hot Notes 13

11. If a borrower chooses not to renegotiate a renegotiable rate mortgage at

the end of the three-year to five-year term with the same lender, the loan
balance becomes due and payable in full. The maximum interest rate
fluctuation is 5%.
12. The takeout loan is the long-term loan in construction financing, some-
times called a standby loan. Proceeds are used to pay off the interim
(short-term) loan.
SA
13. When a contractor secures a completion bond, the insurance company is
ultimately responsible for completion of the project.
14. The purpose of the Federal Housing Administration (FHA) insurance
program is to stabilize the mortgage market by providing insured financ-
ing for loans made by approved lenders.
15. There is no prepayment penalty allowed on FHA or Veterans Adminis-
tration (VA) loans. A prepayment penalty is allowed on Cal-Vet loans.
16. There is no down payment on VA loans unless required by lender.
17. Newer FHA and VA loans usually contain an alienation (due-on-sale)
clause.
18. Cal-Vet is financed by the sale of bonds. The security device used is a
real property sales contract (land contract). Cal-Vet loans are variable
M
interest rate loans. A veteran can buy a farm on Cal-Vet.
19. In truth in lending, the total cost of credit must be expressed as a per-
centage, followed by “annual percentage rate” (fully spelled out). Trigger
terms in advertising include monthly payments, amount of down payment,
and finance charge and require additional disclosures.
20. Rescission period for truth in lending is until midnight of the third busi-
ness day of the last of these events to occur: (1) consummation of the
transaction; (2) delivery of all material truth-in-lending disclosures; or
PL
(3) delivery of the notice of the right to rescind (or after the signing of
the note). This applies to owner-occupied one-to-four residential units.
21. The Real Estate Settlement Procedures Act (RESPA) applies to one-
family to four-family unit mortgage loans. A special information booklet
and good-faith estimate must be presented on receipt of loan application
or within three business days thereof. The borrower may inspect the set-
tlement statement one business day before closing the loan transaction.
No fee can be charged for this statement. RESPA now falls under the
recently formed federal Consumer Financial Protection Bureau (CFPB).
22. RESPA disallows finder’s fees and kickbacks for any service not actually
performed. Each violation of the kickback provision results in a fine of
E
not more than $10,000 or one year in jail or both. RESPA allows the
lender to collect impounds for the current installment, plus two months.
A referral fee from an escrow holder to a broker is a violation of RESPA.
23. Nominal rate is the rate stated or named in a note.
24. Real estate loans are usually based on simple interest, not compound
interest.

CA_RE_Exam_Guide_6E.indb 13 11/13/2013 11:44:52 AM

 14 California Real Estate Exam Guide Sixth Edition

25. The most common form of real estate loan payment is the “level pay-
ment,” indicating the same monthly payment amount with the portion
of principal increasing and interest decreasing over the life of the loan
(fully amortized loan).
26. A partially amortized loan is one that has a balloon payment remaining.
As defined in Article 7, Chapter 3 of Real Estate Law, a balloon payment
may be an amount due that is greater than twice the smallest installment
under the promissory note. The balance is due at the end of the term.
SA
27. Examples of negotiable (salable) instruments are checks, drafts, bills of
exchange, and promissory notes. A trust deed or mortgage contract is not
negotiable; however, this is assigned when the promissory note is sold.
28. “Without recourse” is an example of a qualified endorsement.
29. A mortgagee is a lender. Under a judicial sale of a mortgage contract, the
successful bidder is given a certificate of sale. The sheriff’s deed is given
when the redemption period is up and the mortgagor has not redeemed
the property.
30. There is no deficiency judgment allowed in purchase money transac-
tions. Purchase money is defined as a credit extension. Hard money refers
to cash in hand, such as equity loans.
M
31. A reconveyance deed is given by trustee to trustor, not beneficiary to
trustor.
32. There is no equity of redemption on a trust deed.
33. Once a notice of default has been recorded, the trustor can reinstate the
loan up to five business days before the trustee’s sale.
34. A trustee’s deed is given to the successful bidder at a trustee sale. Foreclo-
sure can be by trustee sale or by judicial sale.
PL
35. An acceleration clause is always found in a trust deed.
36. An alienation (due-on-sale) clause is enforceable.
37. An or more clause allows an early payment of the loan without penalty.
38. A subordination clause is often used on vacant land purchases.
39. An assignment of rents clause benefits a lender.
40. In a “subject to” transaction, the seller remains primarily responsible for
the loan.
41. An open-end loan (such as a construction loan or credit card account)
allows one to borrow additional sums after the balance has been reduced
without rewriting the loan agreement.
E
42. A promotional note is a short-term note of up to and including 36 months
in its term.
43. A seasoned note is one that is 36 months and one day or longer.
44. On a real property sales contract (land contract), the vendee receives
equitable title with legal title remaining with the vendor until a later
agreed-upon time.

CA_RE_Exam_Guide_6E.indb 14 11/13/2013 11:44:52 AM

 Hot Notes 15

45. Under the Uniform Vendor and Purchaser Risk Act of 1947, the party
in possession of the property is not relieved of the lien if the property is
destroyed by some form of disaster.
46. A vendor cannot prevent prepayment by the vendee of the land contract
on subdivided lots of four units or less. The vendee receives equitable
title.
47. To record a land contract, the vendor’s (seller’s) signature on the con-
SA
tract must be acknowledged (notarized).
48. An acceleration clause in a note does not affect its salability (negotiabil-
ity) and might enhance its desirability to the buyer of the note.
49. A conditional commitment for an FHA loan is valid for six months.
50. Real estate loans are calculated on simple interest, not compound
interest.
51. Capital markets include bonds, short-term notes, and Treasury bills.
52. Mortgage bankers must maintain a good line of credit at a bank.
53. Mortgage brokers do not lend their own money.
54. Fannie Mae only deals in the secondary mortgage market.
55. Purchase money loans are credit extensions for the purchase of one to
M
four dwelling units. Hard money is cash.
56. In a “subject to” loan takeover, the seller remains liable.
57. A VA loan amount (federal veterans’ loan program) is based on the cer-
tificate of reasonable value (appraisal). The origination fee is paid to the
lender.
58. An alienation clause (due-on-sale clause) is enforceable and is a benefit
to a lender. It is a type of acceleration clause.
PL
59. An acceleration clause is always found in a deed of trust.
60. The maximum interest rate fluctuation on a renegotiable rate mortgage
is 5%. Its maximum annual change is one-half percent.
61. The only thing a trust deed and mortgage have in common is the secu-
rity. The major difference is the title. A deed of trust may be foreclosed
by trustee’s sale or judicial foreclosure. A trustee’s deed is given to the
highest bidder at a trustee’s sale. There is no right of redemption follow-
ing a trustee’s sale.
62. A request for notice of default benefits any junior lienholder.
63. FHA, but not VA, provides for a duplex purchased for rental.
64. Mutual mortgage insurance is paid on an FHA loan.
E
65. Under a Cal-Vet loan, the California Department of Veterans Affairs
holds title to the Cal-Vet’s home. A qualified veteran can buy a home or
farm directly through a loan from Cal-Vet.
66. Private mortgage insurance (PMI) is available through a pool of private
investor insurance funds.

CA_RE_Exam_Guide_6E.indb 15 11/13/2013 11:44:53 AM

 16 California Real Estate Exam Guide Sixth Edition

67. The Fed does the following to stimulate the housing market: lowers
interest rates, buys securities, and reduces discount rates to member
banks. The effect of raising interest rates and selling securities slows the
housing market.
68. Hypothecation uses real property as security for a debt with the borrower
retaining possession of the property.
69. The secondary mortgage market supplies funds to lenders in the primary
SA
mortgage market.
70. Real estate loans made or arranged by real estate brokers are exempt from
the usury laws. The interest rate is unlimited.
71. A standby commitment is a pledge by a permanent lender to fund a
long-term loan to take out the construction lender when the building is
completed.
72. An open-end loan provides for future advances without rewriting the
loan each time.
73. Under FHA loans, brokers who contributes their own funds to buyers’
down payments, with no disclosure to the sellers, could cause liability for
both themselves and the buyers.
74. A 100% loan is possible on a VA loan. Either the buyer or the seller can
M
pay points on a VA loan. The origination fee on a VA loan is paid to the
lender.
75. Completing the clause in the loan application that inquires about one’s
race or marital status is optional. It is not required to be completed.
76. Sole and separate is an ownership method for limited liability compa-
nies, partnerships, and corporations.

■■ TRANSFER OF PROPERTY
PL
1. A bill of sale transfers title to personal property.
2. A security agreement is used for personal property loans.
3. The UCC-1 form (financing statement) is filed with the secretary of
state.
4. The FHA’s minimum ceiling height is seven feet, six inches.
5. The FHA’s crawlspace requirement is 18 inches.
6. The FHA’s minimum stairwell width is three feet with one handrail.
7. A bulk sales notice must be published by a transferee (buyer) at least
12 business days before the sale. The notice has to appear only once and
E
is designed to alert creditors.
8. Sales tax is a tax on only tangible personal property.
9. The maximum sales tax penalty is 35% for late filing of sales and use tax,
due to fraud or evasion.
10. A buyer should obtain a clearance receipt from the State Board of Equal-
ization to avoid successor’s liability.

