Exam 8

Real Estate Commissioner has the authority to:
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The Law of Agency deals with:-the rights and duties of an agent and principal -principal and third parties with whom the agent deals -agents and third parties whom the agent deals withWhen an adverse possessor has fulfilled the requirements of being open and notorious, uninterrupted for at least five years, has a claim of rights, is hostile to the owner's intent, and has paid property taxes for five or more years this is called adverse possession. When does the adverse possessor receive legal title to the property?Legal title to the property is transferred by court orderA lender would charge "points:"-to help cover the costs of making the loan. -to close the gap between market rates and the fixed rate of the loan. -to increase his effective yield.Able is a 50 year old single man. He purchased a home 9 years ago for $55,000, and sells it today for $60,000. Able would have:No capital gainWho prosecutes an unlicensed salesperson?District Attorney (DA)The effective delivery of a deed under the law depends upon:the intention of the grantor.Who has no agency relationship with the seller or the listing broker, and therefore, is not liable for their actions?buyers brokerWhich of the following economic principles states that at any given level of investment attractiveness, consumer demand tends to focus on the item offered at the lowest prices?SubstitutionA real estate broker hires Jose, an unlicensed assistant, to hand out door hanger fliers in his farm and to make telephone cold calls on Monday and Wednesday evenings soliciting prospective buyers, seller, and borrowers. This is:unlawful for both the broker and the unlicensed assistantFor tax purposes, if a seller pays points it would:-increase her cost basis -be considered a selling expenseWhich of the following may cause mortgage defaults?-late payments or payment in arrears -delinquent property taxes -property not maintainedUnder the law of agency, a fiduciary relationship is created between the broker and seller upon execution of the listing agreement. As far as the brokers responsibility to third parties is concerned, the broker:must be fair and honestA dress factory is being built in an area and will employ mostly women. The real estate office owner told his employees to (1) direct their advertising toward married women with no children and (2) to charge more rent to certain ethnic groups and religious groups than to others. Which of the following is correct?Both (1) and (2) are violations of the Fair Housing LawsRegression would occur with which of the following?The presence of a substandard property in a neighborhood of quality properties.Real property taxes for the fiscal year 2012-2013, became a lien on the property on:January 1, 2012.Which of the following are true?A small house would have a higher square foot or cubic foot unit cost than a larger houseWhen a lender loans money to a homeowner secured by a home, the interest charged is:simple interestGross misrepresentation is:-an obvious falsehood -a knowledge of a falsehood -a representation that caused the damaged or aggrieved party to enter into the contractWhen a loan is fully amortized by equal monthly payments of principal and interest, the amount applied to principal:increases while the interest payment decreasesMarginal tax rate refers to:determination of the tax rate on the next dollar earned.Real estate brokers use a trust fund account:in order to separate trust fund monies from the brokers own funds.When the Federal Reserve Board increases reserve requirements, this causes:Decreased loan activityWhat would be the best way to value a parcel of land if the owner would like to build a single-family home on it?market/comparable approachIn the event a buyer of a single-family, owner-occupied residence defaults under a purchase contract in which both parties had initialed the Liquidated Damages Clause, the maximum the seller can retain would be:3% of the purchase price, not to exceed the amount of deposit.Tax shelter refers to:Income taxAble paid a property owner $100 as consideration for an option to purchase a property. The option contained a clause stating that the option was to be for a duration of 60 days from June 1, 2007 and upon exercising the option, the holder is to purchase the property for all cash within 30 days thereafter. On July 10, 2007 Able sold and assigned his option for $1,000. On July 28, 2008 the new holder of the option notified the owner that he would purchase on August 15, 2007. The owner claimed the option was void. Which of the following is true?The option was valid and the assignee could purchase the property on August 15, 2007Appraisal value takes into consideration:physical characteristics, time, and locationSavings and loan associations lending capacities are:-not limited to a maximum loan amount. -not limited by borrowers assets. -usually used on single-family home loans.As a matter of practice, the escrow holder is authorized to:Call for funding of buyers loanIf there was no agreement concerning the time within which an escrow should close, which of the following would apply?Reasonable period of timeWhich of the following is true?An owners death terminates a listing contractThe correct terminology for highest and best use is:Net incomeThe listing signed by the wife alone to sell community real property is:enforceableWhen a buyer receives a commitment from a lender to provide funds if needed by the buyer, this is called a/an:Standby loanThe income approach would be used to appraise the following, except:New homes in a subdivisionA real estate broker lists a property under a net listing, as well as him having an option to purchase the property within 30 days. After 27 days the broker decides to buy the property, he must:-disclose any and all profits he makes from the purchase -inform the seller regarding any additional offers that are on the property -disclose all material facts he knows about the propertyWhich of the following relate to the appraisal principle of change?