California Real Estate Salesperson License, Practice Exams

Which describes the standard a broker's representations to buyers must meet?

1. No statement without a reasonable basis, and no half-truths ✓
2. Literal truth of each statement, even if misleading overall
3. Honest belief in the statement, whether or not grounded
4. Accuracy only as to facts that appear in the listing itself

Why: Reference Book chapter 10 states that a broker may make no representation without a reasonable basis for believing it true, may assert no half-truths, and may not assert a series of independent truths which together are misleading. Literal truth and honest belief are therefore not enough.

A buyer authorizes her agent in writing to buy one specific house for $300,000. The agent contracts to buy it for $310,000. What express authority did the agent have to do that?

1. All of it, since the price was within five percent.
2. All of it, since the house was the one she named.
3. None; the express grant covered only that price. ✓
4. All of it, since express grants cover price changes.

Why: DRE Reference Book ch. 10: IF THE PRINCIPAL AUTHORIZES THE AGENT TO ACQUIRE A PARTICULAR SINGLE-FAMILY RESIDENCE FOR THE PRICE OF $100,000, THE AGENT HAS EXPRESS AUTHORITY TO DO PRECISELY THAT AND NOTHING ELSE. THE AGENT WOULD NOT HAVE EXPRESS AUTHORITY TO PURCHASE THE HOUSE FOR $105,000. The same reasoning applies at $300,000.

A licensee deposits a client's funds into the licensee's own general account. Which ground does this engage, and what makes it wrong?

1. Conversion; the money of others has been spent for the licensee's benefit.
2. Commingling; the money of others has been mixed with the licensee's own. ✓
3. Secret profit; the licensee has gained the use of the money without disclosure.
4. Misrepresentation; the client was led to believe the funds were held separately.

Why: Business and Professions Code section 10176(e) makes commingling with the licensee's own money or property the money or other property of OTHERS which is received and held by the licensee a ground for discipline. The wrong is complete on the mixing: nothing need be spent, lost or concealed, and the client may suffer no loss at all. That is what separates commingling from conversion, and it is the distinction most often tested.

Once a sale contract has been made, does a broker's agency to sell the property give him authority to modify the contract?

1. No; an agency to sell does not include modifying the contract. ✓
2. Yes; an agent to sell may adjust any term that helps it close.
3. Yes, as long as the new date falls within thirty days of the old.
4. Yes, if the buyer pays the broker a separate fee for the change.

Why: DRE Reference Book ch. 10: AN AGENCY TO SELL THE PROPERTY DOES NOT CARRY WITH IT THE AUTHORITY TO MODIFY OR CANCEL THE CONTRACT OF SALE AFTER IT HAS BEEN MADE.

A married couple filing jointly sells their main home. Only the wife is on the title, but both have lived there for the past four years. What is their maximum exclusion?

1. Nothing, as both spouses must hold title to the home.
2. $250,000, as the husband has never owned the property.
3. $375,000, as the husband qualifies only for a partial share.
4. $500,000, as only one spouse must meet the ownership test. ✓

Why: 26 U.S.C. 121(b)(2)(A): the limit is $500,000 IF (I) EITHER SPOUSE MEETS THE OWNERSHIP REQUIREMENTS ... (II) BOTH SPOUSES MEET THE USE REQUIREMENTS ... AND (III) NEITHER SPOUSE IS INELIGIBLE because of the two-year rule.

A parcel is referred to informally, by street number or by a name such as "The Norris Ranch". What is the practical difficulty with such a description?

1. The county recorder will reject any document that carries such a description.
2. Such a description is legally ineffective to convey any interest in the land.
3. Title companies will not ordinarily insure title involving such a description. ✓
4. Such a description must be accompanied by a record of survey to be effective.

Why: Reference Book chapter 4 is careful here, and the distinction is worth holding: these methods ARE legal, but title companies will not ordinarily insure title involving such a description. That is a commercial consequence, not an invalidity, and it is why the chapter advises consulting a licensed engineer, surveyor or title company where the correct method is in doubt.

A tenant rents an apartment month to month with no end date. Each month the tenancy renews until one party gives notice. What leasehold estate is this?

1. An estate for years.
2. An estate from period to period. ✓
3. An estate at sufferance.
4. A life estate.

Why: DRE Reference Book ch. 9: AN ESTATE FROM PERIOD TO PERIOD (OR PERIODIC TENANCY) IS ONE WHICH CONTINUES FOR PERIODS OF TIME (TYPICALLY YEAR-TO-YEAR, MONTH-TO-MONTH, OR WEEK-TO-WEEK) ... THE MOST COMMON PERIODIC TENANCY IS THE MONTH-TO-MONTH TENANCY.

A developer of a nonexempt subdivision had a buyer sign a lot contract before giving him the printed property report the federal land-sales law requires. Eighteen months later the buyer wants out. What is his position?

1. He may not revoke, since the seven-day period has long passed.
2. He may revoke, since the right lasts two years from signing. ✓
3. He may revoke only by proving the lot lost value since signing.
4. He may not revoke, as the report duty binds only the salesperson.

Why: 15 U.S.C. 1703(c): where THE PROPERTY REPORT HAS NOT BEEN GIVEN TO THE PURCHASER OR LESSEE IN ADVANCE OF HIS OR HER SIGNING SUCH CONTRACT OR AGREEMENT, SUCH CONTRACT OR AGREEMENT MAY BE REVOKED AT THE OPTION OF THE PURCHASER OR LESSEE WITHIN TWO YEARS FROM THE DATE OF SUCH SIGNING. Eighteen months is within two years; no loss in value need be shown.

During a license examination a candidate keeps a phone in a pocket, switched off and never taken out. Does that count as cheating under California law?

1. No; only actually using a device during the examination counts.
2. No, provided the device stayed switched off for the whole session.
3. Yes, but only where the proctor had announced a ban on devices.
4. Yes; possessing an unauthorized device on the premises counts. ✓

Why: Business and Professions Code 10153.01(a)(7) includes in cheating POSSESSION OR USE AT ANY TIME DURING THE EXAMINATION OR WHILE THE EXAMINEE IS ON THE EXAMINATION PREMISES OF ANY DEVICE, MATERIAL, OR DOCUMENT THAT IS NOT EXPRESSLY AUTHORIZED FOR USE BY EXAMINEES ... INCLUDING, BUT NOT LIMITED TO, NOTES, CRIB SHEETS, TEXTBOOKS, AND ELECTRONIC DEVICES. Possession is enough, and no prior announcement is needed.

How are oil and gas leases treated for acknowledgment and recording?

1. As personal property, and so outside the recording system.
2. As chattels real, recordable only with the lessor's consent.
3. As instruments requiring approval by the State Lands Commission.
4. In like manner, with like effect, as grants of real property. ✓

Why: Civil Code section 1219 provides that oil and gas leases may be acknowledged or proved, certified and recorded IN LIKE MANNER AND WITH LIKE EFFECT AS GRANTS OF REAL PROPERTY, and then adds the qualification the section carries about when constructive notice arises. They are treated as interests in land rather than as contracts about a commodity, which is the point being tested.

What property qualifies for like-kind exchange treatment under section 1031 as it now stands?

1. Real property held for productive use or investment. ✓
2. Any property held for productive use in a trade or business or for investment.
3. Real property held either for investment or as a principal residence.
4. Real or personal property exchanged solely for property of the same class.

