FTPrep Exam 1

Simulated Exam #1 169
SIMULATED EXAM #1
1. Real property that is acquired by a neighbor through natural processes such as erosion is an
example of:
a. appurtenance. c. accretion.
b. a prescriptive easement. d. avulsion.
2. If evidence of active infestation is found, a structural pest control report is required to be
provided:
a. when the home being purchased is financed by a Federal Housing Administration
(FHA)-insured loan or U.S. Department of Veterans Affairs (VA)-guaranteed loan.
b. whenever requested by the buyer, whether or not the seller agreed to do so in the
contract.
c. in every sale involving a wood-frame residence.
d. in every sale of a foreclosed property that has been unoccupied for greater than one
year.
3. A purchaser of a condominium unit requests a copy of the conditions, covenants and
restrictions (CC&Rs) and bylaws. These documents need to be provided within:
a. one week. c. three weeks.
b. ten days. d. any time prior to close of escrow.
4. The expression “company dollar” refers to:
a. money required to establish a brokerage office from scratch.
b. money left over after a salesperson’s share of a commission has been paid.
c. net income after taxes.
d. the desk fee paid by the agent to their employing broker.
5. If an appraiser uses improper valuation methods or is negligent in completing a government
loan assignment, they may be guilty of:
a. violating appraisal ethics. c. committing a felony.
b. violating real estate law. d. Both a. and c.
6. The calendar date that is of most concern to an appraiser is the date:
a. the loan was originated. c. the purchase contract was signed.
b. escrow closed. d. escrow was opened.
7. Fee amounts are always:
a. 6% of the price received for a property. c. nonnegotiable and set by law.
b. 2%-8% of the price received for a property. d. negotiable and not fixed by law.
8. The term “kiosk” refers to a(n):
a. commercial warehouse. c. storage warehouse.
b. dome frequently found on churches. d. open-sided booth.
9. Agency relationships may not be solely created by:
a. voluntary offer by the agent. c. ratification.
b. implied contract. d. necessity or emergency.
170 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition
10. When representing their client to third persons in a sale, a licensed real estate broker is
operating under the law of:
a. real estate. c. power-of-attorney.
b. agency. d. licensure.
11. Gloria is considering an income-producing property to purchase as an investment. In analyzing
its suitability for investment, what is Gloria most interested in?
a. The net operating income. c. The property’s operating expenses.
b. Taxes to be paid on the property. d. The capitalization (cap) rate.
12. occurs when a listing agent deletes provisions on the face of a buyer’s signed
purchase agreement and adds copy to replace the deleted material.
a. Editing c. Interlineation
b. Obliteration d. Conformance
13. A contract has been fully executed when it has been:
a. entered into. c. signed and delivered.
b. signed, notarized and recorded. d. completely and fully performed.
14. Real property that builds up along a riverbank is acquired through:
a. a quit claim deed. c. accession.
b. escheat. d. a quiet title action.
15. A metropolitan area where the cities within it have grown together is known as a(n):
a. megalopolis. c. planned unit development (PUD).
b. suburb. d. matrix sprawl.
16. When a salesperson’s employing broker dies, the salesperson needs to:
a. stop all real estate activity immediately until they find a new employing broker.
b. continue working for up to 30 days.
c. continue working if there is an office manager appointed by the broker with two years’
experience within the last five years.
d. continue working for up to 60 days or until another broker takes over the office or the
office is closed.
17. The final step in the appraisal process is to:
a. reconcile the different approaches and arrive at a conclusion.
b. average the values from the different approaches to arrive at a conclusion.
c. assign values and estimate the total.
d. justify the sales price.
18. The principle that housing passes down to lower economic groups would be:
a. Crane’s Law. c. filtering down.
b. supply and demand. d. correlative theorem.
19. When a broker solicits and accepts a deposit on the purchase of real property without express
written authorization from the owner to sell the property, the broker is:
a. guilty of converting a customer’s funds for their own benefit.
b. guilty of violating their fiduciary duty to the owner.
c. acting as an agent for the buyer.
d. acting under a restricted listing.
20. A real estate broker generally acts from a position of trust for the seller or buyer. This is described
legally as a(n):
a. fiduciary relationship. c. dual agency.
b. ostensible alliance. d. independent contractor relationship.
21. Nathan agreed to list his property for sale with Broker Chan. In the listing agreement, Nathan
specified Broker Chan is not authorized to accept a deposit towards the purchase price from the
buyer. What happens if Broker Chan produces a buyer?
a. He must refuse to accept any deposit.
b. He cannot present the offer as written.
c. If he accepts a deposit, he holds it as an agent of the buyer until the offer is accepted by
the seller.
d. If he accepts a deposit and the buyer rescinds the offer prior to acceptance by the seller,
Chan is entitled to one-half of the deposit.
22. A(n) is an individual’s opinion or estimate of a property’s value on a specific date.
a. termite inspection c. appraisal
b. home inspection d. open house
23. The employment agreement between a broker and a salesperson needs to be retained by the
broker and salesperson for:
a. three years from the date of the execution of the contract.
b. three years from the date of the termination of the salesperson’s employment.
c. four years from the date of the termination of the salesperson’s employment.
d. five years from the date of the termination of the salesperson’s employment.
24. How soon must a broker deposit a client check that is made out to the broker’s trust account?
a. One business day. c. Three business days.
b. Two calendar days. d. One week.
25. Who must receive a copy of the structural pest control report?
a. The buyer. c. The broker.
b. The title insurance company. d. The escrow company.
26. A broker presented a written offer to their seller from a buyer. The offer stated that upon
acceptance, the buyer would deposit $25,000 in escrow. The seller made a counteroffer but did
not change the amount of the deposit and sent it back to the buyer. The buyer agreed to all the
changes, but lowered the amount of the deposit to $10,000. All of the following statements are
correct, except:
a. The broker needs to get the seller’s acceptance of the counteroffer.
b. The buyer has created a counteroffer due to the changed deposit amount.
c. The contract is fully enforceable.
d. No contract exists.
27. The relationship between a vendor and vendee under a land sales contract is most similar to
the relationship between a(n):
a. trustor and trustee. c. escrow office and principal.
b. broker and seller. d. seller and buyer.
28. If a lessee assigns their lease to someone else, the lessee:

a. is relieved of all responsibilities under the lease.
b. may be responsible for rent payments.
c. may be responsible for maintenance charges.
d. may be responsible for both rent and maintenance.
29. Mineral and water rights are included in the which are transferred with the
sale of a property.
a. tenant rights c. bundle of rights
b. government rights d. emblements
30. Insulation values are rated as “R”. What does this represent?
a. Resistance to heat flow. c. Thickness.
b. Cost. d. Material used.
31. A violation of a condition in a homeowners’ association’s (HOA’s) conditions, covenants and
restrictions (CC&Rs) is:
a. more severe than the violation of a covenant.
b. the same as the breach of a covenant.
c. less severe than the violation of a covenant.
d. unaffected by restrictions.
32. Peter sold his home to Matt. Matt didn’t record the grant deed, but moved into the house.
Peter then sold the same property to Isabella, who reviewed the county recorder’s records but
did not look at the house. Peter gave Isabella a deed, which she recorded. All of the following
statements are false concerning title to the property, except:
a. Matt maintains title.
b. Isabella now owns the property since she recorded her deed and Matt did not.
c. Isabella has recourse against Matt for his failure to record.
d. Matt and Isabella are co-owners of the property.
33. A listing broker may not be:
a. the sole agent of the owner. c. a dual agent.
b. the sole agent of the buyer. d. a loan broker.
34. The task of evaluating a property to qualify it as collateral for the repayment of a loan is
completed by a(n):
a. appraiser. c. broker.
b. agent. d. home inspector.
35. All of the following statements are true regarding the cost method of appraisal, except:
a. It is used in computing real estate values of public buildings.
b. It is hard to apply.
c. It is used in new residential homes.
d. It produces the lowest value results.
36. Whether property functions as adequate security for a real estate loan depends on the:
a. value of the U.S. dollar. c. consistency of the borrower’s income.
b. value of the property. d. quantity of the borrower’s income.
37. A property owner lost their job. The owner’s loan payments were made for them since they
had a(n):
a. Federal Housing Administration (FHA)-insured loan.
b. U.S. Department of Veterans Affairs (VA)-guaranteed loan.
c. California Housing Financing Agency (CalHFA) loan.
d. CalVET Home Loan.
38. Alienation of title refers to:
a. a cloud on title. c. recording a homestead declaration.
b. angering another. d. transferring an estate.
39. All of the following statements are true regarding a notary acknowledgement contained in a
grant deed, except:
a. It does not need to be notarized by the grantee.
b. The notary needs to stamp it with their official seal.
c. The notary needs to keep a record of the identification of the person acknowledging the
deed.
d. It does not need to be signed by the grantor.
40. Successful marketing materials are generally held to include the following four critical
elements:
a. disclosures, price, location, size.
b. number of bedrooms, baths, size, and location.
c. location, amenities, price, and size.
d. attention, interest, desire, and action.
41. If a newspaper advertisement run by a licensee fails to identify their name or license number,
this is referred to as:
a. misleading conduct.
b. a violation of the Truth-in-Lending Act (TILA).
c. a blind ad.
d. unethical behavior.
42. Confidential financial information about a principal obtained by a broker during the course of
a real estate transaction needs to be kept confidential for how long?
a. Three years after the close of escrow. c. So long as the agency relationship lasts.
b. Only until the close of escrow. d. Forever.
43. A seller enters into an exclusive right-to-sell listing with an agent but does not receive a copy
of the signed agreement. The seller, believing this relieves them of any obligations, personally
sells the property while the listing is in effect. What is the outcome?
a. The listing is invalid and the broker is liable to be disciplined.
b. The broker did nothing wrong.
c. The listing is valid and enforceable, but the broker is liable to be disciplined.
d. The broker may be disciplined only if they accept the commission.
44. A buyer’s agent submitted on offer to purchase a home to a seller along with a $10,000 personal
note as the earnest money deposit. The buyer’s agent is to:
a. inform the seller that the earnest money deposit is a personal note prior to the seller’s
acceptance of the offer.
b. avoid telling the seller what form of earnest money deposit that accompanies the offer
is in.
c. never accept a personal note as an earnest money deposit.
d. refuse to present the offer.
45. A residential mortgage primarily for personal, family or household use and secured by a deed
of trust on a dwelling is known as a:
a. consumer purpose mortgage. c. public project loan.
b. adjustable rate mortgage (ARM). d. swing loan.
46. To make a formal declaration that a statement is true without giving an oath is a(n):
a. acknowledgment. c. affidavit.
b. affirmation. d. deception.
47. All of the following are essential to creating a valid contract, except:
a. lawful object. c. capable parties.
b. mutual consent. d. written documentation.
48. Broker Wallace represented a young man in the sale of his home. After purchase terms
had been agreed to and the grant deed had been signed and delivered into escrow, the title
company discovered the seller was not yet 18 years old and was not emancipated. The grant
deed is:
a. illegal. c. void.
b. voidable. d. valid.
49. In order to form a binding agreement, an offer or counteroffer:
a. needs to be accepted in its entirety and without conditions.
b. needs to be accepted with minor changes in conditions.
c. may be accepted with minor changes if both parties agree to address the conditions
within 15 business days.
d. must contain a provision that specifies which state law controls the transaction.
50. In a §1031 real estate exchange, “boot” does not refers to:
a. unlike property received. c. mortgage relief.
b. cash received. d. like-kind consideration.
51. A group of competing brokers who collectively set commissions based upon an agreed-to
minimum commission schedule are:
a. in violation of antitrust law.
b. conducting aggressive business practices.
c. not in violation of ethic laws.
d. in violation of trust fund accounting requirements.
52. To avoid a taxable gain, a property owner may exchange their commercial property with:
a. a personal residence with a loan on it equal to or greater than the mortgage on their
commercial property.
b. stocks and bonds of equal value.
c. a more valuable apartment building, assuming a larger loan and paying cash boot to
balance the equities.
d. a less valuable commercial complex, receiving money from the other party to
compensate for any difference in equities.
53. On appraisals of older apartment buildings, a major problem in the cost method is:
a. that construction methods and styles have changed.
b. that construction materials have changed.
c. the determination of accrued depreciation.
d. the determination of rental revenue generated by the property.
54. When an appraiser attempts to establish the value of a commercial building, what type of
property is least affected by changing economic conditions?
a. A medical building. c. An automobile dealership.
b. A videogame outlet. d. Fast-food franchise.
55. All of the following information is included in the form style of an appraisal report, except:
a. a site analysis. c. a market analysis.
b. a description of the improvements. d. loan and financing data.
56. The land residual method of appraisal is used to determine the value of the:
a. land alone. c. building and land.
b. building alone. d. unearned increment.
57. What must an appraiser do when they are hired to appraise a property owned by a corporation
in which the appraiser owns a share?
a. Refuse the assignment.
b. Disclose their ownership interest in the property and accept the assignment.
c. Disclose their ownership interest in the property and reduce their fee in equal proportion
to their ownership share in the corporation.
d. Ignore the issue unless they hold a majority interest in the property.
58. When the due-on clause in a trust deed is triggered, the lender may recast or call the loan, also
known as:
a. subordination. c. reconciliation.
b. waiver by proxy. d. acceleration.
59. Who pays the points on a CalVet Home Loan?
a. The buyer. c. The State of California.
b. The seller. d. No one pays the points.
60. A mortgage broker’s fee is customarily paid by the:
a. lender. c. borrower.
b. seller. d. underwriter.
61. Assemblage is closest to:

