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Quiz Session - Attempts With Random Questions

California Real Estate Exam Questions

Page 6 of 25

101.

What is true regarding the primary mortgage market?

  • Loans are made directly to borrowers

  • Loans are never sold, only bought

  • Loans are sold to insurance companies

  • Loans are only made to investors

Correct answer: Loans are made directly to borrowers

The primary mortgage market refers to commercial banks, credit unions, and mortgage bankers. Primary lenders make loans directly to borrowers.

The secondary mortgage market consists of large government organizations and investors that buy loans already made by primary lenders, such as Fannie Mae, Freddie Mac, and Ginnie Mae. Pensions and life insurance companies also buy mortgages as investments.

102.

What would the documentary transfer tax be if the amount of consideration provided was $1,000,000?

  • $1,100

  • $11,000

  • $2,000

  • $12,100

Correct answer: $1,100

The documentary transfer tax is assessed at $0.55 per $500 of consideration.

$1,000,000/500 * 0.55 = $1,100

Put another way, 0.55/500 = 0.0011

Then, just multiply the consideration given by 0.0011.

$1,000,000 * 0.0011 = $1,100

103.

In regard to real estate commissions, which of the following statements is true?

  • They are negotiable

  • They are fixed by federal law

  • There are set rates for different municipalities

  • They are not negotiable 

Correct answer: They are negotiable

A real estate commission can be whatever the seller and listing agent agree. There is no federal or local governing body that standardizes commissions, nor is there any mandated cap or floor for commissions.

104.

Items that are permanently affixed to land or improvements on land are considered real property. Which of the following items would not be considered permanently affixed?

  • A washing machine

  • Doors of a building

  • Permanently installed cabinets

  • Trees

Correct answer: A washing machine

Though washing machines may be difficult to move, they are not considered "affixed" and are not usually treated as real property. If a buyer wants the seller's washer and dryer, this should be clearly noted in the purchase agreement to avoid any confusion.

Items that are affixed to land are considered real property. These include buildings, bridges, and trees, as well as anything that is affixed to them (e.g., the doors of a building, permanently installed cabinets, or built-in appliances).

105.

An agent has a legal responsibility to disclose which of the following to potential buyers?

  • Whether a property is in a special flood hazard area

  • The annual income of the sellers

  • Why the sellers have decided to list their home

  • The demographics of the neighborhood

Correct answer: Whether a property is in a special flood hazard area

Agents are required by law to inform potential buyers of all known aspects of the property's condition, including environmental hazards. This would be done via the Hazard Disclosure Statement (NHD).

Other hazards buyers must be informed of include the following:

  • Seismic hazard zones
  • Dam inundation
  • Earthquake fault zones
  • Elevated fire risk

106.

Exclusive agency listings are unpopular for which of the following reasons?

  • Agents are not guaranteed a commission

  • It pits two agents against each other

  • An agent will have a split commission

  • Agents are guaranteed a commission 

Correct answer: Agents are not guaranteed a commission

In an exclusive agency listing, the listing agent is the only agent who can receive a commission if the property sells. However (and this is the main difference between exclusive agency and exclusive right-to-sell), in an exclusive agency agreement, the seller retains the right to procure a buyer without the agent's help and avoid paying a commission. 

This can result in a situation where the agent does a great deal of work marketing and showing the seller's home, only for the seller to make their own deal and leave the agent without a commission. Because agents are not guaranteed a commission, exclusive agency listings are unpopular.

107.

In which type of loan is the full principal balance due in a lump sum at the end of the loan term?

  • Interest-only loan

  • Interest loan

  • Open-end mortgage

  • Neutrally amortized loan

Correct answer: Interest-only loan

An interest-only loan is a straight, non-amortizing loan in which the lender receives only interest during the term of the loan and the principal is repaid in a lump sum at maturity.

108.

The Residential Listing Agreement (C.A.R. Form RLA) authorizes a broker to do all except which of the following?

  • Sign transaction documents for the seller

  • Place the property in a multiple-listing service

  • Cooperate with buyer’s agents

  • Accept on the seller’s behalf a prospective buyer’s good faith deposit

Correct answer: Sign transaction documents for the seller

The Residential Listing Agreement, Exclusive (C.A.R. Form RLA) is a listing for the sale of one or more specifically described parcels of real property. 

The RLA authorizes the broker to do the following:

  • Place a “for sale” sign on the property
  • Place the property in a multiple-listing service
  • Cooperate with buyer’s agents
  • Accept on the seller’s behalf a prospective buyer’s good faith deposit

It does not authorize the seller's agent to sign transaction documents on the seller's behalf.

109.

In what year was the real estate broker license expanded to include mineral, oil, and gas transactions?

  • 1994

  • 1943

  • 2000

  • 1954

Correct answer: 1994

Since 1994, anyone with a California real estate broker's license has been able to engage in mineral, oil, and gas (M.O.G.) transactions in California. Prior to this event, a specialized M.O.G. license was required to engage in these types of transactions.

110.

A purchase offer can be terminated under which of the following circumstances?

  • All of these

  • Either party's death

  • The offeree rejecting the offer

  • The timeframe of the offer expiring

Correct answer: All of these

An offer is terminated by any of the following:

  • Acceptance of the offer
  • Rejection of the offer
  • Revocation (withdrawal by the offeror prior to acceptance)
  • Expiration
  • Counteroffer
  • Death of either party (or either party being deemed mentally incompetent) 

111.

Which entity is allowed to charge the documentary transfer tax?