Why: 26 USC 1031 is now headed "Exchange of REAL PROPERTY held for productive use or investment" and subsection (a)(1) confines nonrecognition to REAL property exchanged solely for real property of like kind. Personal property was removed from the section, so material describing like-kind exchanges of equipment, vehicles or artwork describes repealed law. A principal residence is neither held for productive use nor for investment and does not qualify.

What must the court determine before ordering payment out of the account?

1. That the judgment debtor has no assets from which the judgment could be satisfied.
2. That the underlying judgment was obtained after a contested trial on the merits.
3. That the claim was filed before any other claim against the same licensee.
4. That the aggrieved party has a valid 10471 cause of action and complied with 10472. ✓

Why: Business and Professions Code section 10473 lets the court order payment ONLY on determining that the aggrieved party HAS A VALID CAUSE OF ACTION WITHIN THE PURVIEW OF SECTION 10471 AND HAS COMPLIED WITH SECTION 10472. The section then arms the commissioner to defend the account, including by RELITIGATING issues determined in the underlying action. Where the underlying judgment went by DEFAULT, stipulation or consent, the applicant bears the burden of proving the cause of action, which is what stops an uncontested judgment becoming an automatic call on the fund.

An optionee holding an unexercised option to buy a ranch wants to borrow by mortgaging his option rights. What is the general rule?

1. He cannot; the option gives him no interest in the land. ✓
2. He may, since an option is itself an estate in the land.
3. He may, but only with the optionor's written consent.
4. He cannot, because option rights may never be assigned.

Why: DRE Reference Book ch. 6: ALTHOUGH OPTION RIGHTS ARE USUALLY ASSIGNABLE UNLESS THERE IS A RESTRICTION TO THE CONTRARY, THEY DO NOT GIVE THE OPTIONEE ANY INTEREST IN THE LAND. FOR THIS REASON, THE OPTIONEE CANNOT MORTGAGE HIS OR HER RIGHTS.

Why should a broker obtain the signatures of all the co-owners on a contract to sell their whole parcel?

1. A buyer cannot compel specific performance as to part only. ✓
2. One co-owner's signature is void unless a spouse also signs.
3. The escrow holder may not open escrow on a partial signing.
4. Unsigned co-owners may later collect a second commission.

Why: DRE Reference Book ch. 6: where there are two owners, IT IS NECESSARY TO GET THE SIGNATURES OF ALL OF THE OWNERS, BECAUSE THE BUYER COULD NOT COMPEL SPECIFIC PERFORMANCE OF THE CONTRACT AS TO ONE-HALF OF THE PROPERTY THAT IT IS CONTEMPLATED THAT THE WHOLE IS TO BE SOLD.

The commissioner offers a Recovery Account claimant a compromise for less than the full claim, and the claimant refuses it. What follows?

1. The decision must be to deny the claim, and the claimant may go to court. ✓
2. The commissioner must then pay the full claim, a compromise having failed.
3. The claim goes to binding arbitration before an administrative law judge.
4. The claim is paid at the offered sum, the offer binding once it is made.

Why: Business and Professions Code 10471.3(b): IF THE CLAIMANT REFUSES TO ACCEPT A SETTLEMENT OF THE CLAIM OFFERED BY THE COMMISSIONER, THE WRITTEN DECISION OF THE COMMISSIONER SHALL BE TO DENY THE CLAIM, and EVIDENCE OF SETTLEMENT OFFERS AND DISCUSSIONS ... SHALL NOT BE COMPETENT EVIDENCE in the claimant's later court application under section 10472.

A restrictive provision in a deed is breached. What relief is available for breach of a covenant, as distinct from breach of a condition?

1. Damages or an injunction, but not forfeiture of the title. ✓
2. Forfeiture of the title, but not damages or an injunction.
3. Damages, an injunction, or forfeiture at the court's election.
4. No relief, unless the covenant expressly states the remedy.

Why: Reference Book chapter 5 separates the remedies precisely: a condition affects the estate and breach may forfeit title, whereas the only remedy for breach of a covenant is an action for damages or an injunction. There is a second asymmetry alongside it – breach of a condition does not subject the breaching party to liability in damages, so each device gives one remedy and withholds the other.

Within what period of receiving a first lien modification application must the servicer acknowledge it?

1. Five business days. ✓
2. Three business days.
3. Ten business days.
4. Thirty days.

Why: Civil Code section 2924.10(a) requires the servicer, when a borrower submits a complete first lien modification application or any document in connection with one, to provide WRITTEN ACKNOWLEDGMENT OF THE RECEIPT OF THE DOCUMENTATION WITHIN FIVE BUSINESS DAYS OF RECEIPT. The initial acknowledgment must describe the modification process with an estimate of when a decision will be made and how long the borrower will have to consider an offer, and must state any deadlines, including those for missing documentation.

What does a recorded HCD form 433A confirm about a manufactured home?

1. That it was built to the HUD Code on or after June 15, 1976.
2. That it is affixed to an approved foundation and is no longer personal property. ✓
3. That it has been inspected and is fit for occupation as a residence.
4. That the space it occupies is owned in fee by the homeowner.

Why: Reference Book chapter 15 says real property status may be verified by the manner of attachment to the site and by what has been recorded in the county, and that a recorded CALIFORNIA DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT (HCD) FORM NUMBER 433A CONFIRMS THAT A MANUFACTURED HOME ON PRIVATE PROPERTY WAS AFFIXED TO AN APPROVED FOUNDATION as certified by a California licensed engineer, AND THAT THE MANUFACTURED HOME IS NO LONGER PERSONAL PROPERTY. The form is about attachment and status, not about construction standards.

Above what balance in the Consumer Recovery Account may the commissioner transfer the surplus into the Real Estate Fund?

1. $200,000.
2. $250,000.
3. $400,000. ✓
4. $500,000.

Why: Business and Professions Code 10470.1(b): IF THE BALANCE REMAINING IN THE CONSUMER RECOVERY ACCOUNT CONTAINS MORE THAN FOUR HUNDRED THOUSAND DOLLARS ($400,000), THE COMMISSIONER MAY AUTHORIZE THE TRANSFER OF ALL OR PART OF THE SURPLUS AMOUNT INTO THE REAL ESTATE FUND. The $200,000 figure is the low-balance trigger in section 10470, a different rule.

A salesperson wants to pay part of her commission to a salesperson at another brokerage who found and referred a buyer to her. How may she pay him?

1. Only through the broker under whom she is currently licensed. ✓
2. Directly, if both of them sign a written referral agreement.
3. Directly, so long as the payment is disclosed to the buyer.
4. Only through escrow, as a disbursement at the close of sale.

Why: Business and Professions Code 10137: IT IS UNLAWFUL FOR ANY LICENSED REAL ESTATE SALESPERSON TO PAY ANY COMPENSATION FOR PERFORMING ANY OF THE ACTS WITHIN THE SCOPE OF THIS CHAPTER TO ANY REAL ESTATE LICENSEE EXCEPT THROUGH THE BROKER UNDER WHOM HE OR SHE IS AT THE TIME LICENSED. A written agreement, disclosure or an escrow disbursement does not take the broker out of the payment chain.

Does consolidating separate legal descriptions into one deed merge the parcels?