a. residual value. c. contribution.
b. plottage. d. substitution.
62. In a buyer’s closing statement, the selling price is listed as:
a. a debit to the buyer. c. a debit to the seller.
b. a credit to the buyer. d. a debit to the lender.
63. Under the Real Estate Law, a real estate salesperson is:
a. an independent contractor. c. an employee of the seller.
b. an employee of the broker. d. self-employed.
64. A brokerage office with a high degree of turnover and failure amongst its staff is most likely a
result of:
a. not enough good listings. c. lack of supervision and training.
b. not enough advertising. d. too low a commission structure.
65. The designation “CPM” stands for:
a. Common Area Property Management. c. Chartered Professional Manager.
b. Corrective Property Maintenance. d. Certified Property Manager.
66. A fictitious business name statement expires:
a. five years from December 31st of the year recorded.
b. five years from recordation.
c. five years from abandonment.
d. Never. A fictitious business name never expires.
67. A lost right caused by an unreasonable delay in the pursuit of a claim is called:
a. dereliction. c. laches.
b. escheat. d. tort.
68. A real property land sales contract does not need to show:
a. the legal description.
b. how a dispute is to be resolved if there is a disagreement.
c. existing loans encumbering the property.
d. the length of time required to pay off the contract.
69. A walk-up refers to:
a. an apartment building with no elevator. c. a drive-in restaurant.
b. agricultural land. d. a trailer park.
70. A 60 ft. by 45 ft. building is to be carpeted. 60% of the square footage will be covered at a cost of
$6 per square yard. The total cost of the carpeting will be:
a. $1,080. c. $1,800.
b. $16,200. d. $9,720.
71. State licensing of contractors protects the public against:
a. dishonesty. c. fraud.
b. incompetence. d. felonious behavior.
72. As opposed to condominium ownership, cooperative ownership has the disadvantage that:
a. owners could lose their equity if the other cooperative owners fail to make their tax and
loan payments.
b. owners cannot deduct tax payments made to the cooperative.
c. owners’ costs are greater than in a condominium.
d. owners have less control over the exterior of their property.
73. The federal Loan Estimate is to be delivered to a borrower:
a. within three business days of receipt of a consumer mortgage application.
b. within three business days of closing.
c. no more than one calendar day before the close of escrow.
d. at least ten business days from the date of the loan commitment.
74. A seller’s broker receives a written offer on a listed property. The broker is certain the seller will
not accept it. The broker may do all of the following, except:
a. Write new terms on the back of the offer and go back to the buyer for approval.
b. Change the offer price to what the broker thinks the seller will accept, and initial the
change.
c. Present the offer to the seller as written.
d. Present the offer to the seller, but advise them not to accept it.
75. The Federal Truth-in-Lending Act (TILA) defines the annual percentage rate (APR) as:
a. the total of only the direct costs of credit paid by a borrower.
b. the total of all costs which the borrower needs to pay in order to get the loan.
c. the relative cost of credit expressed in percentage terms.
d. the difference between the 10-year Treasury Note and the 3-month Treasury Bill.
76. A loan that allows the borrower to make monthly payments less than the interest accruing is
referred to as a(n):
a. 80/20 loan. c. hybrid loan.
b. straight loan. d. option adjustable rate mortgage (ARM).
77. The lowest closing costs other than the down payment are realized using a:
a. Federal Housing Administration (FHA)-insured loan.
b. U.S. Department of Veterans Affairs (VA)-guaranteed loan.
c. CalVET Home Loan.
d. conventional loan.
78. A bank loans Lauren $850,000. Part of the loan agreement calls for Lauren to keep $20,000 of
the loan funds on deposit with the bank for the life of the loan. This is an example of:
a. prepaid charges. c. risk management.
b. yield enhancement. d. compensating balance.
79. All of the following statements are false regarding the agency duty held by a buyer’s agent,
except:
a. The agent represents the buyer only.
b. The agent is a dual agent of both the buyer and seller.
c. The agent may charge an advance fee to the buyer.
d. There are only agents of sellers in California.
80. Unless fraud is involved, an action against a licensee by the Real Estate Commissioner needs
to be initiated within ________ of the occurrence of the alleged violation.
a. two years c. four years
b. three years d. five years
81. The organization responsible for the enforcement of proper sewage and sanitation construction
practices in a subdivision is the:
a. State Sewage Department.
b. Real Estate Commissioner.
c. local health department.
d. Department of Housing and Urban Development (HUD).
82. Harold wills the family estate to his son Patrick on the condition Patrick marry before title will
be transferred. This is an example of a:
a. covenant. c. condition precedent.
b. restriction. d. condition subsequent.
83. A real estate agent may not represent all principals in a transaction when:
a. they have obtained the consent of all parties to this dual agency relationship.
b. they have informed all principals they are the agent of each principal.
c. they are collecting commissions from each principal with the knowledge of the others.
d. they fail to disclose their dual agency status the moment it arises.
84. The real estate disclosure law that became effective January 1, 1988 concerns:
a. agency relationships.
b. people who arrange credit.
c. disclosures made by property sellers.
d. the federal Truth-in-Lending Act (TILA).
85. Marc purchased an apartment building for $2,000,000. The list price was $2,500,000. Marc
put $500,000 down and acquired a new first trust deed for the difference. Marc’s cost basis for
income tax purposes is:
a. $500,000. c. $2,000,000.
b. $1,500,000. d. $2,500,000.
86. The proper order of events in a court proceeding involving real estate is:
a. judgment, attachment, execution. c. judgment, execution, attachment.
b. attachment, judgment, execution. d. execution, judgment, attachment.
87. The Real Estate Commissioner is primarily concerned with financial arrangements in a
subdivision. If the Commissioner wishes to rescind approval of a subdivision, they would:
a. ask the sheriff to arrest the subdivider for fraud.
b. issue an injunction against future sales of parcels in the subdivision.
c. issue a desist and refrain order.
d. suspend the developer’s license.
88. Who may withdraw trust funds?