CA_RE_Exam_Guide_6E.indb 16 11/13/2013 11:44:53 AM

 Hot Notes 17

11. The maximum fee a seller can charge for an on-sale or off-sale general
liquor license is $12,000, if the license is up to five years of age.
12. A bona fide club must be in existence for at least one year in order to
receive a liquor license after proper application.
13. A real estate licensee may represent the sale or purchase of a mobile
home. A certificate of title transfers ownership.
14. Escrow is a neutral third party that acts as an agent for the parties to the
SA
transaction but cannot give legal advice.
15. Escrow instructions must be executed. Any change must be agreed to by
all parties.
16. Escrow is considered complete when all the terms and conditions have
been met.
17. A deed to a fictitious grantee (nonexistent person) is void.
18. The terms short rate and pro rata are insurance terms. Subrogation means
substituting one party’s rights for another and is used in claims cases
where the insurance company pays off the insured and then proceeds
against the party who caused the problem.
19. There is only one unity in tenancy in common and it is possession.
M
20. There are four unities in joint tenancy and they are time, title, interest,
and possession (referred to as TTIP, with a right of survivorship).
21. Joint tenancy title may be held by natural persons (i.e., brother and sis-
ter, husband and wife, friends). Tenancy in common may also be held as
such.
22. Community property is based on Spanish law and reserved for husband
and wife.
23. The legal action against a buyer who defaults on a land contract is a quiet
PL
title action.
24. Leasehold is not a real property item; it describes a tenant’s interest in
property. Leasehold is a chattel real.
25. If the buyer’s name on a contract was shown as “John Hartman and Mary
Hartman,” with nothing further stated, title would be assumed to be as
tenants in common (they could be brother and sister). Do not assume
community property unless the names are followed by “husband and
wife.”
26. The term et ux means “and wife.”
27. A chain of title shows a continuous record of owners of property. With-
out a chain, a title company fears a wild document.
E
28. A title plant contains histories of real estate transactions.
29. An ALTA extended title policy covers the basics, plus additional items
such as encroachments.
30. Title companies set their own rates.

CA_RE_Exam_Guide_6E.indb 17 11/13/2013 11:44:53 AM

 18 California Real Estate Exam Guide Sixth Edition

31. Forgery would be covered on a CLTA standard title insurance policy.

Such a policy is most commonly obtained by homeowners and does not
require on-site inspection of property.
32. Title insurance companies will not protect against known defects at the
time of transfer.

■■ TAX ASPECTS
SA
1. A change of ownership statement must be filed with an assessor within
45 days of change.
2. Sales tax applies to tangible personal property.
3. The maximum sales tax penalty for late filing is 35% if due to fraud or
evasion.
4. Sales are not listed on a balance sheet. They are shown on a profit and
loss statement.
5. Married couples filing jointly are allowed up to a $500,000 capital gains
tax exclusion on the sale of a principal residence in which they have lived
two of the five years before sale. Single filers are entitled to a $250,000
exclusion.
6. The tax exclusion described in no. 5 can be used every two years.
M
7. IRC 1031 exchanges require like-kind property.
8. Real estate syndications are regulated by the corporations commissioner.
9. Currently, deprecation for residential income property is 27.5 years and
for nonresidential, 39 years; both are straight-line and subject to tax law
changes.
10. A written limited partnership is the most common form of syndication in
California, and limited partners have liability up to the amount invested.
PL
11. A general partnership carries “joint and several liability” for partnership
debts.
12. A real estate investment trust (REIT) is made up of 100 or more investors.
13. A condominium is the only place where one purchases a fee simple inter-
est and an in-common interest at the same time.
14. In a community apartment project, all owners are tenants in common.
15. A county board of supervisors sets property tax rates. The State Board of
Equalization assesses public utilities.
16. The Interstate Land Sales Full Disclosure Act involves 25 or more lots
with a seven-day right of rescission.
E
17. Tax consciousness should begin before the acquisition of property.
18. Income taxes are progressive taxes.
19. Property taxes are ad valorem taxes, which means “according to value.”
20. The time frames for the first installment of property tax are November 1
and late after December 10; for the second installment, February 1 and
late after April 10.

CA_RE_Exam_Guide_6E.indb 18 11/13/2013 11:44:53 AM

 Hot Notes 19

21. If property taxes remain unpaid, the county transfers the property to the
state. A five-year redemption period beginning June 30 follows, and the
owner remains in possession.
22. Street improvement assessments are based on the front footage of prop-
erty. After the assessment’s due date, 30 days must pass before the unpaid
balance, if any, goes to bond.
23. Boot and mortgage relief (on exchanges) are taxable in the year of sale.
SA
24. Property taxes are calculated on 1% of assessed value as set by the county
assessor.
25. In a sale-leaseback, a purchaser would be least interested in the seller’s
book value.
26. Prepaid taxes are a credit on a seller’s closing statement.
27. Exchanges are based on equity value. Equity is market value minus liens.
28. An investor of commercial or residential income property who “actively
participates” in the operation of the property can deduct operating
expenses from ordinary income if he owns at least a 10% interest and
makes bona fide management decisions. The maximum annual net loss
deduction against ordinary income is $25,000.
29. To avoid successor’s liability in the sale of a business that collects sales
M
tax, the buyer should be certain to include a provision in the purchase
agreement that an amount for any sales tax collected and not yet paid be
held in escrow until a clearance receipt is received from the State Board
of Equalization.
30. The county transfer tax is easily calculated as $1.10 per $1,000 of the
sales price (the actual calculation is $0.55 per each $500 of the sales price
or fraction thereof). If the sales price is $90,750 with an existing loan of
$30,000, which the buyer agrees to take over, then subtract the $30,000
PL
(as it was taxed in its original sale) and tax the balance of $60,750 at
$1.10 per $1,000 ($60,000 ÷ $1,000 = $60; $60 × $1.10 = $66.00; be
sure to add $1.10 for the $750). The total tax is $67.10. Improvements
for streets, lights, and sewers can be paid by special assessments. Nonpay-
ment of special assessments leads to foreclosure like property taxes.
31. Impound accounts are used for recurring costs like property taxes. Title
insurance is a one-time charge and is not impounded.
32. Under the Truth in Lending Act (TILA), the appraisal and credit report
fees are not included in the annual percentage rate.

■■ REAL ESTATE PRACTICE AND MANDATED DISCLOSURES, LAWS OF

AGENCY, AND FIDUCIARY DUTIES
E
1. Brokers must keep all records for a minimum of three years from the date
of closing, or if not closed, from the date of listing.
2. If the real estate commissioner needs legal advice, the commissioner goes
to the state attorney general.
3. Within its own county, the district attorney’s office prosecutes law
violations.

CA_RE_Exam_Guide_6E.indb 19 11/13/2013 11:44:53 AM

 20 California Real Estate Exam Guide Sixth Edition

4. A licensee may appeal to the court if a decision of the commissioner is

deemed unfavorable to the licensee.
5. The relationship between the real estate broker and the salesperson is
that of employer to employee under real estate law.
6. The Agency Relationship Disclosure Act became law on January 1,
1988, and is found in Civil Code section 2079.
7. If a mobile home has been registered with the California Department of
SA
Motor Vehicles (DMV) or the California Department of Housing and
Community Development (HCD), a real estate licensee can handle
the transaction. A broker cannot display two or more mobile homes on
the brokerage property without being a mobile-home dealer. If a mobile
home (with wheels removed) is affixed to a permanent foundation, it
becomes real property.
8. After passing the real estate exam, the applicant has only one year from
the date the exam was taken in which to mail the application for the
license.
9. A foundation plan shows the piers, footing, subfloors, and columns of a
building.
10. A California real estate license is good for negotiating only in the state.
M
11. A land locator is a broker who helps sell government property and is
required to have a real estate license because a commission is earned.
12. Failure to disclose material facts, whether in real estate or other fields, is
a form of fraudulent misrepresentation.
13. Under real estate law, the salesperson is the employee of the broker. Do
not confuse with the independent contractor status that most licensees
choose for tax purposes. For testing purposes, select the employee-to-
employer relationship.
PL
14. An attorney-in-fact (one who has been given a power of attorney) signs
the principal’s name first, then his name followed by “attorney-in-fact.”
You do not have to be an attorney-at-law to be an attorney-in-fact.
15. The phrase write once read many (WORM) refers to a type of media
storage for electronic signatures that, when done, cannot be changed.
WORM is required by the BRE.
16. Real estate licenses do not have to be displayed on the wall but must be
kept at the main office of the employing broker.
17. A statutory requirement calls for a written agreement between the bro-
ker and the salesperson for employment; however, it does not have to be
on a form approved by the commissioner. A copy of the agreement is to
E
be kept by both the broker and the salesperson for three years.
18. A salesperson cannot act independently of the broker, and no referral
fees or commissions can be received through any other source for real
estate activities other than through the employing broker.
19. Under the prepaid rental listing service requirement, a prospective ten-
ant who has paid the fee must be provided with at least three available
rentals within five days of payment.

CA_RE_Exam_Guide_6E.indb 20 11/13/2013 11:44:53 AM

 Hot Notes 21

20. When a salesperson transfers a license, the new broker must advise BRE
in Sacramento within five days of new employment.
21. All exclusive listing agreements must have a definite termination date.
22. Real estate licensees cannot make a secret profit and must disclose if they
are buying property for their own account.
23. An owner (nonlicensee) may make a secret profit. Owners of property do
not have to disclose what they paid for their property.
SA
24. The term REALTOR® is owned by the National Association of REAL-
TORS®, and only those members may use the term.
25. Inducements to panic selling and blockbusting are discriminatory activi-
ties by a real estate licensee and are violations of law.
26. Joists are supports that are parallel to the floor and ceiling.
27. An agent cannot answer if a seller asks, “What is the racial background
of the buyer?”
28. If the broker is involved in finding loans, records must be kept for four
years. Mortgage loan disclosure statements are an exception and must be
kept for three years.
29. Within three business days, trust funds received by a broker are to be
M
placed into either a neutral escrow depository, the hands of the principal,
or the broker’s trust fund account unless written instructions from the
buyer are to the contrary.
30. If a promissory note is offered as a deposit on an offer, the broker must
advise the principal of this material fact.
31. In an S corporation, all profits and losses are passed through to each
stockholder to calculate against ordinary income.
32. A license is required to act in real estate matters for compensation,
PL
including property management and mortgage lending.
33. An unlicensed person (e.g., secretary, bookkeeper) cannot give informa-
tion regarding a real estate transaction on the telephone or in any way
practice real estate for compensation.
34. Real Estate Principles, Real Estate Practice, and one additional qualified
course are required before applying for a license.
35. One must be 18 years of age or older to apply for a license, once statutory
requirements are completed.
36. Competing brokers agreeing to set commissions at a certain percentage
are in violation of antitrust laws.
E
37. The maximum amount payable from the recovery account per transac-
tion is the amount of loss or $50,000 per transaction. The maximum
payable per licensee (multiple transactions) is $250,000.
38. Any further licensing information can be obtained online at
www.bre.ca.gov.