1. Yes, consolidation in a single instrument merges them automatically.
2. Not absent the grantor's express written statement in the instrument. ✓
3. Yes, but only where the parcels are contiguous.
4. No, parcels can never be merged by any instrument.

Why: Civil Code section 1093 provides that, ABSENT THE EXPRESS WRITTEN STATEMENT OF THE GRANTOR CONTAINED THEREIN, the consolidation of separate and distinct legal descriptions of real property into a subsequent single deed, mortgage, patent, deed of trust, contract of sale or other instrument DOES NOT OPERATE IN ANY MANNER TO ALTER OR AFFECT THE SEPARATE AND DISTINCT NATURE of the real property so described. Putting two descriptions on one page does not make one parcel of them; the grantor must say so in terms.

Within what period must a trustee's deed on a common interest development unit be recorded?

1. Thirty days after the date of sale. ✓
2. Ten days after the date of sale.
3. Sixty days after the date of sale.
4. Before the trustee disburses the proceeds.

Why: Civil Code section 2924.1(a) requires the transfer following a sale of property in a COMMON INTEREST DEVELOPMENT under a power of sale to be RECORDED WITHIN 30 DAYS AFTER THE DATE OF SALE in the county where the property lies. Subdivision (b) then limits the consequence: FAILURE TO COMPLY WITH THE PROVISIONS OF THIS SECTION SHALL NOT AFFECT THE VALIDITY of the trustee's sale or of a sale in favor of a bona fide purchaser. The duty is real; the sanction is not invalidity.

What is the subject of Commissioner's Regulation 2780?

1. Advertising of subdivided lands by a licensee.
2. Discriminatory conduct as a disciplinary ground. ✓
3. Trust fund handling by a broker holding client money.
4. Continuing education requirements for license renewal.

Why: Regulation 2780 of Title 10 is headed "Discriminatory Conduct as the Basis for Disciplinary Action" and enumerates prohibited discriminatory conduct by a licensee, on grounds including race, color, religion, sex, gender identity, gender expression, sexual orientation, familial status, marital status, disability, genetic information, national origin and source of income. It is the route by which a fair housing violation becomes a licensing matter as well as a civil one.

The buyer and seller of a 1960 house write their purchase contract in Spanish. In what language must the lead disclosure attachment to that contract be?

1. Spanish, the language of the purchase contract. ✓
2. English, the language of the federal regulation.
3. Both English and Spanish, printed side by side.
4. Any language the listing agent decides to use.

Why: 40 CFR 745.113(a): EACH CONTRACT TO SELL TARGET HOUSING SHALL INCLUDE AN ATTACHMENT CONTAINING THE FOLLOWING ELEMENTS, IN THE LANGUAGE OF THE CONTRACT (E.G., ENGLISH, SPANISH). A Spanish contract therefore takes a Spanish attachment.

What distinguishes a general agent from a special agent?

1. A general agent conducts a series of transactions involving continuity of service. ✓
2. A general agent may bind the principal, a special agent may not.
3. A general agent is employed, a special agent is an independent contractor.
4. A general agent acts for a fixed term, a special agent for a single day.

Why: Reference Book chapter 10, following Civil Code sections 2295 and 2297, defines a GENERAL AGENT as one who is AUTHORIZED TO CONDUCT A SERIES OF TRANSACTIONS INVOLVING A CONTINUITY OF SERVICE; general agents tend to be an integral part of a business and DO NOT REQUIRE ADDITIONAL AUTHORIZATION FOR EACH TRANSACTION; a branch manager is the chapter's example. A SPECIAL AGENT is one who conducts A SINGLE TRANSACTION OR SERIES OF TRANSACTIONS NOT INVOLVING CONTINUITY OF SERVICE. The distinction matters for how far the agent can bind the principal and for the course and scope of the agency.

What is the effect on a license of incarceration following a felony conviction?

1. Automatic suspension while the licensee is incarcerated. ✓
2. It is automatically revoked once the conviction is final.
3. It is unaffected until the department completes a hearing.
4. It is suspended only where the felony related to real estate.

Why: Business and Professions Code section 10186.1(a) provides that a license or endorsement SHALL BE SUSPENDED AUTOMATICALLY DURING ANY TIME THAT THE LICENSEE IS INCARCERATED AFTER CONVICTION OF A FELONY, regardless of whether the conviction has been appealed, and requires the department, on receiving the certified copy of the record of conviction, to determine the duration of that suspension and to notify the licensee. Whether the felony was SUBSTANTIALLY RELATED to the qualifications, functions or duties of a licensee is a separate question under subdivision (b), and it governs suspension beyond the incarceration rather than the automatic suspension during it.

A buyer moves in on March 1 under an early possession agreement; escrow closes and the deed records on April 15. From which date does the outer limit for suing a broker over the statutory inspection duty run?

1. April 15, the date on which escrow closed and the deed recorded.
2. March 1, the date of occupancy, being the earliest of the events. ✓
3. The date on which the buyer first discovered the defect at issue.
4. The date on which the broker completed the visual inspection.

Why: Civil Code 2079.4: IN NO EVENT SHALL THE TIME FOR COMMENCEMENT OF LEGAL ACTION FOR BREACH OF DUTY IMPOSED BY THIS ARTICLE EXCEED TWO YEARS FROM THE DATE OF POSSESSION, WHICH MEANS THE DATE OF RECORDATION, THE DATE OF CLOSE OF ESCROW, OR THE DATE OF OCCUPANCY, WHICHEVER OCCURS FIRST. Working: occupancy March 1, close of escrow April 15, recordation April 15; the first is March 1, so the two years run from March 1 and discovery does not extend them.

What must be done before a federal tax lien is valid against a purchaser of real property?

1. The taxpayer must be served with a notice of assessment.
2. A notice of lien must be filed with the county recorder. ✓
3. The lien must be reduced to judgment in the district court.
4. Nothing; the lien attaches on assessment and binds everyone.

Why: Reference Book chapter 16 says an unpaid Internal Revenue Code tax becomes a lien on ALL PROPERTY AND RIGHTS TO PROPERTY of the taxpayer, INCLUDING PROPERTY OR RIGHTS TO PROPERTY ACQUIRED AFTER THE LIEN ARISES, but that it IS NOT VALID AGAINST PURCHASERS, HOLDERS OF SECURITY INTERESTS ... AND JUDGMENT LIEN CREDITORS UNTIL A NOTICE OF LIEN HAS BEEN FILED IN THE PROPER PLACE, which for real property is WITH THE COUNTY RECORDER. Even a filed notice does not defeat the classes of super-priority creditor the Internal Revenue Code separately protects.

A broker collects payments on first-lien real property loans for the Federal National Mortgage Association. Where may the broker keep the funds received in trust?

1. Only in a bank or recognized depository in California.
2. Only in an account held in the name of the investor itself.
3. In a federally insured depository, even one outside California. ✓
4. In any depository the broker selects, whether insured or not.

Why: Business and Professions Code 10145(a)(4): a broker COLLECTING PAYMENTS OR PERFORMING SERVICES FOR INVESTORS OR NOTE OWNERS IN CONNECTION WITH LOANS SECURED BY A FIRST LIEN ON REAL PROPERTY MAY DEPOSIT FUNDS RECEIVED IN TRUST IN AN OUT-OF-STATE DEPOSITORY INSTITUTION INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION where the investor is one listed, and THE FEDERAL NATIONAL MORTGAGE ASSOCIATION heads the list. Outside that case, 10145(a)(1) requires A BANK OR RECOGNIZED DEPOSITORY IN THIS STATE.

