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Quiz Session - Attempts With Random Questions

California Real Estate Exam Questions

Page 7 of 25

121.

There are four elements of value—desire, utility, scarcity, and affordability. Which of the following accurately describes scarcity?

  • How much of the item is available to consumers

  • The degree to which a purchaser values the item

  • The product's ability to do the job

  • The consumer's ability to pay for the item

Correct answer: How much of the item is available to consumers?

Value is established by the interplay of these four factors:

  1. Desire: How badly does the consumer want the item?
  2. Utility: Is the item effective at doing its job?
  3. Scarcity: How much of the item is available to consumers?
  4. Affordability: Can the consumer afford to pay for the item?

122.

An area with more interested buyers than properties for sale is likely to have which of the following?

  • Higher prices

  • Lower prices

  • None of these

  • An unusual number of properties that are listed but unsold

Correct answer: Higher prices

Because of supply and demand, areas with fewer properties and more interested buyers are likely to have higher real estate prices.

The principle of supply and demand holds that price varies directly but not necessarily proportionately with demand and inversely with supply. Increasing supply or decreasing demand tends to reduce prices in the market. The opposite is also true.

123.

Yolanda is analyzing a real estate investment opportunity in the California desert. She plans to purchase the property and rent it to tourists. Based on her underwriting, the property will produce $15,000 in NOI annually.

Yolanda presents an offer on the property for $250,000, which is accepted by the seller. Based on these numbers, what capitalization rate should Yolanda expect to achieve?

  • 6%

  • 3.75%

  • 1%

  • 0%

Correct answer: 6%

Capitalization Rate = NOI/Value

$15,000/$250,000 = 6%

124.

Subdivisions of what size are exempt from California's Subdivided Lands Act?

  • Four parcels or fewer

  • Ten parcels or fewer

  • Six parcels or fewer

  • One hundred parcels or fewer

Correct answer: Four parcels or fewer

Subdivisions of four parcels or fewer are exempt from California's Subdivided Lands Act because five or more parcels are subject to it. 

Subdivisions of two or more parcels are subject to the Subdivision Map Act.

125.

Salespersons renewing their real estate license must complete all the following continuing education (CE) courses except for which one?

  • Loan modification

  • Agency

  • Fair housing

  • Ethics

Correct answer: Loan modification

In California, loan modification is not a DRE-approved continuing education course for a real estate salesperson. 

All license renewal applicants must prove compliance with CE requirements. The required 45 hours include 18 hours comprised of these six three-hour courses:

  • Trust Fund Handling
  • Fair Housing
  • Risk Management
  • Ethics
  • Agency
  • Management and Supervision

The remaining hours can be earned with continuing education courses in Consumer Service or Consumer Protection.

126.

What is the documentary transfer tax rate for cities and counties in California?

  • $0.55/$500

  • $0.25/$500

  • $0.60/$200

  • $1.00/$500

Correct answer: $0.55/$500

In California, a county or city may adopt a documentary transfer tax for transfers of real property located in that city or county. The rate for this tax is $0.55 for every $500 of consideration provided. It is common practice for the county to collect this tax and give half of it to the city.

127.

What is a person who brings the buyer and seller together but does not act on behalf of either party as an agent?

  • Facilitator

  • Exclusive agent

  • Dual agent

  • Outside broker

Correct answer: Facilitator

A facilitator brings the buyer and seller together but does not act as an agent for either party. Facilitators perform many of the duties traditionally performed by real estate agents, such as presenting offers and assisting the parties in closing procedures.

128.

Prepayment penalties may not amount to more than which of the following? 

  • Six months' interest

  • Eight months' interest

  • Six weeks' interest

  • Two years' interest

Correct answer: Six months' interest

In California, a loan's prepayment penalty may not amount to more than six months' interest. See Business and Professions Code 10242.6 (a).

129.

Which of the following describes an ad valorem tax?

  • A tax based on the assessed value of the property as a whole

  • A tax based on only the value of the land, not the structures

  • A tax based on the value of any structures on the property but not the land

  • A tax based on the purchase price of the property

Correct answer: A tax based on the assessed value of the property as a whole

Ad valorem is a Latin phrase meaning “according to value.” An ad valorem tax is a tax on the value of the property as a whole as assessed by a government employee (the county assessor, usually). This includes the land and any structures on it. 

130.

A property sold at auction to take care of unpaid taxes would be transferred with which type of deed?

  • Tax deed

  • Gift deed

  • Secret deed

  • Warranty deed

Correct answer: Tax deed

A tax deed is given to a purchaser at a public sale of land held for nonpayment of taxes. It conveys to the purchaser only such title as the defaulting taxpayer had.

A gift deed has no consideration. A quitclaim deed is a deed to relinquish any interest in property that the grantor may have without any warranty of title or interest. A warranty deed is used to convey real property, which contains warranties of title and quiet possession, and the grantor thus agrees to defend the premises against the lawful claims of third persons.

131.

In California, an acknowledgment of a deed may be made before all except which of the following?

  • Real estate broker

  • Any of these

  • Notary public

  • Judge

Correct answer: Broker

In California, acknowledgment of a deed cannot be made before a real estate broker. Deeds can be acknowledged by certain local officials, usually clerks and judges.