a. An unlicensed person.
b. Any employee of the broker
c. Any employee authorized by the broker.
d. A notary public administering an oath or affirmation.
89. It is unethical for a property manager’s compensation to be structured as:
a. payment for significant property repairs performed by the manager.
b. a percentage of gross receipts.
c. a commission on new leases entered into on the premises.
d. kickbacks or discounts on goods and supplies.
90. The four essential elements of an enforceable contract are:
a. competency, mutual consent, lawful object, consideration.
b. express, consideration, mutuality, lawful object.
c. mutuality, written, competent parties, lawful object.
d. communication, written, competent parties, lawful object.
91. When advertising on the internet, the broker needs to:
a. avoid out-of-state inquiries. c. report all international inquiries.
b. employ only real estate licensees. d. exercise proper supervision.
92. A real estate salesperson may only be paid a commission by:
a. the buyer. c. the escrow company.
b. the seller. d. their employing broker.
93. The existence of the following is not required under disclosure law, except:
a. Minorities live next door to a residential property.
b. The prior tenant of a property was afflicted with AIDS.
c. A death occurred in the house four years earlier.
d. The property is located next to a military ordinance site.
94. A broker relayed property information they received from their seller to a buyer. On discovering
the information to be false, the broker is to:
a. inform the seller of the error. c. inform the escrow officer.
b. inform the buyer. d. keep silent.
95. David listed his house for sale with Broker Paulson for $400,000. David told Broker Paulson
it was imperative that the property be sold quickly. Broker Paulson showed the property to
Henry and told him David was financially insolvent and would accept $380,000. Based on
Broker Paulson’s statement, Henry offered David $380,000 for his property. David accepted the
offer. Concerning Broker Paulson’s actions, which of the following is true?
a. Broker Paulson violated his fiduciary obligation to David since he acted in excess of his
authority.
b. When David accepted the offer, Broker Paulson’s actions were vindicated.
c. Broker Paulson’s actions were proper since David stated he wanted an immediate sale.
d. Broker Paulson interpreted David’s wishes and produced a sale. Acceptance of the offer
made Broker Paulson’s actions acceptable.
96. All of the following transactions do not require compliance with the agency law, except:
a. A duplex sold by an owner. c. A transfer between parent and child.
b. A trustee’s sale. d. The sale of commercial property.
97. An appraisal is valid for what length of time?
a. One year. c. Ninety days.
b. Six months. d. The date stated in the report.
98. All of the following are not required in order to transfer fee title to a parcel of real estate, except:
a. All existing loans are to be paid off.
b. Consent to the transfer needs to be obtained from all lenders who hold an interest in the
property.
c. A reconveyance deed from the trustee needs to be recorded.
d. Delivery of a valid deed.
99. Which of the following parties is in the weakest position against loss of property due to a claim
of title by a third party?
a. The person possessing an unrecorded quitclaim deed who does not occupy the property.
b. The person possessing an unrecorded grant deed who occupies the property.
c. The person possessing a certificate of title issued by a title company.
d. The person possessing a recorded deed who rents the property to a tenant.
100. An express contract is one that:
a. will execute quickly.
b. must be in writing.
c. is structured in words, delivered in writing or orally.
d. is quickly negotiated.
101. Which of the following is least likely to be true regarding a property that is transferred through
intestate succession?
a. The owner of the property died with no will.
b. The owner of the property died with a will.
c. The property will be transferred through probate court.
d. The property transfer requires court approval.
102. A seller entered into an oral listing agreement to sell real estate with a broker without a follow-
up written verification. The payment of a commission to the broker under these circumstances
is:
a. unenforceable.
b. enforceable.
c. a violation of the regulations of the Real Estate Commissioner.
d. regarded as contrary to public policy.
103. All real estate brokers and sales agents are required to complete hours of
continuing education (CE) every four years to renew their Department of Real Estate
(DRE) license.
a. 15 c. 45
b. 30 d. 50
104. Housing expenses are one of the largest denominators in the Consumer Price Index (CPI)
since:
a. housing is one of the largest expenses for consumers.
b. more people buy homes than buy businesses.
c. CPI is based upon all consumer purchases.
d. housing impacts the economy.
105. Most real estate sales lawsuits are heard in:
a. the court of appeals. c. the state supreme court.
b. small claims court. d. the state superior court.
106. The physical age of a house can be determined best by inspecting:
a. the architectural style. c. the physical condition of the property.
b. the county records. d. the original recorded subdivision map.
107. The primary concern of an appraiser when analyzing property is:
a. supply and demand. c. the neighborhood.
b. functional utility. d. marketability and acceptability.
108. What is contained in all purchase agreements that states the existence or nonexistence of each
broker’s fiduciary agency with the various parties to the transaction?
a. Agency confirmation provision.
b. Broker liability agreement.
c. Attorney fee provision
d. Hold harmless agreement.
109. All of the following is considered ethical behavior, except:
a. A broker who approves of a pocket listing policy among their staff that is done for
personal gain, not to benefit the client.
b. Keeping complete records of all sales and listings.
c. Resolving disputes between brokers through mediation.
d. Disclosing agency relationships to all interested parties.
110. For a salesperson to be given the authority to review purchase agreements and contracts by
their broker, the salesperson granted supervisory powers needs to have:
a. accumulated two full years’ experience within the last five years.
b. accumulated two full years’ experience within the last 10 years.
c. accumulated two full years’ experience as well as two years college education.
d. been employed by the broker for a minimum of two years.
111. A buyer purchased a home without being informed the house was on a septic tank system.
The buyer has the right to:
a. rescind the contract.
b. have the broker disbarred.
c. sue the escrow company for malfeasance.
d. report the seller to the Department of Real Estate (DRE) for failure to disclose.
112. Why are warranty deeds rarely used in California but commonly used in other states?
a. Warranty deeds are prohibited in California.
b. The buyer may recover treble damages when a grant deed is used.
c. Express covenants in a grant deed run with the land. Covenants in a warranty deed are
personal to one particular buyer.
d. Recourse against a title company under a grant deed is more effective than trying to
collect from the grantor under a warranty deed.
113. Amelia deeds a property to Buster which is never recorded. How would Buster transfer title
back to Amelia?
a. By destroying the deed.
b. By handing the deed back to Amelia as a reconveyance.
c. By writing “cancelled” across the face of the deed and returning it to Amelia.
d. Creating a new deed.
114. A buyer’s agent prepares an offer for a buyer of a home. When is the buyer’s agent to give the
buyer the Agency Law Disclosure form?
a. As soon as practicable.
b. Before showing the buyer the house.
c. Before preparing the offer for the buyer.
d. At opening of escrow.
115. In addition to a general duty owed to the other party in a transaction, a licensee owes a(n)
to act with the utmost good faith and diligence for the benefit of their principal.
a. fiduciary duty c. legislative duty
b. partial duty d. gratuitous duty
116. If a salesperson withholds a new listing from the MLS in an attempt to sell it themselves, it
is called:
a. attempting a secret profit. c. a pocket listing.
b. conversion. d. an illegal withholding.
117. A property was sold netting $410,000 for the seller after a 6% commission was paid. How
much was the property sold for?
a. $434,370. c. $439,180.
b. $386,400. d. $436,170.
118. A fully amortized loan has equal monthly payments. The portion of the payment applied to
principal:
a. goes down each month. c. remains unchanged.
b. goes up each month. d. goes up by equal amounts each month.
119. The person or organization named on a trust deed as the beneficiary is most likely the:
a. trustee. c. lender.
b. borrower. d. buyer.
120. What appraisal license is required to appraise a ten unit apartment building valued at $1
million?
a. Residential license. c. Certified general license.
b. Certified residential license. d. Apartment specialist license.
121. An appraiser was hired by Whitney to appraise DuPont’s property. With whom does the
appraiser discuss their findings?
a. Whitney. c. Any lender interested in the property.
b. DuPont. d. Mr. DuPont’s attorney.
122. California’s energy conservation disclosure requirements require that buyers of newly built
homes receive a disclosure concerning the:
a. type of windows installed.
b. gold star rating assigned to the property.
c. energy consumption of the HVAC unit(s).
d. R-value of insulation used.
123. Why is the replacement cost appraisal approach generally easier to apply to a new property
than an old property?
a. Historic costs are hard to obtain and verify for older properties.
b. It is difficult to value the land on which the property is situated.
c. Depreciation is more difficult to estimate on an older property.
d. Different building codes may have been in effect when an older property was built.
124. A home sold for $300,000. The buyer applied and was approved for a loan with an 80% loan-
to-value ratio (LTV) with a 20% down payment. The property was appraised for $290,000. How
much will the buyer need as a down payment?
a. 20% of $300,000 c. 20% of $290,000 + $10,000
b. 20% of $290,000 d. 20% of $290,000 - $10,000
125. All of the following are essential to the creation of an agency relationship, except:
a. Agreement to pay consideration. c. Consent of the principal.
b. Competency of the principal. d. A fiduciary relationship.
126. When a broker represents only a buyer in the sale of real estate, this is referred to as:
a. single agency. c. dual agency.
b. implied agency. d. general agency.
127. All of the following transactions require the Agency Law Disclosure to be made to all parties,
except:
a. The sale of a commercial building. c. The sale of a residence.
b. The sale of vacant land. d. Lease agreements for less than a year.
128. Agency disclosure is handled in the following sequential steps:
a. disclose, confirm, elect. c. disclose, elect, disclose.
b. confirm, elect, disclose. d. disclose, elect, confirm.
129. What is an example of a real estate advertisement that is clearly misleading?
a. Advertising implying a specific yield different from the stated interest rate.
b. Advertising without stating the sales price.
c. Advertising which includes a map incorrectly indicating the property is close to area
amenities.
d. Advertising which accidentally misspells the broker’s firm name.
130. All of the following deed provisions are unenforceable, except:

a. The property may not be sold to minorities.
b. The property may not be used for religious purposes.
c. The property may be occupied only by females.
d. The property needs to remain with the grantor and their heirs in perpetuity.
131. Broker Gerry sold a property to Sarah that was marketed “as is.” Broker Gerry knew that
the property’s plumbing was in a major state of disrepair but did not tell Sarah. The problem
with the plumbing is not apparent to an ordinary, prudent person. If Sarah sued the seller for
damages, the court action would likely be:
a. successful since the duty to disclose a material fact cannot be avoided by an “as is”
provision under the stated circumstances.
b. successful since “as is” refers only to obvious defects.
c. unsuccessful since the buyer agreed to buy the property in its current condition.
d. unsuccessful since the “as is” status of the sale shows there is a mutual understanding
of possible defects.
132. Wainscoting can be found:
a. as a waterproofing layer added to the exterior of a foundation.
b. as the facade of an office building.
c. on the lower three or four feet of an interior wall when finished differently from the rest
of the wall.
d. as the lining on the inside of the eaves in areas that experience heavy rains.
133. A broker’s receipt of any deposit towards marketing costs from a seller is documented:
a. in the broker’s bank statements.
b. and reported to the Department of Real Estate (DRE).
c. in a subaccount ledger.
d. and accounted to the seller.
134. A real estate agent needs to elect their agency relationship:
a. as soon as escrow opens. c. as soon as practical.
b. before escrow closes. d. whenever asked by either principal.
135. An individual who has been delegated agency duties by an agent of the client, not the client
directly, is known as a(n):
a. principal. c. subagent.
b. amanuensis. d. subtenant.
136. A real estate broker wrote an offer on a property for their buyer that was contingent on the
approval of the home by the buyer’s father. The buyer informed the broker their father was
out of the country for an unknown duration. The broker presented the offer to the seller
without disclosing that the buyer’s father was out of the country. The seller accepted the offer.
In this example, the broker’s conduct was:
a. unethical. c. misleading.
b. unlawful. d. acceptable.
137. If a broker wants to solicit for an advance fee, how many days before use must the broker
submit the proposed solicitation to the Department of Real Estate (DRE) for approval?
a. 10 days. c. 45 days.
b. 30 days. d. 90 days.
138. All of the following will terminate an agency relationship, except:

a. Mutual consent. c. Estoppel.
b. Death of the agent or seller. d. Destruction of the property.
139. Appurtenances go with the land. All of the following are appurtenances, except:
a. Buildings. c. Fences.
b. A swimming pool. d. A trade fixture.
140. Marta’s city built a new park in her neighborhood. This may result in a(n):
a. special assessment. c. tax rate increase.
b. general assessment. d. income tax increase.
141. Real estate investments may include:
a. reduced unemployment. c. debt and equity funds.
b. a stable economy. d. proposition 13.
142. A real estate commission is normally calculated as a percentage of the:
a. selling price.
b. listing price.
c. seller’s equity in the property.
d. down payment or earnest money deposit paid by the buyer.
143. If homes in an area represent the highest and best use of the land and are similar in
architectural design, which of the following principles of appraisal apply?
a. Anticipation. c. Conformity.
b. Contribution. d. Substitution.
144. In the instance of condominium ownership, which of the following may be held in fee title?
a. The outside yard. c. The individual units.
b. The public hallways. d. All of the above.
145. Which of these is considered least important when appraising old residences?
a. The original cost of the residence.
b. The purpose of the appraisal.
c. The physical condition of the structure.
d. The suitability of the residence to the site.
146. Acme Development sent postcards to 25,000 AARP members offering prizes without disclosing
the requirement to visit the retirement community and attend a sales presentation in order
to win. Is this legal?
a. Yes, prizes are always offered.
b. No, since the developer failed to disclose the need to visit the property and attend a
sales presentation.
c. Yes, so long as the offer is open to anyone.
d. No, because prizes might be used as an encouragement to buy the property.
147. The sudden physical loss of land due to a flood is an example of:
a. accretion. c. ponding.
b. avulsion. d. reliction.
148. Information about the thickness and material used for the foundation footing of a property
are contained in:
a. elevation plans. c. foundation plans.
b. plot plans. d. county records.
149. If a newspaper advertisement for the sale of a condominium states only the annual percentage
rate (APR):
a. the number of payments needs to be included.
b. the down payment amount needs to be included.
c. the total financing charges need to be included.
d. no other disclosures are required.
150. A turnkey project is:
a. construction of a property from groundbreaking to completion.
b. a subdivision whose design has been approved by the local planning commission.
c. a franchise sale.
d. a purchase and resale.
SIMULATED EXAM 1 ANSWER KEY