-integration and disintegration -integration and progression -regressionThe best way to establish an agency relationship is through:written agreementConsideration can be:-money -performance -anything of valueEquity loans secured by a residence and used for improvements:have a right of rescission.The maximum fine the Real Estate Commissioner can levy against a broker who pays an unlicensed person for soliciting borrowers or negotiating loans is:$10,000Effective gross income is best described as gross scheduled income:minus vacancy and rent collection losses.Which of the following is found in FHA and VA loans, but not in conventional loans?no prepayment penalty.Marketable title is title that is:free of reasonable objections.When the State of California gives a non-riparian owner permission to use a nearby lake, this is called:AppropriationRESPA requires:a lender to provide to the borrower a loan estimate of charges needed to close the sale.To arrive at the net operating income, you would calculate:gross scheduled income less vacancies and collection losses, less operating costs.What is a chronological history of the owners of a property?chain of titleWhen an offer is made by a buyer and accepted by the seller, which of the following is correct?the buyer would not receive title to the propertyA real estate agent obtains an unsolicited listing by telling an owner that the homes in the area are selling for more than their actual selling prices. This is:IllegalWhich of the following occurs when Seller Able lets Buyer Baker assume that Broker Charlie is his agent?Ostensible authorityAble wanted to buy a large parcel of land for future subdivision, but did not have the $100,000 needed to purchase the property. He persuaded Baker to buy the parcel for $100,000, and then immediately after, Baker signed a land contract of sale on the property to Able for $125,000. This transaction would be:a valid purchase and resaleProperties that are rarely sold would be appraised by the:Cost approachA seller promised a broker that he would pay a 6% commission on the sale of a property. However, the seller did not sign a listing agreement. The broker found a buyer who gave him an earnest money deposit with the signed purchase agreement. The buyer did not specify what to do with the deposit. The seller accepted the offer and then demanded that the broker turn over the earnest money deposit to him. The broker should:give the earnest money deposit to the seller.To arrive at a net income for capitalization purposes an appraiser would use which of the following items:allowance for rent loss and vacancies.A salesperson knew that a client would love a house. The client required her uncle to approve of the purchase before she would proceed. Salesperson accepted the offer for the client and then found out that the uncle was out of the country. This was:IllegalEscrow instruction should be:ExecutedAn exclusive authorization and right to sell listing:contains a legal description of the propertyWhich of the following would be considered a material fact and must be disclosed to the buyer?extensive plumbing repairs are needed in the propertyThe seller of a one-to-four unit dwelling must provide the buyer with a disclosure statement containing:All known problemsA declaration by one who is averse to taking an oath which is reduced to writing and is affirmed before an officer who has authority to administer such an act is called:An affidavitTo effectuate the safety clause (brokers protection clause), the broker must:have notified the seller in writing of the names of all prospective buyers negotiated with during the listing and must be delivered not later than the listing termination date.The relationship between a vendor and vendee in a land contract of sale would be similar to:A beneficiary and trustorAll of the following can be deducted to determine net income, except:Mortgage interestJim receives a life estate for the life of Joe. Jim dies before Joe. The estate:vests in the heirs of JimA loan officer gives a broker a small referral fee in return for his referral of a client looking to purchase a single-family home. Under RESPA:This is forbiddenThe purpose of an escrow is:so the terms of the transaction are met.A verbal agreement between two real estate brokers to split a commission is:EnforceableThe phrase "all due and payable upon the happening of a certain even" is called:An acceleration clauseA deceased husbands will states that his wife can collect all of the rents that come from an apartment building for her lifetime. When she dies, the apartment building is to go to their church. The wife holds:A life estateCompliance with the agency relationship law enacted as a part of the Civil Code would be required in which of the following transactions?A broker who negotiates a lease for a period of longer than one year on one-half of a duplex.The broker is required to provide a ready, willing, and able buyer in order to earn a commission. Which of the following is true?