CA_RE_Exam_Guide_6E.indb 21 11/13/2013 11:44:53 AM

 22 California Real Estate Exam Guide Sixth Edition

39. If you provide the Real Property Transfer Disclosure Statement after
acceptance of offer, the buyer has five days if it is provided by mail (or
three days if given in person) to rescind the contract. The Easton v. Stras-
sburger case reaffirms that both the seller and the agent must make full
disclosure of material facts that may be known or unknown to a potential
buyer.
40. An injured party has two years in which to file legal action on the Trans-
fer Disclosure Statement (TDS). An amendment to the TDS has a
SA
three-day right of rescission.
41. “As is” sales of one to four dwelling units require a TDS.
42. Both the buyer’s agent and the seller’s agent must render a competent
and diligent visual inspection of the accessible areas of one to four dwell-
ing units.
43. A Homeowner’s Guide to Earthquake Safety must be provided on the sale
of one to four dwelling units of wood-frame construction built before
1960. The Alquist-Priolo Special Studies Zones Act requires disclosure
of property located within one-quarter of a mile of a fault line.
44. Jones v. Mayer, a 1968 U.S. Supreme Court landmark decision, bars
(stops) racial discrimination on property matters in the United States.
M
45. Properties of one to four dwelling units built before 1978 require a
lead-based paint disclosure. These properties are referred to as “target
housing.”
46. The Agency Relationship Disclosure Act became effective in 1988. The
process is to disclose, elect, and confirm. Confirmation is done in the
purchase agreement (deposit receipt).
47. The Mello-Roos tax lien disclosure is required from sellers to buyers on
all types of property.
PL
48. The Natural Hazards Disclosure Statement is required from sellers to
buyers on all types of property.
49. The company dollar is gross income minus commissions.
50. The desk cost includes operating expenses for the office, including sala-
ries, divided by the number of salespeople.
51. The Unruh Civil Rights Act prohibits discrimination by businesspersons.
The California Fair Housing Act (Rumford Act) applies to everyone in
the state. Complaints may be filed with the California Department of
Fair Employment and Housing. A homeowner may bring in one room-
mate and be exempt from this act.
52. Advertisements stating that the offering is made only to single women or
E
only to persons of a minority background violate fair housing laws.
53. An agent cannot answer any questions about one’s race.
54. A temporary 150-day real estate license may be issued to a qualified
license applicant whose name appears on a delinquent child support pay-
ment list.

CA_RE_Exam_Guide_6E.indb 22 11/13/2013 11:44:53 AM

 Hot Notes 23

55. An unlicensed person who practices real estate may be fined up to

$20,000. A broker who hires an unlicensed person to practice real estate
also may be fined up to $20,000.
56. An unlicensed assistant who prepares an advertisement must have prior
written approval by the employing broker.
57. A Mello-Roos tax lien is disclosed in the natural hazards disclosure.
58. Construction work of less than $500 in value can be done by someone
SA
who does not have a contractor’s license.
59. Workers’ compensation is required for all real estate licensees, no matter
whether the licensee is an independent contractor for taxation purposes.
60. Eighteen hours of the 45 hours of required continuing education must be
about consumer protection.
61. The district attorney prosecutes law violations by unlicensed persons.
62. In-house sales might give rise to an undisclosed dual agency.
63. As a matter of good practice, a broker who purchases property for his
own account should consider having another agent present the offer.
64. Electronic records are acceptable to the BRE as long as they are backed
up for a three-year period. Upon request by the BRE, a broker must pro-
M
vide paper copies of trust records at the broker’s expense.
65. Radon gas is tested by a spectrometer.
66. Brokers who show property in which they have an option to purchase
must disclose anticipated profit and their status as an optionee.
67. Net operating income minus debt service equals the cash flow of income
property.
68. An investor of commercial property is interested in the property’s net
PL
income.
69. Failure to disclose a dual agency can lead to loss of commission, sus-
pension or revocation of the real estate license, and civil action by the
injured party.
70. Illegal use of the term REALTOR® can result in loss of license. It is also
a violation of California real estate law.
71. Warranty of authority (vicarious liability) states that a principal (seller-
employer) is liable for the acts of the agent (employee) within the scope
of authority granted. Therefore, both the seller and the agent may be
liable for any misrepresentations. (If the agent exceeds the authority, the
agent alone may be liable for resulting damage.)
E
72. The lead-based paint disclosure applies to sales and rentals of residential
one to four dwelling units built before 1978; therefore, this would apply
to a single-family residence built in 1975. This disclosure is especially
concerned with small children who might ingest paint chips.
73. Home sales are a major part of the consumer price index because a home
is the largest purchase the average consumer makes.

CA_RE_Exam_Guide_6E.indb 23 11/13/2013 11:44:53 AM

 24 California Real Estate Exam Guide Sixth Edition

74. A broker who wants to use a fictitious business name must file a fictitious
business name statement with the county clerk, have the notice pub-
lished in a newspaper of general circulation once a week for four weeks,
and apply to the real estate commissioner for approval of the use of the
name.
75. A real estate license can be restricted as to term, employment to a partic-
ular broker, limitation to a certain type of activity, and the requirement
of the posting of a surety bond.
SA
76. In addition to A Homeowner’s Guide to Earthquake Safety being provided
to buyers of residential property built before January 1, 1960, it is also
required on a masonry building built before January 1, 1975, containing
portions of wood frame construction.
77. The property manager is responsible for routine maintenance and is to be
employed under a written management agreement. The issue of property
management should be decided before buying investment property.
78. Property tax is assessed to each condominium owner separately, and each
owner receives a separate property tax bill.
79. The BRE recovery account fund may pay only a maximum of $50,000
per transaction to a person who holds an uncollectible court judgment
against a real estate licensee, even if the person holds a judgment for
M
$55,000. The maximum payable in behalf of one licensee is $250,000.
80. A real estate broker can legally offer gifts as an inducement for business,
whether for sales or loans, providing the conditions for earning the gifts
are in any advertisements.
81. Mello-Roos tax funds may be used to finance the cost of subdivisions.
82. The Natural Hazards Disclosure Statement states whether or not a prop-
erty is in an earthquake zone.
PL
83. If a buyer hands a deposit check to an escrow clerk, then a broker should
reflect it in his files and does not have to keep a trust record of that check.
84. Unstable real estate values tend to occur in areas of mixed home values.
85. There is a two-year grace period after expiration of the real estate license
in which the license can be renewed without taking the real estate
examination again. In this period, one may renew simply by paying the
renewal fee and late fees. However, one cannot practice real estate dur-
ing that time. After the two-year grace period expires, the real estate
license examination would have to be passed again in order to apply for
the license.
86. A fictitious business name refers to “doing business as.”
E
87. A seller of property in an earthquake fault zone, or the seller’s agent,
must disclose to the buyer that the property is situated in an earthquake
fault zone. This can be done in the Real Estate Transfer Disclosure State-
ment or in the purchase agreement.
88. A seller of one to four dwelling units must disclose whether a Mello-Roos
tax lien exists against the property. Mello-Roos municipal bonds may be
used to finance the improvements of streets, gutters, and sidewalks.

CA_RE_Exam_Guide_6E.indb 24 11/13/2013 11:44:53 AM

 Hot Notes 25

89. The Americans with Disabilities Act (ADA) could require the removal
of barriers from commercial properties.
90. A property manager is responsible for routine maintenance, is employed
under a written agreement, and must have a broker’s license.
91. Misuse of the trade names REALTOR® or REALTIST® is both unlawful
and unethical.
92. The laws of agency are found in the Civil Code.
SA
93. In a blind ad, the broker does not indicate license status or company
name.
94. A broker’s failure to make a required disclosure is not excused, even if the
buyer has a right of rescission.
95. Even though a salesperson works for a broker as an independent contrac-
tor, the broker should still provide workers’ compensation coverage.
96. A Buyer-Broker Representation Agreement must be in writing.
97. The agent acts without the authority of the principal. Later, the princi-
pal accepts the acts of the agent. This becomes agency by ratification.
98. A tort is a wrongdoing by one person against another. An agent is liable
to third parties for an agent’s misrepresentations (torts).
M
■■ CONTRACTS
1. A contract must have capacity, mutuality, lawful object, and sufficient con-
sideration to be valid. If it is a real estate contract, it also must be in
writing.
2. A deposit receipt is only a receipt for deposit and an offer to purchase. It
contains the clause time is of the essence.
PL
3. A real estate licensee must have been licensed at the time the real estate
transaction occurred to be able to collect a commission.
4. The listing agreement belongs to the broker even though the salesper-
son takes the listing. The agency relationship is established between the
principal and the broker.
5. A listing agreement authorizes a broker to accept a deposit; it contains
the safety clause.
6. A copy of a contract must be given to each party who signs it at the time
of obtaining signatures.
7. In an option agreement, consideration (deposit) must be paid and can
be in any amount. The seller may keep the consideration whether or not
E
the buyer exercises the option to purchase.
8. Contract law states that there is no minimum age for a married person to
enter into a contract.
9. A listing agreement for the sale of personal property may be by oral
agreement (in limited instances).
10. The maximum term of an agricultural lease is 51 years.

