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California Real Estate Exam Multiple
Choice Questions solved.
Standard title insurance policy (CLTA) does NOT provide on-site inspection. Extended coverage (ALTA) would have covered this type of defect, but a property inspection would have been made prior to policy issuance anyway. Qs Fill in appropriately: "A trend in real estate ______________ the recession trends of business, and when business starts a swing upward." a. precedes, proceeds b. follows, lags behind c. lags behind, precedes d. precedes, lags behind - n Ans✔ d. precedes, lags behind Typical business cycle: (1) Expansion...prosperity (good times) (2) Recession...turn around from prosperity (real estate precedes) (3) Depression...opposite from (1) above (4) Revival...turn around in prosperity (real estate lags) Qs
*For federal income tax purposes, a taxpayer could increase the basis of his/her residence with which of the following? a. Property taxes b. Accrued depreciation c. Addition of a patio d. None of the above, for a personal residence basis cannot be adjusted for any reason - n Ans✔ c. Addition of a patio Capital improvements are acceptable adjustments to basis. Qs Under a lease agreement, who holds the leasehold estate? a. Beneficiary b. Lessee/Tenant c. Lessor d. None of the above - n Ans✔ b. Lessee/Tenant Lessor owns the property, lessee holds leasehold estate. Qs After a broker shows a client's property to a prospective buyer, the broker should:
Qs A broker arranges the sale of a home. There is a purchase money T.D. from the lender. The broker is NOT required to see that the T.D. is recorded if the: a. buyer instructs him not to record. b. buyer and seller select not to have an escrow. c. broker is not involved financially in the loan procurement. d. the beneficiary instructs him not to record the T.D. - n Ans✔ d. the beneficiary instructs him not to record the T.D. Only a lender (beneficiary) can decide whether a promissory note and trust deed are to be recorded. Qs The goal of the Fair Housing Act is for the purpose of: a. removing prejudice in every community. b. establishing selling practices that are "color blind." c. establishing selling practices where you do unto others as you would have them do unto you. d. all of the above. - n Ans✔ d. all of the above. Qs In addition to being registered for a minimum of one year, manufactured homes sold by real
a. 8' wide and 20' long. b. 6' wide and 40' long. c. 12' wide and 30' long. d. 8' wide and 40' long. - n Ans✔ d. 8' wide and 40' long. Qs Which of the following types of financing generally does NOT require any down payment? a. Cal-Vet b. Conventional c. FHA d. VA - n Ans✔ d. VA There is generally no down payment required with a VA loan Qs Businesses in California may take the form of an individual proprietorship, partnership, or corporation. Each form has its advantages. One advantage of operating as a general partnership is that: a. each partner has the use of assets of the partnership. b. management of the business can be left to the other partner with little concern.
a. Everybody purchasing with comparable down payments. b. Everybody having approximately the same income levels. c. Both a and b. d. None of the above. - n Ans✔ c. Both a and b. Neighborhoods generally have similar physical structures based on common social, economic, and political characteristics. Qs A plot of land that is 30 miles square contains how many townships? a. 0. b. 4 c. 9 d. 25 - n Ans✔ d. 25 The plot is 30 miles on a side and a township is six miles on a side. Therefore, the plot has five townships on a side, or 5 by 5 = 25. Qs Complaints involving violations of federal law must be filed within how many days of the violation?
a. 90 b. 120 c. 150 d. 180 - n Ans✔ d. 180 Qs Regarding Conditions and Covenants, which are restrictions imposed upon grantees limiting property use, the enforcement of "conditions" would be considered: a. the same as for covenants. b. more stringent than for covenants. c. less stringent than for covenants. d. none of the above. - n Ans✔ b. more stringent than for covenants. Breach of condition - possible loss of property; Breach of covenant - possible money damages. Qs The trust deed (and note) that normally takes priority is the one that is: a. for the greatest amount. b. a construction loan. c. executed/delivered first.
c. Real Estate Commissioner. d. Real Estate Commissioner or Corporation Commissioner. - n Ans✔ d. Real Estate Commissioner or Corporation Commissioner. A license from one of these two is required Qs Which of the following would be considered an offer in a real estate transaction? a. Condition b. Covenant c. Performance d. Tender - n Ans✔ d. Tender Tender is an offer to perform. Qs To divide equally or proportionately to time of use is to: a. progress. b. probate. c. prorate. d. procrastinate. - n Ans✔
c. prorate. Prorate is to divide, assess proportionately. Qs Sheet metal used to protect a building from water seepage is called: a. furring. b. flashing. c. footing. d. facade. - n Ans✔ b. flashing. Furring are strips of wood applied to walls; footing is the bottom of a foundation; facade is the front of a building. Qs If a home were properly insured with fire insurance to indemnify the owner, he could expect to: a. always gain. b. gain, but never lose. c. lose, but definitely not gain. d. neither gain nor lose. - n Ans✔ d. neither gain nor lose.