What do the keysafe and sign clauses authorize?

1. Placing a key repository and a sign on the property. ✓
2. Entering the property at any time without the seller's notice.
3. Advertising the property on any medium the broker selects.
4. Admitting prospective buyers unaccompanied by a licensee.

Why: Reference Book chapter 20 treats these as two separate authorizations in the listing form: the KEYSAFE/LOCKBOX clause AUTHORIZES THE AGENT TO PLACE A KEY REPOSITORY ON THE LISTED PROPERTY, and the SIGN clause AUTHORIZES PLACEMENT OF BROKER'S "FOR SALE/SOLD" SIGN ON THE PROPERTY. Each is an authority the owner gives; neither is implied by the listing.

Land is worth $90,000 as if vacant. The improvements have a replacement cost new of $360,000, an effective age of 12 years and a total economic life of 60 years. What value does the cost approach indicate, using the age-life method?

1. $360,000
2. $378,000 ✓
3. $450,000
4. $468,000

Why: Reference Book chapter 15's cost approach: value the land as if vacant, estimate cost new of the improvements, deduct accrued depreciation, and add the land. Twelve of 60 years is 20%, so depreciation is $72,000, the improvements are worth $288,000, and adding the $90,000 land gives $378,000. Land is not depreciated, which is why $360,000 is wrong.

A tenant built a walk-in cooler whose walls were framed into the building's own structure. Why may the tenant be unable to remove it?

1. It was attached with bolts rather than glue
2. It was bought on credit from a supplier
3. The lease does not mention trade fixtures
4. It has become an integral part of the premises ✓

Why: Reference Book chapter 4 allows a tenant to remove trade and domestic fixtures, but says the exception does not apply if the thing has, by the manner in which it is affixed, become an integral part of the premises. Bolting, financing and a silent lease do not defeat the right.

A tenant with a disability will install grab bars at his own expense and agrees to restore the bathroom when he leaves. The landlord wants assurance that restoration will be paid for. What may the landlord do?

1. Double the security deposit usually required of tenants.
2. Refuse the change unless the tenant signs a longer lease.
3. Charge a nonrefundable fee equal to the restoration cost.
4. Negotiate a restoration escrow, with interest to the tenant. ✓

Why: 24 CFR 100.203(a): THE LANDLORD MAY NOT INCREASE FOR HANDICAPPED PERSONS ANY CUSTOMARILY REQUIRED SECURITY DEPOSIT. HOWEVER ... THE LANDLORD MAY NEGOTIATE AS PART OF SUCH A RESTORATION AGREEMENT A PROVISION REQUIRING THAT THE TENANT PAY INTO AN INTEREST BEARING ESCROW ACCOUNT ... A REASONABLE AMOUNT OF MONEY NOT TO EXCEED THE COST OF THE RESTORATIONS. THE INTEREST IN ANY SUCH ACCOUNT SHALL ACCRUE TO THE BENEFIT OF THE TENANT.

What must an equity purchase contract contain?

1. The entire agreement, and the purchaser's real estate license number.
2. The terms of payment alone, other matters being for the escrow.
3. The entire agreement, and an appraisal of the residence in foreclosure.
4. The entire agreement, with the purchaser's contact details. ✓

Why: Civil Code section 1695.3 requires every contract to CONTAIN THE ENTIRE AGREEMENT OF THE PARTIES and to include, among other terms, THE NAME, BUSINESS ADDRESS, AND THE TELEPHONE NUMBER OF THE EQUITY PURCHASER (subdivision (a)); THE ADDRESS OF THE RESIDENCE IN FORECLOSURE (b); THE TOTAL CONSIDERATION TO BE GIVEN BY THE EQUITY PURCHASER (c); A COMPLETE DESCRIPTION OF THE TERMS OF PAYMENT OR OTHER CONSIDERATION, including any services the purchaser represents they will perform (d); and THE TIME AT WHICH POSSESSION IS TO BE TRANSFERRED TO THE EQUITY PURCHASER (e). The section does not call for the purchaser's real estate license number or an appraisal, and the terms of payment alone are not enough.

Where a trade association's code of ethics and the law conflict, which governs a licensee's conduct?

1. The code, since it sets the higher standard.
2. Whichever the local association board picks.
3. Whichever rule the client prefers in writing.
4. The obligations of the law take precedence. ✓

Why: DRE Reference Book ch. 19: codes of ethics establish OBLIGATIONS THAT MAY BE HIGHER THAN THOSE MANDATED BY LAW. IN ANY INSTANCE WHERE THE CODE OF ETHICS AND THE LAW CONFLICT, THE OBLIGATIONS OF THE LAW TAKE PRECEDENCE.

A seller of a 1958 house had a lead risk assessment done years ago. Her copy is lost, but the firm that did the work will send her one on request. Must she give the buyer the report?

1. No; she must provide only reports now in her own possession.
2. No; she need only tell the buyer that a report once existed.
3. Yes, but only if the buyer pays the firm's charge for a copy.
4. Yes; a report she can reasonably obtain is available to her. ✓

Why: 40 CFR 745.107(a)(4): THE SELLER OR LESSOR SHALL PROVIDE THE PURCHASER OR LESSEE WITH ANY RECORDS OR REPORTS AVAILABLE TO THE SELLER OR LESSOR PERTAINING TO LEAD-BASED PAINT AND/OR LEAD-BASED PAINT HAZARDS; 40 CFR 745.103: AVAILABLE MEANS IN THE POSSESSION OF OR REASONABLY OBTAINABLE BY THE SELLER OR LESSOR AT THE TIME OF THE DISCLOSURE. A report the firm will send on request is reasonably obtainable, so she must get it and provide it.

Under the principle of supply and demand, how does price move with supply?

1. Directly, and in exact proportion to the supply.
2. Inversely, and in exact proportion to supply.
3. Not at all, once demand is known.
4. Inversely, but not necessarily proportionately. ✓

Why: Reference Book chapter 15 states that price "varies directly, but not necessarily proportionately, with demand, and inversely, but not necessarily proportionately, with supply." Increasing supply tends to reduce price, but the principle does not claim an exact proportion.

A borrower's conventional loan with PMI has been paid down to 80% of the home's original value. She is current and has a good payment history. What does she need to do to cancel the PMI now?

1. Nothing; PMI ends by itself as soon as the balance reaches 80% of value
2. Ask the servicer in writing and meet the holder's value and lien conditions ✓
3. Wait, as PMI can end only when it terminates automatically at the midpoint
4. Refinance the loan, since PMI stays in force for the life of the mortgage

Why: Under 12 U.S.C. 4902(a) PMI is canceled on the cancellation date, when the balance reaches 80% of original value, if the borrower submits a written request, has a good payment history, is current, and meets any holder requirement for evidence that the value has not declined and that there is no subordinate lien. Automatic termination comes later, at 78%.

Kim and Lee own a house as joint tenants. Kim alone mortgages her interest, then dies before the loan is repaid or foreclosed. What does Lee hold?

1. The whole title, still subject to Kim's mortgage.
2. The whole title, free of the mortgage Kim signed. ✓
3. Half, as a tenant in common with Kim's lender.
4. The whole title, once Lee pays off Kim's loan.