CA_RE_Exam_Guide_6E.indb 25 11/13/2013 11:44:53 AM

 26 California Real Estate Exam Guide Sixth Edition

11. A real property sales contract must include the number of years to com-
plete the contract and the basis for a tax estimate. The five essentials of
a land contract are capacity, mutuality (offer and acceptance), lawful object,
sufficient consideration, and a proper writing (the same as any other real
estate contract).
12. The legal action against a buyer who defaults on a land contract is the
quiet title action.
SA
13. A land contract is also called a real property sales contract, installment
sales contract, and agreement for purchase or sale. The vendor (seller)
is the one who must acknowledge (notarize) the land contract in order
for the vendee (buyer) to have it recorded. The vendee receives only
equitable title, not legal title. A quiet title action may be used to enforce
a forfeited recorded land contract.
14. If a property sustains fire damage, a landlord may choose to abate (forgive
or lower) the rent.
15. An exclusive authorization to locate property, in addition to being a type
of buyer-broker representation agreement, could lead to a dual agency
with the informed consent of all parties.
16. Tenant improvements are provided by a tenant improvement allowance.
M
17. If title and possession do not occur at the same time, an interim occu-
pancy agreement should be created.
18. Estate at sufferance describes a tenant who occupies property after his
rights have expired.
19. Illusory refers to uncertain terms.
20. If a tenant is forced to sign a contract for tenant improvements, the con-
tract may be voidable.
PL
21. The consumer price index includes home prices. A reference to heat-
ing, ventilation, and air-conditioning (HVAC) is found in a commercial
lease.
22. A lessee has five days in which to respond to a notice of unlawful detainer
action.
23. A corporation seal authorizes an officer to sign for a corporation.
24. Title to property passes when a deed is delivered.
25. An oral agreement for the sale of real property is unenforceable. A broker
is barred (stopped) from enforcing an oral agreement for real property. A
listing agreement for personal property or a business opportunity may be
by oral agreement.
E
26. The effective date of the deposit agreement is the date the parties sign it.
27. A broker who is not authorized to collect a commission (no listing agree-
ment) must follow the instructions of the buyer regarding the deposit.
28. An exclusive-right-to-sell listing is a bilateral executory agreement.
29. Multiple offers on property must be presented to the seller at the same
time, regardless of the price or terms of the offers.

CA_RE_Exam_Guide_6E.indb 26 11/13/2013 11:44:53 AM

 Hot Notes 27

30. An attorney-in-fact must record her authorization and cannot sell the
property to herself even if she is willing to pay full price.
31. As to covenants, conditions, and restrictions, all conditions run with the
land and bind into the future. Covenants, conditions, and restrictions
(CC&Rs) are enforceable as long as they are legal and reasonable.
32. A seller and a broker do not have a listing agreement. The seller tells
the broker that he will pay the broker a commission if the broker brings
SA
an offer that the seller accepts. The broker does bring an offer with a
deposit that is everything the seller wants, and it is accepted. Even if
the seller wants the deposit, the broker should place the deposit in his
trust account. Remember, it is in a listing agreement that a broker is
authorized to accept a deposit. Without the listing agreement, the broker
must follow either the buyer’s instructions as to the deposit or place the
deposit into his trust account.
33. This statement on an Exclusive Authorization and Right to Sell listing
agreement “Seller acknowledges that Seller has read and understands
this Agreement, and has received a copy” is important in creating a bilat-
eral agreement. The seller’s signature and the agent’s signature (i.e., two
promises) create a two-sided or bilateral agreement.
34. When an agent is acting as an “agent for the buyer,” that agent would not
M
be liable for misrepresentations of the seller or the seller’s agent.
35. A bill of sale transfers title to personal property. A listing of personal
property (in some instances) may be by oral agreement.
36. A listing agreement must be in writing in order to enforce the payment
of a commission.
37. In a court action, a judgment for specific performance is called an equi-
table remedy.
PL
38. In an option agreement, the optionee (prospective buyer) does not have
to perform.
39. A seller sells corn cropland to a buyer. After the completion of the sale,
the seller wants to come back and harvest the corn. The buyer is within
his rights to say no because the growing crops run with the land and now
belong to the buyer.
40. The buyer makes an offer. The seller rejects the offer and issues a coun-
teroffer. The buyer rejects the seller’s counteroffer. The seller then wants
to accept the buyer’s original offer. Is there a contract? No. Remember, a
counteroffer terminates the original offer.
41. The seller can revoke an exclusive authorization and right to sell listing
E
by sending a notice and certified letter to the broker.
42. The commission to be earned as a rental agent is by written agreement
between the parties.
43. An action to enforce an oral agreement for a contract, obligation, or
liability must be brought within two years.
44. The statute of limitations on a written contract is four years.

CA_RE_Exam_Guide_6E.indb 27 11/13/2013 11:44:53 AM

 28 California Real Estate Exam Guide Sixth Edition

45. A real estate licensee can sell a mobile home that has been registered
with the Department of Housing and Community Development.
46. The maximum commission one can charge when acting as an agent is
negotiable between the parties.
47. An oral agreement for real estate is unenforceable. A broker is barred
(stopped) from enforcing an oral agreement.
48. A notice of completion, a notice of cessation, and a notice of nonrespon-
SA
sibility are terms that refer to a mechanic’s lien.
49. If a seller directs an agent to write into an agreement “if the buyer
defaults, any deposit would be given to the seller,” this likely refers to the
liquidated damages clause.

■■ REAL ESTATE MATHEMATICS

Note that math will be approximately 10% of your exam.

I. Three-Way Formulas: When using this three-way formula system in solving a

variety of math problems, one item is equal to the other two. Place one item
in the top half of the circle, according to the formula. Place each of the other
two items in adjacent quarters of the bottom half of the circle. Divide the
upper half by one of the lower quarters, and you will arrive at the solution for
M
the adjacent quarter and vice versa. When multiplying a lower quarter by the
adjacent quarter, you will arrive at the solution in the upper half of the circle.
A. Interest formula: interest = rate × principal

Interest

÷ ÷
PL
Rate Principal

B. Income formula: income = rate × value

Income

÷ ÷
E
Rate Value

CA_RE_Exam_Guide_6E.indb 28 11/13/2013 11:44:54 AM

 Hot Notes 29

C. Area formula: area = width × length

Area

÷ ÷
Width Length
SA
D. Commission formula: commission = rate × sales price

Commission

÷ ÷
Sales
Rate
Price

E. Appraisal formula: net operating income = capitalization rate × value

M
Net
Operating
Income

÷ ÷
Cap.
Rt. Value
PL
F. Made-percent-paid formula: made = percent × paid

Made

÷ ÷
Percent Paid
E
CA_RE_Exam_Guide_6E.indb 29 11/13/2013 11:44:54 AM
 30 California Real Estate Exam Guide Sixth Edition

II. Selling Price Rule: To find the selling price of an item, subtract the percent-
age of profit desired from 100% and then divide the cost by the remainder.
Remember that the letter s is in both selling and subtract. This will help to
recall that you should subtract from 100%, then divide, when it is the selling
price you are seeking.
A. Selling price rule applied: A man wishes to earn 10% profit over the sales
price on a lot he bought for $60,000. He will have to pay closing costs of
SA
$460. What should he sell the lot for? 100% – 10% = 90%. $460 closing
costs + $60,000 cost = $60,460. $60,460 ÷ 90% = $67,177.78.
B. Selling price rule applied to discounted note problem: A woman bought
a note for a 4% discount and paid $16,800. What is the face amount of
the note? 100% – 4% = 96%. $16,800 cost of the note ÷ 96% = $17,500.
III. Cost Rule: To find the cost or net of an item, add the percentage of profit
desired to 100% and then divide the selling price by the total percentage.
Remember there are three letters in the word net, which is for this discussion
the same as cost, and three letters in the word add. This will help to recall that
you should add to 100% and then divide, when it is the cost you are seeking.
A. Cost rule applied: A woman sold her property at $90,000 and made a
15% profit. What did the property cost? 100% + 15% = 115%. $90,000 ÷
M
115% = $78,260.87.
B. Cost rule applied when closing costs are included: A man sold his vacant
lot for $45,000. He made an 18% profit after paying closing costs of $350.
What did the lot cost? 100% + 18% = 118%. $350 closing costs – $45,000
selling price = $44,650. $44,650 ÷ 118% = $37,838.98.
IV. Principal-Interest-Rate-Time Rule: Principal is the loan amount; interest repre-
sents the cost of borrowing money; rate is the cost of borrowing expressed as a
PL
percentage of the loan amount paid in interest for one year; and time refers to
the length of the loan, usually expressed in years.
A. Principal unknown: principal = interest ÷ (rate × time). What is the loan
amount necessary to receive $1,200 interest at 12% if the money is loaned
for three years? $1,200 interest ÷ (12% × 3 years) = $3,333.33 principal.
B. Interest unknown: interest = principal × rate × time. Find the interest on
$3,333.33 for three years at 12%. $3,333.33 principal × 12% × 3 years =
$1,200 interest.
C. Rate unknown: rate = interest ÷ (principal × time). Find the rate on
$3,333.33 that earns $1,200 interest for three years. $1,200 interest ÷
E
($3,333.33 principal × 3 years) = 12% rate.
D. Time unknown: time = interest ÷ (rate × principal). Find the time neces-
sary to return $1,200 on a principal amount of $3,333.33 at an annual rate
of 12%. $1,200 interest ÷ (12% × $3,333.33 principal) = 3 years.