  • Counties

  • The federal government

  • The President

  • The state

Answer: Counties

Counties are permitted to charge this tax, and the city within the county is then permitted to charge the county for one-half of the total tax.

112.

Two criminals decide to create a contract outlining their responsibilities in the course of committing another crime and agreeing how the stolen funds will be distributed. 

What is true about this contract?

  • It is void

  • It is enforceable

  • It is valid

  • It is legally binding

Correct answer: It is void

A contract for an illegal purpose is always void. Void simply means that a contract doesn't pass the tests for validity (competent parties, mutual consent, valuable consideration, legal purpose, good faith). 

113.

Which type of deed does not require consideration to be paid by the grantee?

  • Gift deed

  • Tax deed

  • Foreclosure deed

  • Warranty deed

Correct answer: Gift deed

A grantor can give property to a grantee using a gift deed. The gift is made out of "love and affection," and no consideration is expected from the grantee. 

A gift deed is occasionally given in an attempt to defraud creditors; this constitutes fraud and voids the deed.

114.

What type of loan uses personal property and real estate as collateral?

  • Package loan

  • Blanket loan

  • HELOC

  • Wraparound mortgage

Correct answer: Package loan

A package mortgage is used in home financing covering real property, improvements, and movable equipment/appliances. It is often used when some of the seller's personal property (e.g., furniture, washer, dryer) is being purchased by the buyer, and the buyer wants to use one loan for the entire purchase. The lender collateralizes the loan with the home and the personal property that the buyer is purchasing.

115.

Roger makes an offer to buy Lamont's sprawling Texas ranch. About halfway through the contract, Roger is contacted by a debt collector and realizes that he owes $500,000. After paying his debts, Roger does not have enough money left to follow through on his contract with Lamont. Therefore, Roger has breached the contract. Around this time, Lamont is taking a stroll around his property and realizes that he cannot bear the thought of selling his ranch; there are simply too many special memories here. Although he has many legal remedies for breach available to him, Lamont decides simply to rescind the contract.

What effect will his rescission have on the two parties?

  • Any money transferred is returned, the contract is canceled, and the parties return to their pre-contract condition

  • Both parties will return to their pre-contract condition, but both owe taxes on the property

  • Lamont will retain Roger's earnest money plus legal fees, and then both parties are free to walk away from the contract

  • Any money transferred to Lamont will be retained as damages, and then the contract will be renewed for another six months

Correct answer: Any money transferred is returned, the contract is canceled, and the parties return to their pre-contract condition

When you see "rescind," think "cancel." When a contract is rescinded, it is canceled. Any money transferred is returned, and the parties return to their pre-contract condition. It is as though the contract never existed.

116.

With which type of deed does a grantor convey interest in a property but not give word regarding the warranty of said property?

  • Quit claim deed

  • Grant deed

  • Gift deed

  • None of these

Correct answer: Quit claim deed

With a quit claim deed, the grantor conveys any interest they may have in a property, without any warranty. The grantor's present interest and rights in a property are conveyed; if the grantor has no interest or rights in the property, then their quit claim will not convey any interest or rights in the property.

This is opposed to a grant deed, which does contain warranties. A grant deed promises that title has not been conveyed to multiple people and that the property is unencumbered.

117.

Which form defines the relationship between buyers, sellers, and their agents?

  • Disclosure Regarding Real Estate Agency Relationship

  • Natural Hazard Disclosure

  • Purchase Power

  • Transfer Disclosure Mortgage

Correct answer: Disclosure Regarding Real Estate Agency Relationship (C.A.R. Form AD)

The Disclosure Regarding Real Estate Agency Relationship (C.A.R. Form AD) helps buyers and sellers to understand who they are represented by and what their rights are and provides the opportunity to confirm their agency relationships in a transaction. 

Buyers must receive form AD from their agent prior to signing an offer. Sellers must receive form AD from their agent prior to listing and again—this time from the buyer's agent—prior to accepting an offer.

118.

What is a legal entity created under state law and consisting of one or more shareholders but regarded under law as having an existence and personality separate from such shareholders?

  • A corporation

  • A trust

  • A condominium 

  • None of these

Correct answer: A corporation

A corporation is an entity established and treated by law as an individual or unit with rights and liabilities, distinct from those of the persons composing it. A corporation is a creature of law having certain powers and duties of a natural person. Being created by law, it may continue for any time the law prescribes.

119.

Real estate licensees typically have their licenses revoked or suspended when they are found guilty of all the following except which one?

  • Failing to sell a client's home

  • Obtaining a license under false pretenses

  • Handling earnest money funds improperly

  • Commingling funds 

Correct answer: Failing to sell a client's home

There are countless violations that can result in the suspension or revocation of a real estate license. Among them are misrepresentation, false promises, commingling of funds, secret profits, and negligence. 

Failing to sell a client's home, by itself, is not grounds for suspension or revocation of a real estate license.

120.

All except which of the following are fiduciary duties of real estate brokers?

  • Experience

  • Disclosure

  • Loyalty

  • Confidentiality

Correct answer: Experience

Experience comes with time and is not required of new real estate brokers.

Fiduciary duties of agents include loyalty; confidentiality; the exercise of utmost care (and, in certain situations, reasonable care); full and complete disclosure of all material facts; the obligation to account to the principal; the obligation to act fairly and honestly and without fraud or deceit; and the duty to "explain" and "counsel" about that which has been disclosed or should have been disclosed, thereby permitting the principal to make an informed and considered decision to buy, sell, lease, exchange, borrow, or lend.

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