Why: DRE Reference Book ch. 5: SHOULD THE BORROWER/TRUSTOR/MORTGAGOR DIE BEFORE THE MORTGAGE IS PAID OFF OR FORECLOSED, THE SURVIVING JOINT TENANT GETS TITLE FREE AND CLEAR OF THE MORTGAGE EXECUTED BY THE DECEASED JOINT TENANT. That is why most lenders hesitate to lend on one joint tenant's interest.

A buyer borrows $275,000 to buy a $300,000 home and pays 1.75 discount points. Each point is 1% of the loan amount. What do the points cost?

1. $481.25
2. $4,812.50 ✓
3. $5,250
4. $48,125

Why: Reference Book chapter 12 treats points as loan charges, and here each point is 1% of the LOAN: $275,000 x 0.0175 = $4,812.50. Figuring the points on the $300,000 price gives $5,250.

A title company offers a broker $100 for each customer the broker refers to it. What is the broker's exposure for accepting?

1. Suspension or revocation of the license. ✓
2. None, if the customer is told of the fee.
3. None; title insurers are outside the rule.
4. A fine alone, with no effect on licensing.

Why: Business and Professions Code 10177.4(a): THE COMMISSIONER MAY, AFTER HEARING ..., SUSPEND OR REVOKE THE LICENSE OF A REAL ESTATE LICENSEE WHO CLAIMS, DEMANDS, OR RECEIVES A COMMISSION, FEE, OR OTHER CONSIDERATION, AS COMPENSATION OR INDUCEMENT, FOR REFERRAL OF CUSTOMERS TO ANY ESCROW AGENT, STRUCTURAL PEST CONTROL FIRM, HOME PROTECTION COMPANY, TITLE INSURER, CONTROLLED ESCROW COMPANY, OR UNDERWRITTEN TITLE COMPANY. The section has no disclosure exception, and 10177.4(c) keeps any disclosure duty in place besides.

A salesperson changes the broker they are affiliated with. Who must notify the department, and of what?

1. The salesperson alone, of the change, within thirty days of it taking effect.
2. The responsible broker, of the affiliation, as the commissioner specifies. ✓
3. The former broker alone, of the termination of the affiliation.
4. Nobody, the department learning of it on the next renewal.

Why: Business and Professions Code section 10161.8(a) requires the Commissioner to specify the manner in which a RESPONSIBLE BROKER gives notice of an AFFILIATION with a licensee, and the manner in which a licensee gives notice of a change of address or affiliation. Subdivision (b) then addresses what happens whenever a responsible broker retains a salesperson. The duty is on the broker as well as the licensee, which is the half most often forgotten.

A buyer's agent receives the seller's written disclosure that the house had foundation repairs. Beyond passing it on, what does the agent owe the buyer?

1. Nothing more; disclosing it fully discharges the duty.
2. Only to tell the seller she has read the disclosure.
3. To explain its significance and counsel her about it. ✓
4. To set the price cut the buyer should demand for it.

Why: DRE Reference Book ch. 10: THE AGENT OF THE PRINCIPAL TO WHOM THE DISCLOSURES ARE BEING MADE OWES FIDUCIARY DUTIES TO THAT PRINCIPAL WHICH INCLUDE 'EXPLAINING' THE SIGNIFICANCE AND CONSEQUENCES OF THAT WHICH HAS BEEN DISCLOSED ... AND THE AGENT IS OBLIGATED TO 'COUNSEL' THE PRINCIPAL, which INCLUDES CONDUCTING ANY REQUIRED INQUIRY OR RECOMMENDING THAT AN INQUIRY BE UNDERTAKEN.

Courts have sometimes given what name to a seller's or broker's nondisclosure of known latent defects that the buyer could not discover?

1. Negative fraud ✓
2. Puffing
3. Mutual mistake
4. Constructive eviction

Why: Reference Book chapter 10 states that such non-disclosure has sometimes been referred to by the courts as negative fraud. Puffing is sales talk or opinion, mutual mistake is an error shared by both parties, and constructive eviction is a landlord-tenant doctrine.

A client wants to defer capital gains tax by rolling a sale into a REIT. What is the position?

1. A REIT investment cannot be used to defer gain under the like-kind rules. ✓
2. A REIT investment qualifies as like-kind property for the purpose.
3. A REIT investment defers the gain only where the REIT is an equity trust.
4. A REIT investment defers the gain until the shares are sold.

Why: Reference Book chapter 14 lists among the disadvantages of a REIT that AN INVESTMENT IN A REIT CAN NOT BE USED TO DEFER CAPITAL GAINS TAX AS MAY BE PERMITTED BY THE IRS "SECTION 1031 LIKE-KIND EXCHANGE" RULES, and adds that A REIT CAN NOT PASS TAX LOSSES THROUGH TO ITS INVESTORS as may be possible in certain other real estate investments. The shares are an interest in an entity, not an interest in real property, which is what puts them outside section 1031.

In the township and section system, what is the difference between base lines and meridians?

1. Base lines run vertically and meridians run horizontally.
2. Base lines mark townships and meridians mark correction lines.
3. Base lines mark sections and meridians mark quarter sections.
4. Base lines run horizontally and meridians run vertically. ✓

Why: Chapter 4 of the Reference Book begins the system with base lines, which are horizontal, and meridians, which are vertical. Movement is then described as townships north or south from a base line and ranges east or west from a meridian. Correction lines are a separate feature altogether – guide meridians and standard parallels run every 24 miles to correct for the curvature of the earth.

A broker's authority is limited to producing a ready, willing and able buyer. May the broker accept a deposit from the buyer?

1. Yes; authority to negotiate carries authority to receive the deposit.
2. Yes, provided the deposit goes into the broker's trust account.
3. Not at all; only escrow may receive a deposit.
4. Not for the seller; doing so makes them the buyer's agent. ✓

Why: Reference Book chapter 10 states the general rule: where a broker's authority is limited to producing a buyer on the principal's terms, THE BROKER HAS NO AUTHORITY TO ACCEPT A DEPOSIT FROM THE BUYER, and even express authority to negotiate a sale DOES NOT GIVE HIM OR HER IMPLIED OR OSTENSIBLE AUTHORITY TO COLLECT THE PURCHASE PRICE. when an agent does so, THE AGENT IS ACTING AS THE AGENT FOR THE BUYER AND NOT THE SELLER, so a misappropriation falls on the buyer. In practice VIRTUALLY ALL LISTING AGREEMENT FORMS give the express authority, and it extends to the seller's subagents but not to a broker acting only for the buyer.

A private owner of two single-family houses sells one without an agent and refuses an offer on a prohibited ground. What is the position under the federal Act?

1. Section 3604 does not apply at all, the owner being within the exemption.
2. Section 3604 applies in full, there being no exemption for private owners.
3. Section 3604 largely does not apply, but the advertising provision still does. ✓
4. Section 3604 applies only if the house was advertised in a newspaper.

Why: 42 USC 3603(b) exempts from section 3604 a single-family house sold or rented by a private individual owner who owns no more than three such houses, subject to further conditions on frequency of sale and on not being in the business. But the exemption is expressly stated to apply to section 3604 OTHER THAN SUBSECTION (c) – the advertising provision. So discriminatory ADVERTISING is never exempt, even for an owner otherwise within the exemption. California law may also apply independently.