CA_RE_Exam_Guide_6E.indb 30 11/13/2013 11:44:55 AM

 SALESPERSON PRACTICE
EXAMINATION 1
SA
1. Tenants in common share in the unity of 6. In the event the parties to a bulk sale do not
a. time. comply with the provisions of the bulk sales
b. title. law as outlined in the Uniform Commer-
c. interest. cial Code, the party that would probably be
d. possession. injured the MOST would be the
a. seller.
2. When comparing the economic life of b. buyer.
improved property with physical life of the c. creditor.
property, the economic life d. lender.
a. is longer.
M
b. is shorter. 7. In California, a broker must have an employ-
c. is the same. ment contract with each licensed employee in
d. depends on the type of improvements. the office. This contract
a. must be kept by the employees for five
3. The builder’s plan that displays the piers, sub- years after the term of employment.
floors, footing, and columns within a structure b. must be in writing.
is called c. need not be retained by the broker.
a. a floor plan. d. need not be retained by the salesperson.
PL
b. an elevation plan.
c. a foundation plan. 8. Through valid contractual assignment of a
d. a plot plan. lease, the assignee purchases the leasehold
interest and becomes a
4. Federal law protects purchasers of subdivi- a. landlord.
sion properties that are located in the United b. guarantor.
States and are being offered for sale in inter- c. sublessee.
state commerce. This law provides for a right d. tenant.
of rescission within
a. 3 days. 9. Which of the following is TRUE with respect
b. 5 days. to an impound account?
c. 7 days. a. The lender holding the account pays the
d. 10 days. same interest rate on funds as that paid by
E
a savings and loan on savings accounts.
5. A mortgage company would give the LEAST b. It benefits both the trustor and the
consideration to which of the following in beneficiary.
granting a loan? c. The maximum amount cannot exceed
a. Borrower’s present and future income 5% of the annual disbursements.
b. Value of the property in relation to loan d. It is required on all home loans.
c. Borrower’s need for financial assistance
d. Amount of down payment

31

CA_RE_Exam_Guide_6E.indb 31 11/13/2013 11:44:55 AM

 32 California Real Estate Exam Guide Sixth Edition

10. Upon payment of a fee, information on 15. If a salesperson misinforms a buyer as to deed
inspection reports issued by any licensed struc- restrictions,
tural pest control operator may be obtained a. there is no liability if the restrictions are a
from the Structural Pest Control Board for up matter of record.
to two years by b. the salesperson and the broker may both
a. the seller only. be liable for damages.
b. the buyer only. c. only the salesperson is liable.
c. the seller and buyer only. d. only the principal is liable.
SA
d. anyone who requests it and pays the fee.
16. A real estate broker negotiates a $7,000 sec-
11. A real estate license is required by ond trust deed note secured by real property.
a. a principal who sells three or more homes The loan was to be paid in full in five years.
in one year. The MOST the broker could charge as a com-
b. a trustee. mission for her services would be
c. a mortgage loan broker. a. 3%.
d. an appraiser. b. 6%.
c. 10%.
12. An unlicensed secretary working in a real d. 15%.
estate office may legally
a. discuss terms for sale of a property adver- 17. The trustor under a trust deed is the party who
tised by the broker. a. signs the note as maker.
b. type listing agreements for salespersons. b. holds the title to the property in trust.
M
c. collect rent on properties managed by the c. acknowledges the note for recording.
office. d. lends the money.
d. quote prices on listed property over the
telephone. 18. The act providing for civil action against
persons conducting business establishments
13. To an appraiser, a definition of value is by aggrieved persons claiming discrimination
a. the relationship of a desirous person to on account of sex, color, religion, ancestry, or
the thing desired. national origin is the
b. the ability of one commodity to com- a. Civil Rights Act.
PL
mand other commodities in exchange. b. Rumford Act.
c. the present worth of all rights to future c. Unruh Act.
benefits arising out of property ownership. d. Act of 1969.
d. all of these.
19. A licensed real estate broker is accused of
14. A man granted a woman a subsurface ease- violating the Unruh Act for refusing to rent
ment to remove the minerals from the land property to anyone other than persons of the
but never designated the place of removal, Caucasian race. If found guilty, the broker
so the a. must pay $250 to the party infringed on
a. woman must obtain the man’s consent as as punitive damages.
to right of entry. b. is subject to actual damages.
b. woman has an implied easement to enter c. must pay $250 to the party infringed on
E
and use the surface of land to extract the as punitive damages and is subject to
minerals. actual damages.
c. woman has no right of entry to remove d. is none of these.
the minerals.
d. woman’s easement rights are land-locked.

CA_RE_Exam_Guide_6E.indb 32 11/13/2013 11:44:55 AM

 Salesperson Practice Examination 1 33

20. The act that empowers the State Depart- 24. A promotional note is a promissory note secured
ment of Fair Employment and Housing to by a trust deed executed on unimproved real
act against discrimination in both publicly property or executed after construction of an
assisted and private housing accommodations improvement of the property but before the
under specified conditions is the first sale of the property as so improved, pro-
a. Civil Rights Act. vided the note was not executed in excess of a
b. Rumford Act. specified period of time. A note that has been
c. Unruh Act. in effect for how many months would NOT be
SA
d. Act of 1969. classified as a promotional note?
a. 18
21. In a tight money market, which of the fol- b. 24
lowing would be a TRUE statement regarding c. 30
conventional loans? d. 37
a. The buyer will pay a lower origination
fee. 25. A life insurance company that is engaged in
b. The buyer will pay more points. making real estate loans would normally cre-
c. The seller will pay greater discount ate these loans with the assistance of
points. a. the VA or through the FHA.
d. The seller will pay a higher origination b. a federal-chartered or state-chartered sav-
fee. ings and loan association.
c. a mortgage banker.
22. Which of the following BEST describes a d. any of these.
M
“complete” escrow?
a. It is considered a perfect escrow. 26. For a homestead to be effective, it must be
b. The escrow holder has ceased being an filed before the
agent for both parties. a. judgment is rendered.
c. All papers are properly drawn up and b. judgment is recorded.
ready for final steps to be taken to close c. lawsuit is filed.
the escrow. d. lis pendens is recorded.
d. All services of the escrow holder are
involved. 27. Garcia, Lewis, and Thompson are joint ten-
PL
ants. Garcia conveys his interest to Jackson.
23. When an escrow is in progress and all the Which of the following is TRUE?
conditions have been satisfied, the escrow a. Lewis, Thompson, and Jackson are joint
officer becomes tenants.
a. a counselor to both the buyer and the b. Lewis, Thompson, and Jackson are each
seller. one-third tenants in common.
b. an advocate to safeguard the interest of c. Jackson owns one-third as a tenant in
the principal. common with Lewis and Thompson, who
c. the independent agent for each of the now own two-thirds as joint tenants.
parties to the escrow. d. None of these.
d. None of these
E
CA_RE_Exam_Guide_6E.indb 33 11/13/2013 11:44:55 AM
 34 California Real Estate Exam Guide Sixth Edition

28. Salesperson Holly, who is employed by broker 32. A woman is leasing a property for a 10-year
Jonas, was able to secure an acceptance of an term. A man asks the woman to grant him an
offer from a buyer on a property that was listed easement over the property. In these circum-
by broker Donald. Donald had agreed to coop- stances, which statement is TRUE?
erate with Jonas. After escrow was opened, a. This would be illegal because only the
Holly was in need of $100 and asked Donald lessor can grant such a use.
to advance her $100 from the eventual com- b. This would be legal for the term of the
mission. If Donald advances Holly the $100, lease.
SA
which of the following is TRUE? c. This would be illegal because the owner
a. It would be acceptable, provided it is must join in such a grant with the lessee.
released through the escrow holder. d. The tenant can legally grant such a right
b. It would be a violation of the real estate for an indefinite period.
law.
c. It would be legal because it doesn’t matter 33. Which of the following is community
from whom Holly receives the money. property?
d. It would be legal as long as it does not a. Husband’s salary
come out of the escrowed money. b. Income from husband’s separate property
earned during marriage
29. Should a dispute regarding a commission arise c. Income from wife’s separate property
between two sales licensees who are members earned during marriage
of the National Association of REALTORS®, d. All of these
by the provisions of that organization’s Code
M
of Ethics, they will settle the matter by 34. A deed to a person under an assumed name is
a. litigation. a. void.
b. estoppel. b. voidable.
c. arbitration. c. permissible.
d. mandamus. d. prohibited.

30. A liquidated damages clause in a real estate 35. For appraisal purposes, a commercial property
contract valued in excess of $250,000 requires
a. allows the buyer to withdraw her offer a. any type of appraisal.
PL
anytime before acceptance. b. a certified general appraiser.
b. is looked on with disfavor by the courts. c. an appraisal by a member of the Appraisal
c. determines the damages to be paid in case Institute.
of fire during escrow. d. none of these.
d. sets up a procedure to be followed in case 36. The statute of limitations specifies the time
of foreclosure. limits in which lawsuits must be brought to
31. With regard to a deed of trust and promissory court in the event of a breach. Under this
note, which of the following statements is statute, a buyer must bring legal action against
TRUE? a seller for failure to perform under a valid
a. The provisions of the promissory note purchase contract within
prevail over the deed of trust. a. 90 days.
E
b. The promissory note secures the trust b. 1 year.
deed and the property. c. 2 years.
c. The provisions of the trust deed prevail d. 4 years.
over the promissory note.
d. The trust deed secures the promissory
note.