1. c – Acquiring land through natural forces, such as the accumulation of sediment on a coastal
property, is accretion. Answer choices A. and B. are types of legal ownership whereas D is
a loss of land, generally resulting from a change in course of a body of water. Only accretion
represents a gain of property.
2. a – Pest control reports are only required of U.S. Department of Veterans Affairs (VA) and
some Federal Housing Administration (FHA) transactions, such as where active infestation is
observed.
3. b – Conditions, covenants and restrictions (CC&Rs) need to be delivered within ten days of the
buyer’s request. However, as a matter of good practice, CC&Rs and other mandated disclosures
are to be delivered as soon as practicable.
4. b – The company dollar is the remainder of the broker’s split of the fee after paying their
agent’s commission.
5. d – Both ethics violations and possibly fraud have occurred. The key word “may” in this
question allows for the possibility of intent. Negligence is an ethics violation. Fraud is a felony.
Real estate law does not apply since this is an appraisal issue not related to brokerage activity.
6. c – The date that is most critical to an appraiser is the date the contract was signed since the fair
market value (FMV) for a property is established as the purchase price agreed to by the buyer
and seller.
7. d – Though commonly 6% of the price received for a property, fee amounts are always
negotiable and not fixed by law
8. d – Kiosks are the small stands in the promenade of a shopping mall.
9. a –This is a NOT question. An agency relationship cannot be created solely by the voluntary
act of only the agent. The formation of an agency relationship requires a written or oral
agreement between both the principal and the agent. Both an implied agency and agency
created by emergency needs to be ratified by the principal.
10. b – In the context of representing their client to third persons in a sale, the law of agency exists
for the purpose of clarifying the conduct of an agent when dealing with a third-party for the
benefit of their client.
11. d – The capitalization rate (cap rate) is the annual rate of return on invested capital
experienced by an investment property based on net operating income (NOI) produced by
the operations of an income property. The cap rate is of critical importance to income property
investors. The cap rate is calculated by dividing the NOI by the property’s price.
12. c – Interlineation is the best answer as it refers to the process of modifying boilerplate wording
in a form by inserting additional language between the printed lines. This is improper conduct
when it is performed after the principal has signed the agreement.
13. d – Execution of a contract occurs when it has been completely and fully performed.
14. c – Accession is an addition to property through human efforts or by natural forces. For
example, real property that builds up along a riverbank refers to accession by a natural
occurrence. The other three answer selections are legal actions. While accession allows for
addition by both human and natural forces, accretion is by natural forces only. As with this
question, you will not be required to decide between the two.
15. a – When a metropolitan area grows by the connection of various cities within it, it becomes
a megalopolis.
16. a – A salesperson needs to work under the supervision of a broker. If their employing broker
dies, the salesperson may not conduct licensed activity until a new employing broker is
named.
17. a – Reconciling the appraisal analysis explains how the conclusion of the appraisal report
was reached. The reconciliation will weigh the differences between the various appraisal
approaches used by the appraiser.
18. c – Filtering down is the correct answer. Notice the correct answer has the word “down” in it
just as in the question, which states, “housing passes down.” None of the alternative answer
selections appear to relate to the question.
19. c – As an agent for the buyer, the broker requires no authorization from the seller to accept a
deposit on the purchase of property from the buyer they represent.
20. a – This protected relationship between the client and the agent is called fiduciary. It is a
position of trust that exists between the agent and their client.
21. c – Due to the lack of seller authorization, Broker Chan holds the deposit towards the purchase
price as an agent of the buyer until the offer is accepted by the seller.
22. c – An appraisal is an individual’s opinion of a property’s value on a specific date, documented
in an appraisal report.
23. b – Employment records between a broker and a salesperson need to be kept for three years.
The three year time period begins to run on the termination of the employment.
24. c – Three business days is the time allowed to deposit a client’s check into the broker’s trust
account.
25. a – The only person listed who has a need to know the findings of a structural pest control
report is the buyer.
26. c – Until both the buyer and seller have reached a mutual agreement and a meeting of the
minds, there is no contract, and thus answer selection C. The contract is fully enforceable
is not correct.
27. d – In a land sales contract, the seller acts as lender and retains title to the property until paid
in full. The relationship most similar to this would be that of the borrower and lender (i.e.,
mortgagor and mortgagee).
28. d – The assignment of a lease does not relieve the lessee (tenant) of responsibility they may
have agreed to under the terms of a lease. Only an assumption of the lease will free the lessee
of an agreed-to obligation.
29. c – Mineral and water rights are transferred with the sale of a property.
30. a – Insulation is designed to avoid the transfer of heat. The higher the insulation’s R factor, the
greater the resistance to heat loss.
31. a – The violation of a condition in a homeowners’ association’s (HOA’s) conditions, covenants
and restrictions (CC&Rs) is considered more serious than a violation of a covenant. The
violation of a condition may result in the loss of title whereas a covenant is simply a promise,
the breaking of which will not result in the loss of title.
32. a – Since Isabella failed to look at the property and determine whether it was occupied, Matt
retains title. Constructive notice requires that the buyer (Isabella) look at the property as
well as the county records.
33. b – In no instance would the listing broker represent only the buyer. A listing broker may
either represent both the buyer and seller (as a dual agent), or just the seller.
34. a – An appraiser determines value of a property rather than its condition, which is performed
by a home inspector. For the purposes of qualifying the collateral which secures the loan, the
lender requires an appraiser’s determination of the property’s value.
35. d – This is a FALSE question. Of the three appraisal approaches to determine a property’s value,
the cost approach will generally produce the highest value and the income approach will
generally produce the lowest. The reason for this is that while the cost approach shows the
actual expense to replace the property, the income approach demonstrates the value based on
the income it generates which is always less. Note that the alternative answer selections may
be useful to remember for other questions.
36. b – To establish whether a property represents adequate security for a loan, the value of the
property needs to be determined by an appraiser.
37. c – Under a California Housing Financing Agency (CalHFA) loan, the CalHFA will make
loan payments for a borrower during a period of unemployment.
38. d – Alienation of title refers to a transfer of ownership.
39. d – A grant deed is signed by the grantor and the records of the proof of identity are kept by
the notary. This is another example of a question that offers potentially useful information
that may be helpful when answering other questions on the state exam.
40. d – For questions regarding marketing, remember this helpful acronym: AIDA. The essential
elements of marketing materials are as follows: attention, interest, desire and action.
41. c – A blind ad is marketing material that fails to alert the reader to the fact that the advertisement
was placed by a licensed real estate agent or broker.
42. d – Confidentiality has no time limit. Any such confidential financial information needs to be
kept secret for perpetuity.
43. c – The failure to deliver a copy of any signed document is a violation of agency law that
may warrant disciplinary action by the Department of Real Estate (DRE). However, the signed
listing contract is still valid and enforceable against the seller.
44. a – The agent is obligated to inform the client of all material facts. The form of the deposit is
a material fact. An agent needs to present all offers unless they are patently frivolous or the
seller explicitly instructed the agent to no longer present offers.
45. a – A debt incurred primarily for personal, family, or household purposes and secured by
a parcel of real estate containing one-to-four residential units is known as a consumer
mortgage.
46. b – Both answer selection A and C are formal declarations that require an oath. Only an
affirmation stops short of the oath.
47. d – This is an EXCEPT question. An oral contract may be valid, and thus D. written
documentation is the correct answer. A valid contract requires four elements be present:
capable parties, consideration, legal object and mutual consent.
48. c – Since the grantor was under the age of 18 and therefore not legally capable, the deed is void.
Another question in this simulated exam mentions that capable parties are an essential
element to the formation of a valid contract.
49. a – Any changes to a contract voids the original contract. Thus, in order to be binding, both
principals need to agree to and sign the contract without changes.
50. d – Boot refers to any consideration in a §1031 exchange of an unlike kind. Once again, the
answer choices offer the reader important information regarding the subject of this and related
questions.
51. a – A conspiracy such as the one described in this question is a clear violation of antitrust laws.
These laws are designed to prevent the formation of monopolies and encourage competition
in the market.
52. c – “Like-kind” in the context of a §1031 exchange refers to the purpose for holding the property
— i.e., the replacement property will be used for a similar purpose as the subject property. So
long as the purpose is the same, the physical variations of the real estate are of no importance.
53. c – The quantity of accrued depreciation becomes increasingly difficult as buildings get older,
and causes the cost approach to lose its validity. Under the cost approach of appraisal, an
appraiser arrives at a property’s value based on the present cost of constructing the present
improvements and acquisition of the land.
54. a – This is a LEAST question. A medical building is the least impacted by changed economic
conditions. The tenants of a medical building are generally under long-term leases where
no rent is charged based on the volume of receipts, as occurs under a percentage lease.
Alternatively, automobile sales decline and fast food restaurants may see a rise in volume
during recession.
55. d – This is an EXCEPT question. Appraisals state factual data about the property and
surrounding area, not the financial and loan data.
56. a – The word “residual” refers to that which is left after subtracting other values. In a land
residual appraisal, the cost of the building is subtracted from the property value to determine
the value of the raw land.
57. b – Disclosure is the necessary action as it provides the client the opportunity to select a
different appraiser if they feel the appraiser’s interest in the property is too significant, even
after the appraiser accepts the assignment. Here, the choice of whether to retain the appraiser
is left to the client.
58. d – The due-on clause accelerates the payoff of the loan. Only answer choice A also pertains
to loans, but it allows a new loan to become senior to an existing mortgage.
59. d – No points are charged on a CalVet loan. It is a land sales contract.