Which of these may a seller do with pro rata payments received for insurance and taxes under a land contract?

1. Disburse them for another purpose whenever the seller decides, with no other consent needed.
2. Retain them as additional consideration for the contract once the seller gives the payor notice.
3. Apply them to the buyer's arrears of installments, without the encumbrance holder's consent.
4. Disburse them for another purpose with the consent of the payor and of any encumbrance holder. ✓

Why: Civil Code section 2985.4 requires a seller who receives pro rata payments for insurance and taxes to HOLD THESE AMOUNTS IN TRUST FOR THE PURPOSE DESIGNATED, and provides that they SHALL NOT BE DISBURSED FOR ANY OTHER PURPOSE WITHOUT THE CONSENT OF THE PAYOR AND ANY PERSON OR CORPORATION HOLDING AN ENCUMBRANCE ON THE PROPERTY. Both consents are needed; any other use is a breach of the trust.

After the Recovery Account pays a judgment creditor, what becomes of the creditor's rights in the judgment?

1. The creditor keeps them and may still collect the full judgment from the licensee.
2. The commissioner is subrogated to them, and the creditor assigns the judgment. ✓
3. They are extinguished, the payment satisfying the judgment in full by law.
4. They pass to the licensee's broker, who becomes liable to repay the account.

Why: Business and Professions Code 10479: THE COMMISSIONER SHALL BE SUBROGATED TO ALL OF THE RIGHTS OF THE JUDGMENT CREDITOR AND THE JUDGMENT CREDITOR SHALL ASSIGN ALL OF HIS OR HER RIGHT, TITLE, AND INTEREST IN THE JUDGMENT TO THE COMMISSIONER, and anything recovered goes back into the Consumer Recovery Account. The judgment is not extinguished; it changes hands.

What is the effect of the equal housing opportunity clause in a listing?

1. It discharges the broker from liability for discrimination.
2. It binds the seller to accept any conforming offer received.
3. It satisfies the Commissioner's advertising regulations.
4. It is prima facie evidence of nondiscriminatory intent. ✓

Why: Reference Book chapter 20 says of the EQUAL HOUSING OPPORTUNITY CLAUSE that it IS PRIMA FACIE EVIDENCE OF NONDISCRIMINATORY INTENT, and adds the limit in the next sentence: THE PROOF OF COMPLIANCE IS, OF COURSE, THAT THE PARTIES ACT IN THE SPIRIT OF THE DECLARATION. A clause is evidence of intent; conduct is proof of compliance.

An officer of a corporation negotiates a lease of property the corporation owns, and is paid a special fee for doing so. Does the exemption in the Real Estate Law apply?

1. Yes; the exemption turns on the property being the corporation's, whatever the pay.
2. Yes, provided the fee is approved by the corporation's board before it is paid.
3. No; the exemption is lost where the officer expects special compensation. ✓
4. No; a corporate officer is never exempt when a lease rather than a sale is involved.

Why: Business and Professions Code section 10133(a)(1) exempts a regular officer of a corporation or a general partner of a partnership acting as to property the entity owns, leases, or proposes to purchase or lease – but only IF THE ACTS ARE NOT PERFORMED BY THE OFFICER OR PARTNER IN EXPECTATION OF SPECIAL COMPENSATION. The condition is the point of the exemption: it covers people doing their own organization's business, not people quietly brokering for a fee. Leases are within the exemption; the special fee is what takes this outside it.

Which of these is NOT among the adaptive design features the Act requires in covered multifamily dwellings?

1. An accessible route into and through the dwelling.
2. A lift serving every floor of the block. ✓
3. Reinforcements in bathroom walls for later grab bars.
4. Light switches and thermostats in accessible locations.

Why: 42 USC 3604(f)(3)(C)(iii) requires premises within covered multifamily dwellings to contain four FEATURES OF ADAPTIVE DESIGN: AN ACCESSIBLE ROUTE INTO AND THROUGH THE DWELLING; LIGHT SWITCHES, ELECTRICAL OUTLETS, THERMOSTATS AND OTHER ENVIRONMENTAL CONTROLS IN ACCESSIBLE LOCATIONS; REINFORCEMENTS IN BATHROOM WALLS TO ALLOW LATER INSTALLATION OF GRAB BARS; and USABLE KITCHENS AND BATHROOMS such that a person in a wheelchair can maneuver about the space. The earlier clauses require accessible common areas and doors wide enough for passage; a lift is not among the requirements.

A developer wants to cluster homes on part of a tract and leave the rest as shared open space, which the standard lot-size rules would not allow. Which zoning approach fits?

1. A use variance for each lot.
2. A planned unit development. ✓
3. An accessory use permit.
4. A nonconforming use.

Why: DRE Reference Book ch. 27: a PLANNED UNIT DEVELOPMENT is A PLANNING AND ZONING TERM DESCRIBING LAND NOT SUBJECT TO CONVENTIONAL ZONING TO PERMIT CLUSTERING OF RESIDENCES OR OTHER CHARACTERISTICS OF THE PROJECT WHICH DIFFER FROM NORMAL ZONING. Ch. 18 adds that it applies zoning in a more flexible manner, through approval of a master plan for the area.

An appraiser estimating the cost new of a house separates its direct costs from its indirect costs. Which of these belongs with the indirect costs?

1. Lumber and labor for framing the walls and the roof.
2. Building permits and interest on the construction loan. ✓
3. Grading the site and bringing utility lines onto it.
4. Landscaping the yard and paving the driveway and walk.

Why: DRE Reference Book ch. 15, Cost Approach: direct expenses are those OF CONSTRUCTION SUCH AS LABOR, MATERIALS AND EQUIPMENT AND ENGINEERING FOR THE BUILDING, SITE PREPARATION, STREET AND UTILITY WORK, LANDSCAPING, ETC.; INDIRECT EXPENSES SUCH AS LEGAL, TITLE, APPRAISAL AND FEASIBILITY STUDY FEES, LICENSES, PERMITS, AD VALOREM TAXES DURING CONSTRUCTION ... FINANCING CHARGES, ACCOUNTING, ETC. Permits and construction loan interest are soft costs; the other choices are all hard costs.

An inspection finds dry rot and termite damage in a house's framing. Which category of depreciation does this represent?

1. Outmoded design.
2. Economic obsolescence.
3. Physical deterioration. ✓
4. Superadequacy.

Why: Reference Book chapter 15 lists physical deterioration as resulting from wear and tear, negligent care, "damage by dry rot, termites, etc.," or severe changes in temperature. Functional obsolescence comes from design and utility defects, and economic (external) obsolescence from influences outside the property.

How is a component part of a property valued, under the principle of contribution?

1. At the cost of installing it, less accrued depreciation.
2. At its replacement cost as at the date of the appraisal.
3. In proportion to its contribution to the value of the whole. ✓
4. In proportion to the floor area it occupies within the whole.

Why: Reference Book chapter 15 states the principle of contribution as valuing a component part IN PROPORTION TO ITS CONTRIBUTION TO THE VALUE OF THE WHOLE – not at what it cost and not at what it would cost to replace. The chapter's superadequacy example makes the practical point: a pool costing $60,000 to build where the market will pay $10,000 for it has contributed a fraction of its cost, and that gap is functional obsolescence.