CA_RE_Exam_Guide_6E.indb 34 11/13/2013 11:44:55 AM

 Salesperson Practice Examination 1 35

37. The type of interest usually charged on single- 41. An individual purchased a fee simple interest
family home loans is in airspace and an undivided interest in com-
a. annuity. mon in a portion of a parcel of real property
b. prepaid. that could be used for residential, commercial,
c. compound. or industrial use. This would be classified as
d. simple. a. a condominium.
b. a stock cooperative.
38. A homeowner engages a broker to sell her c. a planned development.
SA
home under an exclusive authorization and d. none of these.
right-to-sell listing. Under these circum-
stances, the broker’s authority is 42. Filing a complaint under the federal housing
a. whatever third parties perceive it to be. law must, according to the statute of limita-
b. whatever the broker believes his author- tions, be done within how many days from the
ity to be, even if it extends beyond occurrence of the alleged act?
those duties agreed to under the listing a. 60
contract. b. 90
c. that which will be necessary to sell the c. 180
property, regardless of the listing terms, d. 360
because that is the purpose for which he
has been hired. 43. Which of the following is necessary to legally
d. that which has been agreed to between transfer title to real property?
the principal and the agent and that a. A current beneficiary statement on any
M
which is necessary, proper, or usual in the existing loan
ordinary course of business for effecting b. A title policy showing title vested in the
the sale of the property. grantor
c. The services of a licensed real estate
39. When reviewing the credit standing of a pro- broker
spective borrower, the bank would probably d. None of these
grant the loan if the borrower showed that her
a. FICO score was strong. 44. FHA-insured loans can be granted only on
b. cash in the bank almost equaled her residential properties that meet minimum
PL
liabilities. building standards. In a residence approved
c. liabilities were three times her net worth. for FHA-insured financing, which of the fol-
d. existing loan was in default only one lowing requirements for the construction of a
month. stairwell does NOT have to be met?
a. There must be two handrails.
40. A commercial acre is defined as an acre of b. The tread of the step must have a mini-
land mum width.
a. in a shopping center in a rural area. c. The riser must be a minimum height.
b. in an industrial development. d. The stairwell must allow for minimum
c. in a new subdivision zoned for commer- headroom.
cial use.
d. less the streets and alleys. 45. If an owner dies leaving a will, but without
E
heirs, his property
a. vests in the devisees, subject to
administration.
b. escheats to the State of California.
c. escheats to the United States.
d. does none of these.

CA_RE_Exam_Guide_6E.indb 35 11/13/2013 11:44:55 AM

 36 California Real Estate Exam Guide Sixth Edition

46. An investor owned a number of promissory 52. If a person affixes property to the land of
notes secured by trust deeds. To relieve herself another by mistake, the
of the burden of keeping an account of those a. person may remove it under prescribed
that paid and those that had not paid, she conditions, including payment of
employed a real estate broker to handle the damages.
collections. One of the requirements imposed b. property may not be removed because it
by the real estate law is that the broker has become a fixture.
a. post a bond with the commissioner. c. landowner must pay for its cost.
SA
b. have a special endorsement on his d. landowner may destroy it.
license.
c. have a written contract with the investor. 53. Which of the following is the viewpoint of
d. must do all of these. the accountant and the appraiser with respect
to depreciation?
47. When a loan is obtained to purchase real a. The accountant is concerned with book
property and a note and trust deed are exe- depreciation, while the appraiser deals
cuted, the party that furnishes the funds is the with actual depreciation.
a. grantee. b. The appraiser is interested only in book
b. beneficiary. value.
c. trustor. c. The accountant is interested only in what
d. trustee. caused the depreciation.
d. The accountant is interested in the book
48. The BEST appraisal method to establish the value, while the appraiser is interested in
M
current market value of a shopping center the theory of depreciation.
would be the
a. cost-income. 54. If zoning prohibits a use permitted by private
b. market data–income. deed restrictions, the
c. income–gross rent multiplier. a. zoning controls.
d. cost–gross rent multiplier. b. courts must be called on.
c. deed restrictions control.
49. A “holder in due course” brings action to col- d. zoning is invalid.
lect on the note. Which one of the following
PL
may the maker of the note use as a defense? 55. A prospective buyer, who was not a real estate
a. Lack or failure of consideration licensee and had no ties to the seller’s broker,
b. Prior cancellation wished to purchase a large parcel of land and
c. Fraud in the inducement made an offer on the property at a price of
d. Material alteration of the note $600 per acre. The seller accepted the offer
and escrow was opened. During the escrow
50. Which of the following would be considered period, the seller discovered that the buyer
an estate of indefinite duration? had already entered into an agreement to
a. An estate for years resell the acreage at a price of $2,000 per acre
b. An estate of inheritance to an unknown buyer. Under these circum-
c. A lease for 99 years stances, the original seller’s recourse is to
d. Material alteration of the note a. rescind the contract.
E
51. If the owner enters into an exclusive-agency b. refuse to close the escrow and sue for
listing and thereafter sells the property damages.
through his own efforts, c. void the contract based on
a. no commission is payable. misrepresentation.
b. the broker is entitled to 50% of the d. do nothing.
commission.
c. the broker is entitled to full commission.
d. none of these happens.

CA_RE_Exam_Guide_6E.indb 36 11/13/2013 11:44:55 AM

 Salesperson Practice Examination 1 37

56. A beneficiary statement is furnished by the 62. An owner knew the roof leaked in his house
a. trustee upon the demand of the trustor. and disclosed that fact to the broker with
b. beneficiary upon the demand of the whom he listed the property for sale. The
escrow company. broker is required to
c. beneficiary upon the demand of the a. comply with the owner’s request to keep
trustee. it a secret.
d. surveyor upon the demand of the b. disclose such fact to a prospective buyer.
beneficiary. c. protect the seller and not say anything.
SA
d. have a new roof put on and put the bill
57. An individual who has rented real property into escrow.
may remove which of the following on termi-
nation of the lease? 63. A copy of the real estate commissioner’s
a. Manufacturing equipment public report that was issued on land within a
b. Trade fixtures land project must be given by the subdivider
c. Items for domestic use or the subdivider’s agents or salespersons to
d. All of these a. all owners of land adjacent to the
subdivision.
58. Attachment is b. every adult prospect who wrote or tele-
a. a legal seizure of property. phoned requesting one or who visited the
b. an assessment. site and indicated an interest in purchas-
c. a lien. ing one or more of the sites.
d. a form of tax. c. every prospective buyer, but the subdi-
M
59. If the U.S. government obtained a lien against vider or the subdivider’s agents can wait
a taxpayer who failed to report a certain until just before signing the purchase
portion of his rental income, it would be agreement.
classified as d. the local newspaper so it can be published
a. general. in the legal section.
b. specific. 64. A township is
c. voluntary. a. 6 miles square.
d. none of these. b. 24 miles around.
PL
60. Limitations on the use of real property may be c. 36 square miles.
created by d. all of these.
a. building codes. 65. A broker who has a signed listing to sell a
b. zoning regulations. property can refuse to submit an offer on that
c. deed restrictions. property
d. all of these. a. under circumstances in which the broker
61. For a judgment to constitute a lien, it must also has obtained a backup offer.
meet certain prerequisites. Which of the fol- b. whenever the offer is for less than the
lowing is NOT a prerequisite? listed price.
a. It must be a judgment that money is c. if, in the listing agreement, the bro-
owed. ker also has an option to purchase the
E
b. It must be a valid judgment. property.
c. An abstract of judgment must be recorded d. when expressly instructed to do so by the
in the state in which the real property is owner.
situated.
d. It must be rendered by a lawfully consti-
tuted court.

CA_RE_Exam_Guide_6E.indb 37 11/13/2013 11:44:55 AM

 38 California Real Estate Exam Guide Sixth Edition

66. An enforceable standard listing agreement 70. The taxpayer would ordinarily have to pay
that has been signed by the seller and the property taxes on all of these EXCEPT
broker a. a condominium interest.
a. obligates the seller to sell. b. intangible personal property.
b. requires a meeting of the minds. c. public tax-exempt land under a lease
c. requires a seller to be able to deliver a (e.g., an oil lease).
marketable title and a buyer “ready, will- d. an easement over the land of another.
ing, and able” to buy.
SA
d. does all of these. 71. When issuing the closing statement, escrow
would debit the seller of income property for
67. A salesperson receives an offer from a buyer which of the following items?
who has no cash but offers a deposit of $500 in a. Prepaid taxes
the form of a personal note payable in 30 days. b. Prepaid rent
Which of the following is TRUE? c. Prepaid fire insurance premium
a. This is unacceptable because a deposit d. All of these
must be in cash or a check.
b. The form of deposit is immaterial, as long 72. When applying the principle of substitution,
as the $500 figure appears on the deposit the homebuyer would consider
receipt. a. use.
c. A salesperson may accept a personal note b. earnings.
as deposit only by first advising the seller c. structural design.
of this action. d. all of these.
M
d. A salesperson may accept a note if made 73. The law that requires that certain contracts be
in favor of the broker to handle expenses. in writing is contained in the
68. Functional utility in a dwelling depends on a. statute of limitations.
a. the desires of its occupants. b. Small Loan Act.
b. its floor plan and equipment. c. statute of frauds.
c. zoning of the area. d. Fair Trade Law.
d. condition of the heating system. 74. The legal procedure to evict a nonpaying ten-
PL
69. A broker was taken to court by a client who ant is by
was suing the broker for fraud in a real estate a. action by lessor through physical ejection.
transaction. The client was successful and b. court action for specific performance.
was awarded damages in the civil suit. After c. unlawful detainer.
the judgment has been handed down, the real d. nonaction.
estate commissioner can immediately 75. Which of the following statements is correct
a. revoke the broker’s license. with regard to an easement and the dominant
b. suspend the broker’s license pending a tenement?
hearing. a. The dominant tenement receives
c. file an accusation and statement of issues both the benefit and the burden of the
and proceed against the broker. easement.
d. hold a hearing with his or her deputies to b. The owner of the dominant tenement
E
decide if a notice of suspension should be can retain the easement but can transfer
mailed. title to the property.
c. It can be created for ingress and egress
only.
d. The easement is transferred with the
transfer of the dominant tenement.