$150,000 - 20% = 150,000 - 30,000 = $120,000 improvement value. $120,000 ÷ 35 years = $3,428.57 x 10 years = $34,285.71 accrued depreciation. Adjusted Basis (10 yrs later) = $150,000 - $34,286 = $115,714. Qs *Which of the following phrases would best bind all parties to pay their debts? a. Jointly b. Individually c. Individually and severally d. Jointly and severally - n Ans✔ d. Jointly and severally All parties are held responsible collectively or individually for the entire obligation. Qs An owner offered his home to a buyer for $100,000 cash. The buyer paid the owner $ cash to keep the offer open for two weeks. The owner accepted the $100. Ten days later, the owner notified the buyer that he was withdrawing his home from the sale. The next day the buyer tendered $100,000 cash to the owner. Under these conditions: a. the offer to sell was binding. b. seller violated the agreement to hold open the offer to sell, but did not have to sell to the buyer because the buyer had not promised in his original conversation to buy the property. c. seller rescinded, voiding the transaction.
d. although the seller violated the agreement, he effectively prevented a binding contract from forming by withdrawing his property from the market. - n Ans✔ a. the offer to sell was binding. Seller has no option. By accepting the $100 payment, he entered into a binding agreement. Only the buyer has the privilege of deciding "to buy, or not to buy." That is what the $100 option money paid for. Qs A licensed real estate broker desires to work as a salesperson. She should: a. apply to take salesperson's examination. b. inactivate broker license and apply for salesperson's license. c. apply for salesperson's license. d. enter into agreement (written) with employing broker and work as a salesperson. - n Ans✔ d. enter into agreement (written) with employing broker and work as a salesperson. Cannot function in any way as to use his broker license while operating under other broker's license as salesperson, other than acting as a salesperson Qs An appraiser observes wide cracks in the corner of a basement, spreading up two walls. This was most likely caused by: a. weak joists. b. deterioration due to dampness.
c. void, even though original holder had sold the option—however, the purchase day was beyond the required date of sale. d. valid, and the Assignee (Mr. C) would be able to purchase the subject property on May
- n Ans✔ d. valid, and the Assignee (Mr. C) would be able to purchase the subject property on May
Option assignment was legal (without prohibition stated in the original document), and the escrow period commenced within the option period and did not run beyond the prescribed 30-day period. Qs If one person has the authority to act on matters for another, including the right to bind (sign for) on contractual matters, the person with that authority would be known as the: a. power of attorney. b. beneficiary. c. trustee. d. attorney-in-fact. - n Ans✔ d. attorney-in-fact. A step beyond that of agent. Can affix that other person's name to a contract. Signature: "Principal, by Agent Only, His Attorney-in-Fact." Qs The Truth-in-Lending Law would apply to which of the following?
a. First trust deed and junior loans b. Construction loans c. All loan transactions d. None of the above - n Ans✔ a. First trust deed and junior loans Does NOT apply to ALL loans, i.e., construction loans to developers or builders. Qs Characteristics of a particular lender are: prefers short-term loans; prefers interim loans; buyer costs are higher than other lenders; past relationships with borrowers are important. What kind of lender is this? a. Savings bank b. Insurance company c. Private individual d. Commercial bank - n Ans✔ d. Commercial bank Qs A house sold for $120,000 on which a seller was to pay 6% brokerage fee. Other costs were 1% prepayment penalty on existing $90,000 first loan balance, escrow fees of $500, title insurance premium of $400, and 3 points (%) loan discount fee on a new loan of $110,000 (VA). The seller's costs would be what percent of his equity?
Appraisers are licensed and certified to provide a professional opinion of value. Anyone may estimate. Answers "c" and "d" are professional services provided by licensed real estate agents and brokers engaged in the sale of real estate. Qs You have taken an exclusive right to sell listing to assist an owner in selling his home. The owner could lease the property for a maximum of: a. as long as he wishes, with consent of broker. b. not more than 99 years, with or without the broker's consent. c. not beyond the listing period, without the broker's consent. d. the owner cannot lease the property without the consent of the broker, as is clearly spelled out in the listing agreement. - n Ans✔ b. not more than 99 years, with or without the broker's consent. The owner can do as he wishes, with or without the consent of the broker. However, violation of the listing agreement could create a condition whereby the owner was liable to the broker for a full commission. Under no circumstances can the owner lease for a period in excess of the 99 years maximum allowed by law. Qs A real estate syndicate fails to disclose a true statement of the condition of title and all the encumbrances thereon. The penalty for this violation is: a. $5,000 judgment against officers. b. $5,000 fine and 10 years in jail. c. $10,000 fine and 10 years in jail. d. $5,000 fine and 5 years in jail. - n
Ans✔ c. $10,000 fine and 10 years in jail. Qs The primary activities of FNMA in the secondary money market involve: a. FHA loans only. b. VA and FHA loans. c. 2nd loans up to $22,000. d. all types of real estate loans. - n Ans✔ b. VA and FHA loans. The key word is the "primary" activity. FNMA can now deal with conventional loans, but still heavily works with VA and FHA loans. Qs A salesperson, working with buyers having limited cash available for down payment, finds a property listed at $96,000, ca sh to new loan. The buyers want the home. However, the maximum loan available is for 80% of value, requiring 20% cash investment. The buyers say that if the sellers would take back a 2nd note, maybe they could buy it. Sellers do not want to take back a note, per listing information. The salesperson should: a. not write any offer, since it will not be what sellers want. b. call the sellers to discuss their taking back a 2nd note. c. write the offer the buyers want to make and present it to the sellers. d. write an offer for cash to a new loan, and hope the buyers are lucky and obtain a cooperative lender. - n Ans✔