-Sellers acceptance confirms performance. -The broker earns a commission even if escrow never closes. -There is a valid contract.A capitalization rate can be determined by:-summation -band of investment theory -comparisonWhy are warranty deeds rarely used in California, yet they are commonly used in other parts of the United States?title insurance, with its recourse against the title company, has largely supplanted warranty deed with its recourse against the grantor.When acquiring a property subject to an existing deed of trust, fee title is transferred:By delivering a deed from the grantorA broker is relieved of the obligation to present an offer to purchase real property to the principal:when the offer is patently frivolous or he is acting on written instructions of the principal.Tenancy is legally the estate of:a tenant in real property.An appraiser would estimate the value of the land (whenever possible) by:the selling prices of comparable properties.An on-site inspection for title insurance is least likely to occur with which type of title insurance policy?standard coverage policy covering a homeBuyer signs a purchase agreement and receipt for deposit and gives a deposit check to broker to hold for two weeks un-cashed, regardless of when the offer is accepted by the seller. The broker:must present the offer and inform the seller that the deposit check is to be held un-cashed.Able sold his home and carried back a $150,000 first deed of trust. Later, he sold the promissory note to Baker endorsing it, without recourse. If the borrower defaults on the loan:Baker would have to foreclose in order to collect the balance due.Able and Baker own adjacent parcel of real estate. Able says to Baker: "You may cross my property until I tell you to stop." The interest that Baker has in Able's property is:A licenseWhen a person dies without a will he has died:intestate.To prevent discrimination a developer instructs his sales staff to give special preference to women who want to purchase properties from him and to set aside the same number of homes for each ethnic group (Hispanic, African-American, Asian). Which of the following is correct?Both policies are discriminatory and therefore illegalAn abstract of title is:a written summary of documents relating to the title to the property.Able gave Broker Charlie a listing and promised to pay him a 6% commission if he finds a suitable buyer. This is:a bilateral executory contract.A real estate broker desires to join a group of individuals for the purpose of investing in real estate. The following method of syndication would provide the least protection for an investor:General partnershipIf a seller signs open listings with five different brokers:each of the brokers have the opportunity to earn a commissionWhen the taxes increase on an income property, the property value will:decrease more than the amount of the annual tax increase.Escheat causes certain real property to:revert to the State of California.Which of the following is considered a business opportunity?-Sale of a business and goodwill of the enterprise. -Sale or lease of a business and goodwill of the business opportunity. -Lease of an existing business opportunity.When a property owner restores a property without changing its style or floor plan, this is called:RehabilitationAll property sales and purchases are required to be in writing:To be enforceableWhen an appraiser is not ethical and does not follow proper MAI standards, his behavior is:a felonyThe cost approach for an apartment building is not as useful/least important in:appraising an old structure with many functional problems.In addition to county and municipal regulations such as zoning and the State Map Act, other governmental regulations can be imposed on a subdivision by:-FHA and VA. -Department of Real Estate. -Health, fire, and building safety codes.Ad valorem most nearly means:according to valueThe buyers earnest money deposit may be:-a promissory note -a post-dated check -anything that the seller considers valuableIf a broker accepts an oral contract to earn a commission on the sale of real property and the seller actually pays him the money:the broker can accept the commission.The seller takes back a junior lien secured by a second trust deed on the property and asks the agent to execute a request for notice of default. Who benefits?The beneficiary on the second trust deed.Which of the following is correct?