132.

After a tenant vacates their unit, how long does their landlord have to refund the tenant's security deposit?

  • 21 days

  • 1 month

  • 1 week

  • As long as the landlord wants

Correct answer: 21 days

When a residential lease ends, if there is no damage or required cleaning in the unit, the landlord must refund the tenant's security deposit. In California, the landlord has 21 days from the day the tenant vacates to refund the security deposit.

133.

Which of the following is false regarding a listing agreement?

  • It is not a legally binding document

  • It must include the listing price

  • It must include the listing period

  • It must include all agreement terms

Correct answer: It is not a legally binding document

The listing agreement is a legally binding document that includes the listing period, all agreement terms, and the listing price.

134.

Which of the following is true regarding a ground lease?

  • It is a lease of land only

  • It is a lease used only in the retail business

  • It is a lease for minerals and airways

  • It is not a "true" ground lease if it is for fewer than 10 acres of land

Correct answer: It is a lease of land only

A ground lease is an agreement for the use of the land only, sometimes secured by improvements placed on the land by the user. 

Ground leases are typically used when the owner leases raw land for agricultural or mining purposes, wants to retain ownership of land that is to be developed, and wants to retain ownership of land to sell an interest in improvements.

135.

What type of loan commitment is most often used to retire a construction loan?

  • A take-out commitment

  • A firm commitment

  • A lock-in commitment

  • An FHA commitment

Correct answer: A take-out commitment

With a take-out commitment, the lender agrees to pay the balance of another loan. This is often used when a short-term construction loan is replaced with a long-term permanent loan. The construction loan is "taken out," so to speak.

136.

Which type of deed is often used to clear a "cloud on the title"?

  • Quit claim deed

  • Warranty deed

  • Last will and testament

  • Tax deed

Correct answer: Quit claim deed

A quit claim deed is a way a grantor transfers only the interest the grantor has at the time the conveyance is executed. There are no implied warranties in connection with a quit claim deed. This type of deed guarantees nothing, and there is no expressed or implied warranty that the grantor owns the property or any interest in it. Moreover, a quit claim deed does not convey any after-acquired title. 

Warranty deeds are the most common type of deed in general and may be used between family members, although they typically are not used when transferring gifts. Special warranty deeds are used by those who obtain property through a tax sale. A tax deed is also primarily used to convey the deed at a tax sale.

137.

The Statute of Frauds requires certain contracts to be which of the following?

  • In writing

  • Witnessed by at least five people

  • In blue ink

  • On parchment paper

Correct answer: In writing

The Statute of Frauds is a law based on an old English statute that requires certain contracts to be in writing and signed. Examples of contracts covered by the Statute of Frauds include contracts for the sale of real property and contracts not to be performed within one year. 

The Statute of Frauds pertains to whether a contract is enforceable, not valid.

138.

Which of the following would cause an agent's license to be temporarily or permanently taken away or refused for renewal?

  • Participates in discriminatory practices

  • Does not have a college degree in real estate practice

  • Does not sell a sufficient number of properties in a calendar year

  • Has been fired in the past five years

Correct answer: Participates in discriminatory practices

This action goes against multiple Fair Housing statutes. In most states, including California, an agent's license could be temporarily or permanently taken away or refused for renewal if the agent engages in discriminatory practices. An agent who violates Fair Housing laws by participating in discriminatory practices could also face fines and potentially prosecution.

139.

When looking at an amortization table for a fixed-rate, fully-amortizing loan, one would expect the portion of installments allocated to the principal to be highest at ____ and the portion of installments allocated to interest payments to be highest at ____.

  • maturity; the start of the loan

  • the start of the loan; also the start of the loan

  • maturity; the midpoint of the loan term

  • the start of the loan; the midpoint of the loan term

Correct answer: maturity; the start of the loan

An amortization table for a fixed-rate, fully amortizing loan will lay out a fixed monthly installment that is put toward the principal and interest. There are several steps in determining how much of each month's installment is put toward the principal and interest. 

First, interest is calculated by applying the interest rate to the principal balance. After a portion of the monthly installment is allocated to interest, there will be some amount of the installment left over. This remainder is put toward the principal balance. As a result, the principal balance shrinks every month. Because interest payments are calculated by applying a fixed percentage to the principal, if the principal shrinks, so will the interest payments. As interest owed decreases, the portion of each monthly installment that can be put toward the principal grows. Therefore, the portion of installments allocated to the principal is highest at maturity, and the portion of installments allocated toward interest is highest at the start of the loan.

If you're having trouble understanding this, looking at an amortization table will help to solidify the concept. Better yet, get hands-on experience by building your own amortization table in Excel.

140.

Due to the placement of power lines behind a property owner's home, the utility company is granted right-of-way across the property owner's land to maintain the lines. This is known as what?

  • Easement in gross

  • Commercial easement

  • Lien

  • Default 

Correct answer: Easement in gross

An easement gives the easement holder the right to use the land of another. There are two types of easements—an easement appurtenant and an easement in gross. 

An easement in gross does not benefit the owner of adjoining real property but still has a beneficiary. An example of a party that benefits from an easement in gross could be a utility company that needs access to a property to install and maintain telephone lines.

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