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Quiz Session - Attempts With Random Questions

California Real Estate Exam Questions

Page 10 of 25

181.

Regarding the California Workers' Compensation Act, which of the following statements is true?

  • If a broker is illegally uninsured, then that employer may be liable for up to $100,000 in penalties

  • A broker is only required to carry workers' compensation coverage for salespersons if they meet their sales goals

  • A broker is not required to carry workers' compensation coverage for their employees

  • A broker will increase their risk by carrying workers' compensation coverage

Correct answer: If a broker is illegally uninsured, then that employer may be liable for up to $100,000 in penalties

California requires real estate brokers to provide workers’ compensation coverage for their real estate sales agents. If an agent of an uninsured broker is injured and cannot collect the workers’ compensation benefits to which they are entitled through the broker’s policy, the agent receives benefits from the Uninsured Employers Fund (UEF). The UEF would, in turn, make every attempt to collect from the broker.

In addition, when an investigation is conducted by the Division of Labor Standards Enforcement and it is determined that an employer is illegally uninsured, then that employer may be liable for up to $100,000 in penalties.

All uninsured employers in the real estate industry are urged to obtain workers’ compensation coverage immediately either through the state-recognized self-insurance program or through a carrier recognized by the California Department of Insurance.

Section 10032.b of the Business and Professions Code states the following:

A real estate broker and a real estate salesperson licensed under that broker may contract between themselves as independent contractors or as employer and employee, for purposes of their legal relationship with and obligations to each other. Characterization of a relationship as either "employer and employee" or "independent contractor" for statutory purposes, including, but not limited to, withholding taxes on wages and for purposes of unemployment compensation, shall be governed by Section 650 and Sections 13000 to 13054, inclusive, of the Unemployment Insurance Code. For purposes of workers' compensation, the characterization of the relationship shall be governed by section 3200 and following of the Labor Code.

182.

If an individual uses a witnessed will to transfer property at death, how many people must witness the will in the maker's presence?

  • Two

  • One

  • Four

  • Ten

Correct answer: Two

A witnessed will must be signed and dated by the property owner(s) and at least two witnesses. Per best practice, the witnessed will should be prepared by an attorney. 

183.

The payment that a broker or real estate agent receives for the sale of a property is known as which of the following?

  • Commission

  • Sale split

  • Profit percentage

  • Sale earnings

Correct answer: Commission

A commission is an agent’s compensation for performing the duties of the agency. In real estate practice, a commission is usually a percentage of the selling price of a property. Or, on a lease deal, the agent's commission might be a percentage of a year's rent.

Commissions are always negotiable.

184.

According to the Equal Credit Opportunity Act, creditors cannot discriminate against applicants on the basis of which of the following?

  • All of these

  • Race

  • Religion

  • National origin

Correct answer: All of these

According to the Equal Credit Opportunity Act, creditors cannot discriminate against applicants on the basis of race, color, religion, national origin, sex, marital status, age, or dependency upon public assistance.

185.

Who is a grantor?

  • A person who sells an item of real estate

  • A person who buys real estate

  • A person who surveys land

  • A broker handling the transaction

Correct answer: A person who sells an item of real estate

A grantor is a person who transfers their interest in property to another by a grant. A grantee is a person to whom a grant is made.

186.

When a property is listed for sale, who is responsible for setting the listing price?

  • The seller

  • The broker

  • The salesperson

  • The appraiser

Correct answer: The seller

The seller's agent will provide guidance and help the seller understand pricing conditions in their market, but it's ultimately up to the seller to set the price.

187.

A real estate agent requiring a borrower to obtain title insurance from a particular title insurance company is considered to be what?

  • Illegal under RESPA

  • Legal in many states, including California

  • Legal as long as the real estate agency approves it

  • Allowed under the Federal Title Insurance Code

Correct answer: Illegal under RESPA

Requiring buyers to purchase title insurance from a particular title insurance company is illegal under the Real Estate Settlement Procedures Act (RESPA). Receiving a fee (i.e., a kickback) for a referral to a title insurance company is also prohibited.

188.

What happens to a real estate market if the base employers/industries in the area move or go out of business?

  • Real estate demand evaporates

  • Real estate demand increases

  • Rents go down, but home values are likely to rise

  • The "rubberband" effect

Correct answer: Real estate demand evaporates

Base employers are the foundation of a real estate market. When denizens of a city lose their jobs, they don't have money to pay rent or mortgages. If a foundational employer or industry goes away, the loss of income for a city's people can be great enough that the entire city's real estate market falls apart. Detroit is a good example.

189.

Which of the following pieces of legislation controls the construction of residential properties or other properties within a quarter mile of a fault line?

  • Alquist-Priolo Earthquake Fault Zoning Act

  • California Earthquake Act

  • National Environmental Policy Act

  • Elmore-Winston Zoning Act

Correct answer: Alquist-Priolo Earthquake Fault Zoning Act

The Alquist-Priolo Earthquake Fault Zoning Act is designed to control development in the vicinity of hazardous earthquake faults. The zones are usually one-quarter of a mile in width. Structures built prior to 1975 are not affected by this act.

190.

What effect does absorption have on vacancy rates?

  • When absorption increases, vacancy will decrease

  • When absorption increases, vacancy will increase

  • When absorption increases, vacancy will usually remain the same

  • Vacancy and absorption are not related

Correct answer: When absorption increases, vacancy will decrease 

Absorption refers to the supply of property that is occupied over time. As property is absorbed, vacancy goes down.