CA_RE_Exam_Guide_6E.indb 38 11/13/2013 11:44:55 AM

 Salesperson Practice Examination 1 39

76. Legal enforcement of the terms of a deed of 82. A broker licensee can legally claim a commis-
trust in case of default may be sion for
a. either by trustee’s sale or judicial a. a loan that she did not negotiate.
foreclosure. b. the sale of a property on which she had
b. by trustee’s sale proceedings only. an exclusive authorization to sell with a
c. by judicial foreclosure only. definite termination date.
d. by none of these. c. the sale by another of a property on
which she had an open listing with a
SA
77. California law permits a person to file a dec- termination date.
laration of homestead, provided that person is d. the sale by another on which she had a
living in net listing with a termination date.
a. the residence on which he holds a 35-year
lease. 83. An appraiser in analyzing the data for a final
b. a cooperative apartment project in which opinion of value on a property would give
he has a fee interest in the unit that he LEAST consideration to
occupies. a. the assessed value of the property.
c. a 12-unit apartment building that he b. the value of the land.
owns. c. comparisons of other properties.
d. any of these. d. its highest and best use.

78. The person who has gained the right to act in 84. Airspace is a public highway, but the land-
behalf of another is known as owner’s property line in the sky
M
a. an affiant. a. is owned by the federal government.
b. a principal. b. may be owned by the surface owner.
c. an attorney-in-fact. c. is owned by the state where the land is
d. an executor. located.
d. is as much as he can use and occupy in
79. The commissioner may suspend or revoke the connection with the land.
license of any real estate licensee who
a. demonstrated negligence or incompe- 85. A purchaser of a condominium unit recorded
tence in performing any act for which he a homestead on her property immediately
PL
is required to hold a license. after its purchase. One year later, this owner
b. failed to exercise reasonable supervision failed to pay her monthly homeowners asso-
over the activities of his salespeople. ciation fees and the association began legal
c. willfully disregarded or violated any of the steps to enforce the collection. Under these
provisions of the real estate law. circumstances, which is TRUE?
d. did all of these. a. The homestead would offer her no
protection.
80. Which of the following is an encumbrance? b. The other owners could collect the
a. Fence amount due but only the excess over the
b. Lease amount of the homestead exemption.
c. Homestead c. The homestead is invalid because it does
d. Trade fixture not protect a condominium unit owner’s
E
81. The fee that the appraiser charges for his interest.
appraisal is established by the d. The homestead would give the unit
a. agreement between the appraiser and the owner full protection.
client. 86. To be effective, a demand must be accompa-
b. California Department of Veterans nied by
Affairs. a. objectivity.
c. real estate commissioner. b. inflation.
d. American Institute of Real Estate c. purchasing power.
Appraisers. d. transferability.

CA_RE_Exam_Guide_6E.indb 39 11/13/2013 11:44:55 AM

 40 California Real Estate Exam Guide Sixth Edition

87. Which of the following would be the key fac- 91. The real estate commissioner may impose a
tor in a developer’s decision in choosing the fine against a real estate broker who pays an
BEST site to build a new shopping center in a unlicensed person to negotiate real estate
suburban area? loans. The maximum fine would be
a. Traffic count a. $1,000.
b. Population b. $5,000.
c. Purchasing power c. $20,000.
d. Topography d. $50,000.
SA
88. The words procuring cause would have an 92. A real estate licensee, in advertising property
important meaning for sale, includes the credit terms available to
a. in a dispute over commission on an open complete the sale. With respect to advertising,
listing. which of the following is TRUE?
b. when securing a listing. a. Regulation Z allows exceptions.
c. in the sale of government land. b. Regulation Z applies in all instances.
d. in a lawsuit against a licensee involving c. Regulation Z allows exceptions and
fraud. applies in all instances if the loan exceeds
$25,000.
89. A man owned a farm property on which he d. The real estate licensee is not bound by
was growing a crop of corn. Before the har- Regulation Z, as he is subject to the real
vest, he sold the property to a woman. The estate commissioner.
man intended to harvest the crop after the
M
sale, even though this was not stated in the 93. An individual purchased a nine-acre parcel of
sales agreement. Which would most likely be unimproved property. He then subdivided the
TRUE regarding the corn crop? nine acres into one-acre parcels. If the subdi-
a. The man would have the right to harvest vider plans to sell only three one-acre parcels
the crop, as this was his intention. per year over the next three years, she must
b. The crop would go with the land because comply with
it is considered real property. a. the State Subdivision Map Act.
c. The man’s intent would take precedence b. the State Subdivided Lands Act.
over the sales agreement. c. both the State Subdivision Map Act and
PL
d. The woman cannot claim the crop the State Subdivided Lands Act.
because it would be considered personal d. none of these.
property.
94. The maximum space permitted between wall
90. A purchaser obtains a property for 20% studs under MOST building codes is how
less than the listed price and later sells the many inches on center?
property for the original listed price. The a. 6
percentage of the profit on her original invest- b. 12
ment is c. 16
a. 10%. d. 24
b. 20%.
c. 25%.
E
d. 40%.

CA_RE_Exam_Guide_6E.indb 40 11/13/2013 11:44:55 AM

 Salesperson Practice Examination 1 41

95. Which of the following is TRUE with respect 101. The issuance of a writ of execution could
to riparian rights? result in a
a. The riparian landowner has the absolute a. sheriff’s sale.
ownership of the adjacent water. b. reassessment of property taxes.
b. The ownership of riparian rights can be c. mechanic’s lien.
determined from the public records. d. tax deed.
c. Riparian land must be adjacent to the
stream and in the watershed of the 102. When risk increases, capitalization rates
SA
stream. a. increase.
d. They must be expressly stated in the deed b. remain constant.
to such land. c. decrease.
d. do none of these.
96. Acquisition of property by its incorporation
with other property is known as 103. All of the following may be used to describe a
a. accession. construction loan EXCEPT
b. succession. a. a interim loan.
c. recession. b. a loan for future advances.
d. commingling. c. an open-end loan.
d. a package loan.
97. A landlord and a tenant enter into a discus-
sion relating to an extension of a lease under 104. An investor has decided to take legal action
which the tenant had occupied the prop- against a seller. The legal procedure the inves-
M
erty for some length of time. Because they tor might seek before a judgment is rendered is
could not agree on the terms, it was decided a. an attachment.
between the parties that the lease would be b. a trustee’s sale.
discontinued. This decision to discontinue the c. a judicial sale.
lease would be considered d. a writ of execution.
a. a termination. 105. The substitution of a new contract for an
b. a rescission. existing one is known as a
c. a voided contract. a. subordination.
d. an unenforceable contract.
PL
b. novation.
98. A contract signed under duress is c. rescission.
a. void. d. pledge account.
b. voidable. 106. A home contains massive cornices that
c. illegal. affect the value of the property. This is an
d. enforceable. example of
99. Which of the following could be similar to a a. functional obsolescence.
planned development in California? b. external obsolescence.
a. Stock cooperative c. physical deterioration.
b. Land project d. deferred maintenance.
c. Condominium 107. The degree of an angle of a slope or roof is
E
d. Community apartment project called the
100. An investor who is interested in purchasing a a. gable.
commercial property for investment purposes b. hip.
would be MOST interested in c. pitch.
a. gross income. d. mansard.
b. net income.
c. topography.
d. pedestrian traffic.

CA_RE_Exam_Guide_6E.indb 41 11/13/2013 11:44:55 AM

 42 California Real Estate Exam Guide Sixth Edition

108. The BRE states that if a broker chooses 113. Under the authority of a valid California real
to store records electronically, the bro- estate license, you may market
ker must use the write once read many a. residential property.
(WORM) method. The BRE is particularly b. agricultural property.
concerned with c. industrial and commercial property.
a. electronic signatures. d. any of these.
b. allowing data entry.
c. ceasing activity. 114. After recording a notice of default, a trustee
SA
d. storing activity. who is foreclosing under the power of sale
clause in a trust deed must wait three months
109. The purchase price of property is the starting before
point in calculating a. issuing a trustee’s deed.
a. book value. b. filing court action.
b. sales price. c. reconveying title to the beneficiary.
c. market value. d. publishing the notice of sale.
d. liability potential.
115. Which of the following parties would be in
110. A real estate broker, when acting as agent for violation of the real estate law if they were
a seller, not licensed by the Bureau of Real Estate?
a. is obligated to render faithful service to a. An attorney-in-fact who signed a deed to
the seller. the property owned by his principal
b. can modify the terms of any contract that b. An attorney operating a real estate busi-
M
the seller enters into. ness out of her law office
c. can give the seller legal advice. c. An attorney’s secretary who also performs
d. can eliminate any offers on the seller’s his duties as a secretary in a real estate
property that the broker believes are not business
good enough. d. All of these

111. In the event a licensee is found guilty of 116. The major part of the California laws relating
violating the antidiscrimination regulations of to real property are created by the
the real estate commission, the commissioner a. state constitution.
PL
may take which of the following legal actions b. legislative acts.
against the licensee? c. real estate commissioner.
a. A suit for damages for expenses incurred d. Business and Professions Code.
b. Collect punitive damages to insure
against further discrimination in the 117. If a broker makes a misrepresentation, relying
future on information furnished by the owner, and
c. Revocation or suspension of the license of the purchaser is consequently relieved from
the individual the contract because of the misrepresentation,
d. Any of these the broker is entitled to
a. a full commission.
112. The phrase that BEST describes the nature b. whatever compensation he might ask for
of a broker’s duty to keep a principal fully in a court action.
E
informed is c. reimbursement for only out-of-pocket
a. ethical conduct. expenses in connection with the unex-
b. continuing responsibility. ecuted contract.
c. fiduciary obligation. d. no commission.
d. trustworthy business principles.