-A copy of the public report must be displayed in a subdividers sales office -A copy of the public report must be given to anyone upon request -Under certain circumstances a public report may be renewedProperty taxes become what on real property?A lienWhich of the following statements is false?An option binds the optionee to performance.Who must consent to dual agency?Buyer and sellerWhen changes are made to the plan, form, or style of a residence to correct functional and economic obsolescence this is called:remodelingA subdivision map would include a(n):-site plan -elevation drawings -street locationsThe owner of a hardwood store, who owned the real property where it was located, sold the real property and leased it back for a long term. For income tax purposes, the seller may:deduct 100 percent of future rents.An agency relationship can be terminated by:-death or incapacity of the principal or agent. -extinction of subject matter. -operation of law.If a broker informs a seller verbally that he is negotiating with a buyer, and one day after the expiration of the listing the buyer buys the property, the owner:is not liable for a commissionWhen an appraiser estimates the quantity, quality, and durability of income he is using:the capitalization of income.How long are restrictions valid?PerpetualWhich of the following would be considered an advantage of a subchapter S corporation?Subchapter S corporations pay no tax. Any tax liability is shouldered by the individual shareholders individual tax returns.The following would allow the seller to retain legal title, in the purchase of real property, to the property being conveyed:Contract of saleFiduciary obligations include:-truth -confidentiality -competenceThe sales comparison or market data approach would be least reliable in:An inactive marketWhen a probate is being escrowed, the escrow holder will prorate the taxes based upon the:existing assessed value.Which of the following contracts falls under the Statute of Frauds:Any agreement which is not to be performed within one year.A deed of trust is recorded in 1989. Mechanic's lien is recorded in 2004. Which has priority?The deed of trust has priority, as long as work was started and/or materials were delivered after the deed of trust was recordedA broker has two offers on the same property. The two offers are from salespeople within his office and both have given deposits. The broker decides not to present the second offer until the first offer has been accepted or rejected by the seller. The seller is not made aware of the second offer. The brokers action is:not permissible.To secure a commission, a real estate agent (if a salesperson, then through the agents broker) would:file a civil suit, in court, against the person owing him a commission.When a real property purchase is in escrow, the escrow officer can:accept written instructions from the seller and buyer changing the price and terms without the approval of any of the agentsGross income minus what items equals effective gross income?vacancy, bad debts, and rent collection lossesThree parties owned equal interests in a large parcel of potentially agricultural land as tenants-in-common. One of the co-owners decided to lease the entire parcel to a 3rd party for agricultural purposes without the consent of the other co-tenants. Under these circumstances, if the two parties entered into the contract, the lease would be:invalid as one co-tenant cannot obligate the other co-tenants for a lease of the whole property without their consentWhich of the following would not qualify as a promotional note?37 monthsA selling agent is the exclusive agent of the buyer, therefore, he cannot:reveal anything negative regarding the buyer to the seller.When a licensee has been suspended due to payment of a claim from the Real Estate Recovery Account, the license cannot be reinstated until the licensee has repaid:the total amount plus interest.Escrow reserves of taxes and insurance benefit:-beneficiary -trustorA broker with an open listing contract on a property agrees orally to share a commission with the selling broker upon sale of the property. When the property sells, the listing broker is paid a commission, but he refuses to share the commission as promised. The selling broker:Would have a good chance to secure a judgement (recover commission) in a court actionIncome earned on an investment would be called:cash-on-cash returnThe phrase of indefinite duration applies to a(n):estate of inheritanceCopies of all listings, deposit receipts, canceled checks and trust records must be retained by a licensed real estate broker for:3 yearsAll of the following items are usually prorated at the close of escrow, except:delinquent interest on unsecured loansWhich of the following factors is least important in the appraisal of an old single-family residence?original cost of constructionAt 12:00 noon, Baker made an offer to purchase a single-family residence. He instructed his real estate broker not to present his offer until 6:00 PM. By 6:00 PM, three more offers had been submitted. The real estate broker should:present all offers to the property owner simultaneously as soon as possible.When a lease is assigned:the assignee becomes the tenant.Able had a house worth $200,000 and sold it, taking back a note for $125,000. Able sold the note at a discount for $123,500 and wrote without recourse when he endorsed it on the back. Baker, who bought the note, has recourse to:Correct! foreclose on the house for $125,000.A broker negotiates a deal between buyer and seller and then opens escrow. The buyer deposits a check directly into escrow. The broker must:Log the deposit in his trust account under un-deposited fundsWhen a person receives real property by succession it is conveyed by:Court orderAt 12:00 noon, Baker made an offer to purchase a single-family residence. He instructed his real estate broker not to present his offer until 6:00 PM. By 6:00 PM, three more offers had been submitted. The real estate broker should:present all offers to the property owner simultaneously as soon as possible.Which of the following is a benefit of a net lease?lessor receives net income.