191.

In California, who has the responsibility of giving, refusing, and revoking real estate licenses?

  • Real Estate Commissioner

  • California governor

  • California Association of Realtors

  • California Superior Court

Correct answer: Real Estate Commissioner

The Real Estate Commissioner governs the California Department of Real Estate (DRE) and is its chief executive. The Real Estate Commissioner has the responsibility of giving, refusing, and revoking real estate licenses.

192.

Which of the following is not a contract-validity requirement?

  • In writing

  • Mutual consent

  • Legal purpose

  • One party's consideration

Correct answer: In writing

Not all contracts are required to be in writing. The Statute of Frauds indicates which contracts must be in writing to be enforceable.

To be valid, a contract must have:

  • Competent parties (over 18 and mentally competent)
  • Sufficient consideration (something of value is given by both parties, e.g., $1,000,000 in exchange for a house)
  • Mutual consent of the involved parties
  • Legal purpose (e.g., a contract for the sale of a stolen painting is invalid)
  • Voluntary (the parties to the contract must act freely and not under the influence of misrepresentation, fraud, or duress)

193.

In what year was the Taxpayer Relief Act passed?

  • 1997

  • 1945

  • 2001

  • 1967

Correct answer: 1997

The Taxpayer Relief Act was passed in 1997. Among other things, the act provided relief from capital gains tax on the sale of a primary residence. Under the act, couples are granted a $500,000 ($250,000 for single-filers) capital gains tax exclusion.

194.

The term "blockbusting" refers to which of the following practices?

  • Making money by encouraging homeowners to rent or sell their properties by telling them that individuals of a protected class are moving into their neighborhood

  • Modifying services or conditions for different people as a way of discriminating against someone in a protected class

  • Encouraging individuals to refinance their mortgage at a higher rate

  • Dishonestly telling an individual that a property is unavailable as a way of discriminating against them

Correct answer: Making money by encouraging homeowners to rent or sell their properties by telling them that individuals of a protected class are moving into their neighborhood

Blockbusting is the practice of inducing panic-based home sales at prices below market value, especially by exploiting the prejudices of property owners in neighborhoods in which the racial composition is changing or appears to be on the verge of changing. It is a form of illegal discrimination prohibited by the Fair Housing Act.

195.

In California, if the seller of a property is a "foreign person," the buyer must withhold and send what percentage of the gross sales price to the Internal Revenue Service?

  • 15%

  • 50%

  • 0.1%

  • 10%

Correct answer: 15%

Congress enacted the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) to impose a tax on foreign persons when they sell a US real property interest. A “foreign person” includes a non-resident alien, foreign partnerships, trusts, estates, and corporations that have not elected to be treated as a domestic corporation under IRC §897(i). 

For US property dispositions subject to FIRPTA, the transferee (purchaser) is required to withhold and remit to the IRS 15% of the gross sales price to ensure that any taxable gain realized by the seller is actually paid.

196.

According to the California Statute of Frauds, which contract does not need to be in writing to be valid and enforceable?

  • A lease that will be enforced for a year or shorter from the contract date

  • A lease for a mobile home

  • A lease for a two-family dwelling

  • None of these

Correct answer: A lease that will be enforced for a year or shorter from the contract date

A lease with a term of one year or shorter may be created by verbal agreement. However, for the sake of clarity and to reduce the risk of disagreement (both during the lease term and after the tenant’s surrender of the premises), all leases, even those with month-to-month terms, should be reduced to written form. 

California’s Statute of Frauds requires a lease to be in writing if it either (a) has a term longer than one year or (b) has a term shorter than one year that expires more than one year after the agreement is reached.

197.

When a borrower signs a security agreement that they promise to pay, they are signing which of the following?

  • A promissory note

  • A deed of trust

  • A bill of sale

  • An offer contract

Correct answer: A promissory note

Following a loan commitment from the lender, the borrower signs a note, promising to repay the loan under stipulated terms. The promissory note establishes personal liability for its payment.

A promissory note is "evidence of the debt."

198.

A CLUE Home Seller's Disclosure Report is used for what purpose?

  • Underwriting an insurance policy

  • Making structural improvements

  • Reporting crimes by real estate agents

  • Alerting buyers to the values of surrounding homes

Correct answer: Underwriting an insurance policy

CLUE reports are used when underwriting or rating insurance policies. These reports describe types of insurance losses over the previous five years and the amounts paid for those losses. Sellers are sometimes required by buyers to attach CLUE reports to the purchase offer. These reports can help buyers estimate the cost of insuring the home.

199.

A borrower wants to ensure that the interest rate on their loan does not increase before the closing date. What type of loan commitment should the borrower obtain?

  • A lock-in commitment

  • A take-out commitment

  • A firm commitment

  • A conditional commitment

Correct answer: A lock-in commitment

A lock-in commitment is sometimes offered to homebuyers who want to ensure that interest rates do not increase during their application and closing periods. Lock-in loan commitments offer to lend a specified amount for a specific term and interest rate with the addition of an agreement that the lender will not raise the interest rate for a certain period, such as 60 days.

200.

If the Real Estate Commissioner of California places a bar order on a revoked licensee, the individual becomes unemployable at all except which of the following?

  • Law office

  • Credit union or bank

  • Title company

  • Escrow company

Correct answer: Law office

When a real estate license is revoked, the Real Estate Commissioner can bar the licensee from working in real estate and for real estate-related businesses, including real estate brokerages, lenders, banks, credit unions, escrow companies, or title companies.

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