60. c – Mortgage broker fees are customarily, though not exclusively, paid by the borrower.
61. b – Assemblage is the act of combining parcels of land to derive an increase in value, called
plottage.
62. a – The seller is credited for the sales price in the buyer’s closing statement; the buyer is debited.
The credit to the buyer comes from how the sales price is paid, typically a cash down payment
and purchase-assist financing.
63. b – This question requires us to accept a dichotomy unique to real estate. A salesperson is an
employee and agent of the broker for the purposes of the Real Estate Law. However, they are
generally classified as an independent contractor for tax purposes.
64. c – Lack of supervision and poor training create a high degree of turnover in a brokerage office.
65. d – “CPM,” meaning Certified Property Manager, is a designation that property managers
earn after sufficient education and experience. It is not required for providing property
management services.
66. b – The DBA (“doing business as”), also known as a fictitious business name needs to be
renewed every five years.
67. c – Laches is an unreasonable delay in making an assertion or claim, such as asserting a right,
claiming a privilege or making an application for redress, which may result in refusal.
68. b – Each of the other answer selections need to be known by both the vendor and the vendee
(seller and buyer) in a land sales contract. A dispute resolution provision is good practice,
though not required.
69. a – While uncommon in California and more prevalent on the east coast, a multi-story
apartment building without an elevator is referred to as a walk-up.
70. a – This is a math problem which requires several sequential steps (and provides several ways
to make a mistake).
60 sq. ft. x 45 sq. ft. = 2,700 sq. ft. Multiply this total by the percentage of the floor to be covered
by carpeting (2,700 sq. ft x 60% = 1,620 sq. ft.). Divide this amount by nine (1 sq. yard = 3 ft. x
3 ft. = 9 sq. ft) to convert square feet into square yards (1,620 sq. ft. / 9 sq. ft. = 180 sq. yards). To
determine the cost, multiply this amount by $6 (180 sq. yards x 6 = $1,080).
71. b – State licensing of contractors requires experience and other qualifying requirements to
protect the public from incompetence. These skills can be tested to acquire a license. Dishonesty,
felonious behavior and fraud are legal concerns dealt with by the district attorney, not the
licensing authority.
72. a – Cooperative ownership (co-op) is a corporate ownership of the property. Thus,
individual owners have a lease on the apartment unit and a share of stock in the corporation
that owns the property. If the other shareholders do not meet their mortgage and property
tax obligations, the corporation may default on the mortgage and the lender may foreclose,
causing all the owners to lose their equity.
73. a – The federal Loan Estimate needs to be delivered to a borrower within three business days
of the lender’s receipt of a consumer mortgage application.
74. b – This is a NOT question. The offer is a contract between the principals. Thus, only the buyer
or seller may authorize changes to the contract.
75. c – The annual percentage rate (APR) is stated as a percentage and represents the total cost
of credit including the prepaid interest costs (points).
76. d – The option adjustable rate mortgage (ARM), which results in negative amortization,
is the correct choice.
77. c – Closing costs are charges related to the transaction that are paid through escrow. The
CalVet Home Loan is a land sales contract and is therefore different from each of the other
answer choices. There are no loan charges in this arrangement and thus the escrow charges
are lower.
78. d – This question illustrates the need to select the best answer available. The correct term for
what the bank has required is a compensating balance – leaving enough money with the
bank to offset potential foreclosure costs. It can also be said to improve the yield and reduce
the lender’s risk.
79. a – The questions states the agent is acting as a buyer’s agent. Therefore, only answer choice A
fulfills this description. Agency duty has nothing to do with advance fees.
80. b – The Statute of Limitations allows a three-year period after the alleged violation for the
Real Estate Commissioner to initiate an action against a licensee, except in the case of fraud
where the limit is three years from the occurrence or one year of the discovery.
81. c – Neither the Real Estate Commissioner nor the federal Department of Housing and Urban
Development (HUD) have a direct concern with local sewage management. Further, there is
no state sewage department. Thus, by elimination, that leaves only answer selection C. local
health department.
82. c – A condition precedent is a provision in an agreement calling for the occurrence of an
event or performance of an act before title is transferred.
83. d – In order to represent both principals in a transaction as a dual agent, the agent’s dual
agency status must be disclosed as soon as possible.
84. a – There are several disclosures that became effective around the late 1980s. However,
the agency disclosure law is the one that became effective in 1988. The Transfer Disclosure
Statement (TDS) became effective in 1987.
85. c – Cost basis is the cost incurred to acquire and improve property and is used primarily for tax
reporting and recovery of capital. Loans have no effect on a property’s cost basis, and neither
does a seller’s list price.
86. b – The order of events in a court proceeding are as follows: the attachment of the property
though a lis pendens to ensure its availability if a judgment is awarded. Then, after judgment
has been made, it is executed.
87. c – If the Real Estate Commissioner feels the need to retract approval of a subdivision, they
issue a desist and refrain order. There are two laws that relate to subdivisions: the Subdivision
Map Act, which is handled locally through the Planning Department, and the Subdivided
Lands Law, which is handled by the Department of Real Estate (DRE).
88. c – The broker may authorize any employee to be responsible for trust fund withdraws.
89. d – A property manager’s compensation may take several forms. However, kickbacks from
suppliers or service companies are unethical as those savings rightfully belong to the client.
90. a – Only answer choice A fulfills all the requirements of an enforceable contract. Not all
contracts are written. However, all contracts require consideration, mutual consent and
legally competent participants.
91. d – Internet advertising by its nature opens the market to an international audience. While
the broker need not be sufficiently computer literate to implement the advertising, they do
need to properly supervise that which is done in their name by their licensed agents and
unlicensed staff.
92. d – Only the employing broker can compensate the salesperson. The broker receives their
broker fee (commission) at the close of escrow and delivers a percentage of the fee to the
salesperson involved in the transaction.
93. d – This question provides a good opportunity to recognize unnecessary or improper disclosures.
94. b – If a broker has already communicated false information to the buyer that was not known
to the broker to be incorrect, they need to clarify the information with the buyer once they
discover its inaccuracy. Informing the seller will not resolve the earlier misinformation given
to the buyer and the escrow officer is not the person who is duty bound to pass along the
corrected information to the buyer.
95. a – The only correct interpretation of agency law is that broker Paulson acted outside his
authority and revealed private financial information that may or may not have been true
without client permission. The alternative answer selections may have a ring of truth, but the
state exam is concerned with legal issues.
96. d – The Agency Law Disclosure is only required on transactions involving a licensed agent
and is delivered to all parties in targeted transactions.
97. d – An appraisal report is a snapshot of property and local market conditions. Therefore, an
appraisal is only valid on the date stated in the report. As conditions and the market change,
an appraisal becomes invalid.
98. d – A more complete answer might say “delivery and acceptance” of a deed. However, given
the choices offered, only D. Delivery of a valid deed is acceptable.
99. a – The question speaks to constructive notice. Answer selection A refers to a quitclaim deed
that is not recorded nor does the person occupy the property. Recording documents as well
as physical possession of a property are both cause for someone to recognize and question an
interest in property.
100. c – An express contract represents a mutual agreement between real estate participants. An
express contract can be oral or in writing.
101. b – Intestate means a property owner dies with no will. Under such conditions, the transfer
generally requires a court approved transfer through probate court, unless a revocable transfer
on death deed has been recorded.
102. a – The only issue regarding an oral listing is that it fails the conditions of Statute of Frauds
which requires the listing to be in writing to be enforceable. As such, the broker’s fee is
unenforceable in a court action.
103. c – A licensee needs to complete 45 hours of continuing education every four years. Notice
that this question contains an answer to another state question regarding how often a license
needs to be renewed – every four years.
104. a – The answer is part of the question. Housing is the largest single expense for most consumers.
105. d – The state superior court is where most real estate lawsuits are heard. Generally real estate
cases are too large for a small claims court to settle. The court of appeals and the state supreme
court will only hear those cases not settled by a lower court.
106. b – County records are clearly the most accurate way to determine the physical age of a
house.
Consider the alternatives — architectural style is generally not grounded exclusively in a
specific period of time, the condition of a property reflects effective age but not necessarily
its physical age if it is adequately maintained, and subdivision recording only applies if the