CA_RE_Exam_Guide_6E.indb 42 11/13/2013 11:44:55 AM

 Salesperson Practice Examination 1 43

118. For the person who has qualified in an exami- 123. The termination of a power of attorney can
nation for a real estate license, the maximum occur by
time allowed to file the required application is a. the death of the attorney-in-fact.
a. one year from taking the test. b. the revocation by the principal.
b. one year from being notified of the results c. the incapacity of the parties to the power
of the test. of attorney.
c. two years from taking the test. d. any of these.
d. two years from being notified of the
SA
results of the test. 124. There are many duties and responsibilities of a
property manager. Some of the duties include
119. Under the law of agency, a fiduciary relation- a. protecting the investor’s capital.
ship is created between the broker and the b. providing effective services for the owner
seller on execution of the listing agreement. and the tenants.
As far as the broker’s responsibility to third c. attempting to increase the net income of
parties, the broker the property.
a. must be fair, honest, and disclose material d. all of these.
facts.
b. has no obligation. 125. During the redemption period of a loan under
c. need disclose material facts only when a judicial foreclosure who is in possession of
asked about them. the property?
d. should disclose the lowest price the seller a. The mortgagee
is willing to accept. b. The mortgagor
M
c. The trustee
120. The law of agency is concerned with the d. The sheriff
rights and duties between and among
a. the agent and the principal, whether 126. The purpose of Division 6 of the Uniform
disclosed or undisclosed. Commercial Code, which addresses the bulk
b. the principal and third parties with whom transfer of inventory of a business being sold,
the agent deals on behalf of the principal. is to alert the
c. the agent and the third parties with a. transferor’s buyers.
whom the agent deals on behalf of the b. transferor’s creditors.
PL
principal. c. transferee.
d. all of these. d. transferor’s customer list.

121. The master plan of the city or county of San 127. The MOST logical first step for subdivider
Francisco typically shows Livingston to take before going forward with
a. its traffic patterns. plans to create a new development with all of
b. its street patterns. the latest amenities is to
c. its public transportation locations. a. find the best location.
d. all of these. b. secure adequate financing.
c. purchase the land.
122. An agreement between two parties to do or d. prepare a market analysis.
not to do certain things is known as
128. A buyer gives a full offer to purchase a seller’s
E
a. an affidavit.
b. a contract. property. The seller rejects the offer. What
c. a declaration. recourse is available to the buyer?
d. a verification. a. Sue the seller for specific performance
b. Sue the seller for actual and punitive
damages
c. Sue the seller for both specific perfor-
mance and actual and punitive damages
d. None of these

CA_RE_Exam_Guide_6E.indb 43 11/13/2013 11:44:55 AM

 44 California Real Estate Exam Guide Sixth Edition

129. The personal assets of each partner may 135. The deferred maintenance of a building refers
be sought by the creditors of which type of to
syndication? a. the need for rehabilitation of the
a. Regular corporation building.
b. General partnership b. future repairs that are anticipated.
c. Limited partnership c. the upgrading of appliances and fixtures
d. All of the above for greater appeal of the building.
d. none of these.
SA
130. For a woman to hedge her capital against
inflation, she would invest in 136. It is important to the running of a commercial
a. government bonds. bank to maintain liquidity and salability of its
b. equity assets. loans. Therefore, which type of loan would
c. savings accounts. MOST commercial banks prefer to make?
d. mortgages. a. Short-term loans
b. Junior trust deeds
131. If an owner did NOT pay his broker the c. Real estate loans for their own portfolios
earned and agreed-on commission, what d. Takeout loans
action could the broker take?
a. File a lis pendens 137. Which of the following would be considered
b. File a lawsuit in civil court an offer in a real estate transaction?
c. File a complaint with the real estate a. An option
commissioner b. A covenant
M
d. All of these c. A verbal agreement
d. Tender
132. All of the following are assignable EXCEPT
a. a trust deed. 138. Real property of the estate of a person who
b. a grant deed. died intestate is to be sold by the administra-
c. a lease agreement. tor. This property can be sold only
d. a deposit receipt. a. at public auction.
b. to the highest bidder resulting from a
133. According to the Truth in Lending Act, Regu- newspaper advertisement.
PL
lation Z of the Federal Reserve System, which c. after the court has approved the terms of
of the following advertisements is correct? sale and the price.
a. Assume a 6% APR loan d. for cash.
b. Assume a 6% annual percentage rate loan
c. Assume a 6% annual mortgage loan 139. A lessee’s interest is
d. All of these a. personal property.
b. chattel real.
134. Under the cost approach to the appraisal of c. a grant to use property for a period of
property, how are the land and improvements time that reverts to the grantor at the
valued? expiration of the term.
a. Jointly in one approach d. all of these.
b. Singly, using more than one approach
c. Singly, using one approach 140. When a stream tears land away from its bank,
E
d. None of these it is called
a. accretion.
b. avulsion.
c. absorption.
d. alluvion.

CA_RE_Exam_Guide_6E.indb 44 11/13/2013 11:44:55 AM

 Salesperson Practice Examination 1 45

141. When a husband and wife hold title to prop- 147. As used in contract law, tender means
erty in joint tenancy, the wife can will a. a promise to perform, such as to buy or
a. one-half of the husband’s share. sell.
b. one-half of the entire property. b. actual payment of money or delivery of
c. one-half of her share. deed.
d. none of the property. c. an offer of money or deed or other
performance.
142. A joint tenancy estate d. a fully executed contract.
SA
a. is a single estate.
b. is an estate in severalty. 148. When compared with a conventional contract
c. involves real property. of sale, the distinguishing characteristic of an
d. involves personal property only. option to purchase real estate is
a. irrevocability.
143. In real estate, the word tenancy means b. mutuality of contract.
a. two or more people joined in an c. lack of mutuality in obligations.
enterprise. d. none of these.
b. a way of holding ownership.
c. a tenacious person. 149. When the sale of a business also involves the
d. a devise. bulk sale of the stock in trade (inventory), a
notice of the sale must be given as provided in
144. A man willed his property to his favorite a. California Real Estate Law.
nephew and the nephew’s wife, giving them a b. California Civil Code.
M
two-thirds and one-third interest, respectively, c. Uniform Commercial Code.
with the right of survivorship. Title would be d. article 7 of the Business and Professions
held by the nephew and his wife as Code.
a. joint tenants.
b. community property. 150. A prudent lender would take into consider-
c. tenants in common. ation which of the following before issuing a
d. tenancy in partnership. loan?
a. Borrower’s ability to pay
145. To be effective and to transfer title, a deed b. The market value of property that is the
PL
must security for the loan
a. be acknowledged. c. Current economic trends
b. be executed on a day other than Sunday. d. All of these
c. have an adequate description of the
property.
d. contain the phrase “to have and to hold.”

146. Which of the following is the kind of informa-

tion one might expect to find on the elevation
sheets of construction plans?
a. Construction details and arrangements of
inner areas
b. Exterior sides of a house as they will
E
appear after structural work is complete
c. Contour of the plot, elevations of the
land in relation to the streets, boundaries,
and the finished grade
d. Thickness of slab floor, kind and size of
steel wire reinforcement, and areas where
slab is to be thickened for placement of
load-bearing walls

CA_RE_Exam_Guide_6E.indb 45 11/13/2013 11:44:56 AM

 CALIFORNIA REAL ESTATE EXAM GUIDE
Ensure your success SIXTH EDITION

with these proven study The Sixth Edition of California Real Estate Exam Guide is the most
comprehensive preparation tool available for the California real
tools from Dearborn™ estate salesperson and broker exams. Based on the highly successful
Real Estate Education: preparation techniques of veteran real estate professional and trainer
Minnie Lush, this book presents the material students will encounter
on their exam in an easy-to-learn format.
SA
California Real Estate Economics

California Real Estate Escrow

and Title
This updated text features:
• UPDATED HOT NOTES—Comprehensive salesperson and broker sections
California Real Estate Finance
focus on the most important terms and concepts.
California Real Estate Law • MORE THAN 2,000 PRACTICE QUESTIONS—Includes 1,500 carefully written
California Real Estate Practice salesperson practice questions and an additional 600 broker-specific
questions to test retention of the material and readiness for the
California Real Estate Principles California exam.
Fundamentals of Real Estate • D ETAILED EXPLANATIONS—Answer keys with in-depth rationales are
M
Appraisal included for all questions to help you master difficult material.
Mastering Real Estate Math • E ASY-TO-FOLLOW FORMAT—Helps identify topics for further study and
strengthens test-taking skills.
Property Management
• REAL ESTATE MATHEMATICS—A special mathematics section with
Real Estate Brokerage: diagrams and examples ensures that you have the math skills you
A Management Guide and need to be confident on test day.
Workbook
PL
The Language of Real Estate Minnie Lush, BA, GRI, ABR, REALTOR®, real estate broker, author,
and lecturer, is acclaimed as one of the finest real estate speakers
and trainers in California. She periodically appears as a guest on
talk shows and is an invited speaker for many organizations at the
local, state, and national levels. Lush has served on a California
State Department of Real Estate education committee. She is
a master faculty member of the California Association of REALTORS®, lecturing
throughout California in the Graduate REALTOR® Institute program. She has
served as president of the Burbank Association of REALTORS® and has chaired
many of its committees.
E
332 Front Street South, Suite 501
La Crosse, WI 54601
www.dearborn.com, 800.972.2220
For comments or queries about
this product, please email us at
contentinquiries@dearborn.com.