What are the two periods a taxpayer must observe in a deferred like-kind exchange?

1. 30 days to identify, and 180 days to complete.
2. 45 days to identify, and 180 days to complete. ✓
3. 45 days to identify, and 90 days to complete.
4. 60 days to identify, and 180 days to complete.

Why: 26 USC 1031 fixes both: the replacement property must be IDENTIFIED within 45 DAYS of the transfer of the relinquished property, and RECEIVED within 180 DAYS of that transfer or by the due date of the return for the year, whichever is earlier. The 180 days is not additional to the 45 – both run from the same starting point, which is the detail that most often trips a candidate.

What authority does an exclusive right to sell listing give the broker?

1. The right to sell the property and to convey title on the owner's behalf.
2. The right to accept an offer conforming to the listing terms.
3. The right to solicit offers and to be paid however the property sells. ✓
4. The right to encumber the property to secure the commission.

Why: Reference Book chapter 10 is explicit that while an exclusive right to sell GRANTS TO THE REAL ESTATE BROKER THE RIGHT TO RECEIVE A COMMISSION REGARDLESS OF WHETHER THE PRINCIPAL, THE LISTING BROKER OR ANY OTHER BROKER SELLS THE PROPERTY, SUCH A LISTING AGREEMENT DOES NOT CONVEY ANY POWER TO THE LISTING BROKER TO SELL THE PROPERTY. The authority granted is THE RIGHT TO SOLICIT OFFERS FROM PROSPECTIVE BUYERS (OFFERORS) AND THE RIGHT TO BE COMPENSATED however the property is sold.

Which approach is most often applicable to a manufactured home on a foundation on its own lot?

1. The cost approach.
2. The income approach.
3. The sales comparison approach. ✓
4. The gross rent multiplier method.

Why: Reference Book chapter 15 says the valuation approaches outlined for other residential properties apply to manufactured and mobile homes attached to foundations on individual lots, and that THE SALES COMPARISON APPROACH IS OFTEN THE MOST APPLICABLE VALUATION APPROACH for these properties. Where the home sits on a fee-owned space, the chapter adds, the exercise resembles appraising a residential planned unit development, taking in association services and fees and the CC&Rs governing the park.

An FHA borrower's monthly payment is $1,850, and the mortgage provides the largest late charge FHA allows. The payment is 20 days overdue. What is the most the lender may charge?

1. $37.00
2. $74.00 ✓
3. $92.50
4. $111.00

Why: 24 CFR 203.25: THE MORTGAGE MAY PROVIDE FOR THE COLLECTION BY THE MORTGAGEE OF A LATE CHARGE, NOT TO EXCEED FOUR PER CENT OF THE AMOUNT OF EACH PAYMENT MORE THAN 15 DAYS IN ARREARS. $1,850 x 4% = $74.00.

A buyer is financing a home that the lender determines lies in a special flood hazard area. When must the buyer be told of the flood hazard?

1. Orally, at any time before the loan documents are finally signed
2. In writing, within 30 days after the loan has closed and funded
3. In writing, reasonably in advance of signing the purchase agreement ✓
4. Only if the buyer first asks whether flood insurance is required

Why: 42 U.S.C. 4104a(a)(1) requires the lender, as a condition of making the loan, to notify the purchaser (or obtain satisfactory assurance that the seller has) of the special flood hazards in writing, a reasonable period in advance of the signing of the purchase agreement, lease or other documents, and to keep a record of receipt. The notice includes a hazard warning, the purchase requirements and the availability of private coverage (4104a(a)(3)).

What is a buyer entitled to on a sale, absent a specific exclusion?

1. All fixtures and all personal property left on the property.
2. Only the items the contract lists, fixtures included.
3. All fixtures, and only the personal property listed in the contract. ✓
4. All fixtures, and any personal property the seller does not remove.

Why: Reference Book chapter 20 states the default: SUBJECT TO SPECIFIC EXCLUSIONS MADE PART OF THE CONTRACT, THE BUYER IS ENTITLED TO ALL FIXTURES - items attached permanently, by cement, plaster, bolts, screws or nails, to what is permanent - the chapter's examples being electrical, lighting, plumbing and heating fixtures, fireplace inserts, solar systems, built-in appliances, window coverings, air conditioners and in-ground landscaping. THE BUYER IS ENTITLED TO ONLY THAT PERSONAL PROPERTY LISTED IN THE CONTRACT, large potted plants outside being the chapter's example of what is not a fixture.

What does the term ad valorem mean when applied to property taxes?

1. The tax is a flat charge on each separate parcel.
2. The tax is based on the owner's income.
3. The tax is based on the property's value. ✓
4. The tax is paid only when the land is sold.

Why: DRE Reference Book ch. 27: AD VALOREM is A LATIN PHRASE MEANING 'ACCORDING TO VALUE.' USUALLY USED IN CONNECTION WITH REAL ESTATE TAXATION.

A manufacturer pays a hauler to take its drums of hazardous waste to a landfill owned by someone else. Years later the landfill leaks. Can the manufacturer be liable for response costs?

1. No, liability rests only on the landfill's owner
2. No, since it paid a licensed hauler to handle the waste
3. Yes, as a person who arranged for disposal of its waste ✓
4. Only if it still owns an interest in the landfill site

Why: 42 U.S.C. 9607(a)(3) makes liable any person who by contract, agreement or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal, of hazardous substances it owned or possessed, at a facility owned or operated by another. Owners are one liable class among several, and hiring a transporter does not shift the arranger's liability.

Who counts as a "licensed person" for the higher-priced mortgage loan division?

1. A real estate broker licensed under the Real Estate Law, and no one else.
2. A real estate broker, a finance lender, or a mortgage lender. ✓
3. Any person holding a mortgage loan originator endorsement.
4. Any depository institution making loans secured by real property.

Why: Financial Code section 4995(b) defines a licensed person as A REAL ESTATE BROKER licensed under the Real Estate Law, A FINANCE LENDER OR BROKER licensed under the California Financing Law commencing at section 22000, A RESIDENTIAL MORTGAGE LENDER licensed under the California Residential Mortgage Lending Act commencing at section 50000, and the commercial and industrial banks and other institutions the subdivision goes on to name. The same activity may be carried on under any of several licenses, and the division reaches all of them.

A subdivision falls below the threshold at which a final map is required. What map is required instead?

1. A parcel map, unless its preparation is waived by local ordinance. ✓
2. No map at all, the Subdivision Map Act not applying.
3. A tentative map only, filed with the county recorder.
4. A record of survey map prepared and certified by a licensed land surveyor.

Why: Government Code section 66428(a) requires a PARCEL MAP for subdivisions as to which a final or parcel map is not otherwise required, unless preparation of the parcel map is WAIVED by local ordinance as the chapter provides. The same subdivision permits local ordinances to require a tentative map where a parcel map is required, so the lighter procedure is a floor set by the state that local government may build upon.

What does the federal Act say about advertisements for the sale or rental of a dwelling?

1. None may indicate a preference, limitation or discrimination on a protected ground. ✓
2. None may state the protected characteristics of the present occupants.
3. None may be published without the licensee's name and license number.
4. None may describe a neighborhood by the composition of its residents.