home was immediately built.
107. d – The best answer is selection D. marketability and acceptability. Each of the alternative
answer selections may play a part in the decision of an appraiser analyzing a property.
108. a – The agency confirmation provision discloses the agency of each broker in the
transaction and is contained in all purchase agreements and counteroffers.
109. a –This is a NOT question. The pocket listing is inappropriate since, for the agent’s personal
gain, the property is not being exposed in the multiple listing service (MLS). The alternative
answer selections are all positive ethical decisions, and thus cannot be correct. If the NOT in the
question was missed, it may be difficult to choose between the remaining incorrect answers.
110. a – This is a required experience question. For a salesperson to be given the authority to review
documents by their broker, they need to have accumulated two full years’ experience within
the last five years. This is true for broker licensees as well.
111. a – Only answer selection A. rescind the agreement is appropriate. This is an excellent
example of arriving at the correct answer by eliminating the incorrect answer choices. Choice
D fails since the seller doesn’t answer to the Real Estate commissioner. Choice C fails since
the escrow officer is not responsible for disclosures. Choice B fails since most brokers are not
members of the State Bar.
112. d – A warranty deed places the liability on the grantor rather than a title company. It is often
difficult to find the seller after the escrow has closed. To sue and hope for a judgment against
the seller is impractical.
113. d – A deed becomes valid once it is delivered. To transfer a property to another individual or
back to the previous owner, a new deed is to be executed and delivered. Failure to do so may
render the ownership ambiguous and create a cloud on title.
114. a – The three steps in the creation of an agency relationship are to first disclose, then elect who
is represented, then confirm that decision. Disclosure is to be made as soon as practicable.
115. a – The agent’s duty to their client is a fiduciary duty.
116. c – A pocket listing is the withholding of a listing from the multiple listing service (MLS) for
the agent’s personal gain. This violates the fiduciary duty owed to the client since it limits the
property’s exposure on the market.
117. d – This is an example of a simple math problem that requires calculation since only answer
selection B is clearly wrong. The equation is: $410,000 = 94% of X. 410,000/94 = 4,361.70. Then
4,361.70 x 100 = $436,170.
118. b – With a fully amortized mortgage, the interest expense is subtracted from the payment first.
As a portion of principal is paid each month, the loan balance is reduced and therefore the
interest portion of the payment goes down. This in turn causes the principal portion to rise.
119. c – The beneficiary on a trust deed is the lender, i.e., the holder of a note secured by a trust
deed that is entitled to the performance of the provisions in the trust deed. In the context of a
mortgage, this is the mortgagee.
120. c – There are four levels of appraisal licenses. Anything other than a one-to-four unit residential
property requires a certified general appraiser license.
121. a – An appraiser can ethically share the contents with an appraisal report with the client or
anyone named by the client, a peer review committee and a court of law.
122. d – The rating of the insulation installed in a property needs to be disclosed to buyers of newly
built homes. The alternative items can be visually observed by the buyer.
123. c – A new property requires no adjustment for depreciation. Under the replacement cost
approach, the appraiser determines the dollar amount required to replace an improvement at
its current cost. As the property ages, the depreciation is greater. The effective age of a property,
which is what depreciation is based on, is affected by remodeling and maintenance variations
unique to each property. Thus, the replacement cost appraisal approach is generally easier to
apply to a new property than an old property.
124. c – The $300,000 selling price remains the same regardless of how the down payment is
calculated. So with the appraisal at $290,000, the buyer will need 20% of this value. Presuming
the sales price is not adjusted, the buyer will need to also place the difference between the
sales price and the appraisal ($10,000) as part of the down payment.
ORIGINALS NEW ARRANGEMENT
$240,000 LOAN $232,000
$60,000 DN. PYMT $68,000
$300,000 TOTAL $3000,000
125. a – This is a NOT question. Agency is not necessarily a matter of compensation. The agency
relationship between a client and agent exists whether or not the transaction closes and the
agent receives a fee.
126. a – An agent may only be a single agent (representing one party in a transaction) or a dual
agent (representing both parties in a transaction). As the broker in this question represents
only a buyer, the broker is a single agent.
127. d – The Agency Law Disclosure is not required for leases of less than one year.
128. d – The agency relationship options are first disclosed. Then the agent elects what the
relationship will be and finally confirms that choice with all participants involved in the
transaction.
129. c – Maps and real estate advertisements that show close proximity to favorable amenities or a
greater distance from unfavorable elements are misleading.
130. b – A deed restriction can prohibit religious use of a property but not discriminate against
minorities or females.
131. a – An “as is” defense by the seller requires full disclosure of all material facts known about a
property. “As is” is not synonymous with “no disclosure required.”
132. c – Wainscoting is a traditional style of wall covering in which a chair rail divides the lower
portion of the wall from the upper portion which is generally of a different material.
133. d – Monies advanced to the broker for future marketing costs needs to be accounted to the
seller.
134. c – The election of an agency role needs to be chosen as soon as possible and then confirmed
with all participants.
135. c – An individual who has been delegated agency duties by the primary agent of the client,
not the client themselves, is a subagent. For example, when another broker acts on behalf of
a seller at the request of the seller’s broker, a subagency with the seller has been established
by the brokers.
136. b – The misleading nature of the undisclosed factor rises to the level of unlawful conduct as it
places the seller in a position in which they can neither sell the property to someone else nor
complete the accepted transaction. As with puffing, it is the belief and trust bestowed by the
principal that causes the act to move beyond a matter of ethics and become unlawful.
137. a – Before a broker may solicit, advertise for and agree to receive an advance fee, the
paperwork material is to be submitted to the Commissioner of the Department of Real Estate
(DRE) for approval at least 10 calendar days prior to use.
138. c – This is a NOT question. Estoppel – the principle that prevents a person from asserting
something contrary to what is implied by previous actions or statements – will not terminate
the relationship. Each of the alternative answer selections will terminate an agency
relationship.
139. d – This is a NOT question. Trade fixtures belong to a commercial tenant and are to be
removed at the end of their tenancy, and thus are not an appurtenance. Appurtenances run
with the land and are transferred with it on its sale.
140. a – In this question, the park is built within a specific neighborhood. If an assessment is made
for the cost to build and/or maintain the park, it would apply to just the owners of property in
that neighborhood as a special assessment.
141. c – Answer choice C is correct since debt and equity funds are forms of real estate investments.
Answer choices A and B may represent the benefits of real estate investments, but are not real
estate investments themselves.
142. a – The price paid for a property establishes what the commission due to the broker will be.
143. c – There are several principles to real estate value. The principle of conformity holds that
the maximum value is realized when a reasonable degree of homogeneity of improvements is
present. Use conformity is desirable, creating and maintaining higher values.
144. d – In a condominium complex, an individual owner owns their own condo as well as a
proportional share of all common areas. They can own both in fee title.
145. a – This is a LEAST question. The original price or value of anything is of little concern when
determining its present value. Thus, the original cost of a residence is not of importance when
conducting an appraisal.
146. b – The issue raised by this question is one of disclosure. Prizes and gifts are allowable so long
as there is a full disclosure of all the terms and conditions associated with the promotional
event.
147. b – Avulsion is the sudden loss (or addition) of land through natural forces. Accretion is
the gradual addition to property through the accumulation of layers of soil. Reliction is the
gaining of land area.
148. c – The foundation plans speak to questions related to the building foundation in the same
manner that a framing plan illustrates the framing of a property.
149. d – The annual percentage rate (APR) may stand alone as financial information without
providing additional financial information in a newspaper advertisement.
150. a – The term “turnkey” implies a property is complete and ready for immediate occupancy,
requiring nothing more of the property to fulfill its intended purpose.

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Simulated Exam #1 169

28. If a lessee assigns their lease to someone else, the lessee:

61. Assemblage is closest to:

88. Who may withdraw trust funds?

130. All of the following deed provisions are unenforceable, except:

138. All of the following will terminate an agency relationship, except:

SIMULATED EXAM 1 ANSWER KEY

59. d – No points are charged on a CalVet loan. It is a land sales contract.

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