Why: 42 USC 3604(c) makes it unlawful TO MAKE, PRINT OR PUBLISH, OR CAUSE TO BE MADE, PRINTED OR PUBLISHED, ANY NOTICE, STATEMENT OR ADVERTISEMENT with respect to the sale or rental of a dwelling THAT INDICATES ANY PREFERENCE, LIMITATION OR DISCRIMINATION based on race, color, religion, sex, HANDICAP, familial status or national origin, OR AN INTENTION TO MAKE ANY SUCH PREFERENCE. The test is what the words indicate, so no discriminatory act beyond publishing need be proved.

What is the basic commodity a real estate syndicator has to offer investors?

1. Access to institutional finance.
2. The pooled capital of the investors.
3. Professional management. ✓
4. The property the syndicate acquires.

Why: Reference Book chapter 14 says syndication offers PROFESSIONAL MANAGEMENT WHICH MIGHT NOT OTHERWISE BE ECONOMICALLY FEASIBLE FOR THE SMALL INVESTOR, and that professional management, THE BASIC COMMODITY THAT THE SYNDICATOR HAS TO OFFER, IS CRUCIAL TO SUCCESSFUL SYNDICATION. The capital comes from the investors; what the sponsor contributes is the management of it.

A manager asks families with children for a larger security deposit than other tenants pay. Is this lawful under the federal fair housing rules?

1. Yes, if the larger deposit is refunded when the family moves out.
2. Yes, since children may cause more wear than adult tenants.
3. No, but only if the building has four or more rental units.
4. No; different deposit terms because of familial status are barred. ✓

Why: 24 CFR 100.65(b)(1): prohibited actions include USING DIFFERENT PROVISIONS IN LEASES ... SUCH AS THOSE RELATING TO RENTAL CHARGES, SECURITY DEPOSITS AND THE TERMS OF A LEASE ... BECAUSE OF ... FAMILIAL STATUS.

What does the Civil Code accept as good consideration?

1. A benefit to the promisor, or a prejudice suffered by the other. ✓
2. A payment of money, or a promise to pay money, and nothing else.
3. Anything the parties agree is of equal value to what is promised.
4. A benefit conferred on the promisor that the promisor was already entitled to.

Why: Civil Code section 1605 recognizes two forms: any BENEFIT conferred or agreed to be conferred upon the promisor, TO WHICH THE PROMISOR IS NOT LAWFULLY ENTITLED, or any PREJUDICE suffered or agreed to be suffered by the other person, other than such as they are already lawfully bound to suffer. The qualifying words are the whole of it: doing what you are already obliged to do is not consideration, which is the benefit the promisor was already entitled to.

For what does the Civil Code say an agent represents the principal?

1. All purposes within the scope of the agent's actual or ostensible authority. ✓
2. All purposes expressly stated in the instrument creating the agency.
3. All purposes the principal has ratified after the event in writing.
4. All purposes customary in the trade in which the agency is exercised.

Why: Civil Code section 2330 states both the reach and the consequence: an agent represents the principal for all purposes within the scope of actual OR OSTENSIBLE authority, and all the rights and liabilities that would accrue to the agent from transactions within that limit accrue instead to the principal. Ostensible authority counts equally with actual, which is what makes the scope wider than the instrument and is the reason a principal must be careful what they let others believe.

A buyer's offer states that it expires at 5 p.m. Friday. The seller signs an acceptance and delivers it on Saturday morning, and the buyer has not responded. Has a contract been formed?

1. Yes; a contract formed when the seller signed the acceptance.
2. No; the offer lapsed, so the late acceptance is only a new offer. ✓
3. Yes, since the delay was shorter than a single business day.
4. Yes, unless the buyer objects in writing within a reasonable time.

Why: DRE Reference Book ch. 6: THE OFFER IS REVOKED IF THE OFFEREE FAILS TO ACCEPT IT WITHIN A TIME PERIOD PRESCRIBED IN THE OFFER ... IF THE ACCEPTANCE IS TOO LATE OR OTHERWISE DEFECTIVE, THE PERSON MAKING THE OFFER CANNOT WAIVE THE DELAY OR DEFECT AND TREAT THE RELATIONSHIP AS A BINDING CONTRACT. Under general contract law the late acceptance works only as a new offer (in effect a counteroffer), which the buyer is free to accept or reject.

On what theory other than contract may a broker recover a commission?

1. Intentional interference with prospective economic advantage. ✓
2. Unjust enrichment of the seller at the broker's expense.
3. Breach of the implied covenant of good faith and fair dealing.
4. Promissory estoppel arising from the seller's encouragement.

Why: Reference Book chapter 10 says a broker may recover UNDER A TORT RATHER THAN A CONTRACTUAL THEORY by proving the owner's actions CONSTITUTED INTENTIONAL INTERFERENCE WITH THE PROSPECTIVE ECONOMIC ADVANTAGE OF THE BROKER. Its case is a broker who worked on the strength of a sign reading "FOR SALE - CONTACT YOUR LOCAL BROKER", told the owner in writing he was the procuring cause, and was cut out: the court denied a contractual claim FOR LACK OF ANY WRITTEN AGREEMENT TO PAY THE COMMISSION SIGNED BY THE OWNER but upheld the right to sue in tort.

May a licensee pay money instead of serving a suspension?

1. Yes; the licensee may elect to pay the prescribed penalty instead of any suspension.
2. No; a suspension once ordered must be served.
3. No, unless the suspension followed a stipulation rather than a hearing.
4. Yes; the commissioner may stay it on payment and on no further cause arising. ✓

Why: Business and Professions Code section 10175.2(a) lets the commissioner, where satisfied that THE PUBLIC INTEREST AND PUBLIC WELFARE WILL BE ADEQUATELY SERVED, and ON THE PETITION OF THE LICENSEE, stay execution of all or part of a suspension on two conditions: that the licensee PAY A MONETARY PENALTY to the department, and that they INCUR NO OTHER CAUSE FOR DISCIPLINARY ACTION within a period the commissioner specifies. It is a discretion of the commissioner's exercised on the licensee's petition, not an election the licensee makes, and subdivision (b) makes it available whether the suspension came from a contested hearing or a stipulation.

A seller agrees to pay 2 discount points on the buyer's 90% loan. The price and the appraised value are both $400,000. What do the points cost the seller?

1. $720
2. $7,200 ✓
3. $8,000
4. $72,000

Why: DRE Reference Book ch. 27, DISCOUNT POINTS: THE AMOUNT OF MONEY THE BORROWER OR SELLER MUST PAY THE LENDER ... A POINT EQUALS ONE PERCENT OF THE LOAN. Loan $400,000 x 0.90 = $360,000; 2 points = $360,000 x 0.02 = $7,200. $8,000 wrongly takes the points on the price.

An attorney in fact executes a deed transferring the principal's property. How must it be signed?

1. The principal's name, and the attorney's own as attorney in fact. ✓
2. The attorney's own name alone, with the power of attorney attached.
3. The principal's name alone, the authority being evidenced by the power.
4. Both names, each acknowledged separately before a notary.

Why: Civil Code section 1095 provides that when an attorney in fact executes an instrument transferring an estate in real property, he MUST SUBSCRIBE THE NAME OF HIS PRINCIPAL TO IT, AND HIS OWN NAME AS ATTORNEY IN FACT, and both elements are required: the principal's name because the principal is the grantor, and the attorney's own name in that capacity so the instrument shows on its face how it was executed.