CA Real Estate Salesperson Exam Preparation Test

1. During a period of time in which unemployment is declining and the gross national product is increasing:

The value of single family residences would tend to increase in value

New home sales would tend to increase

Demand for existing housing would increase

All of the above would be true

With full employment and a high level of national production, people will be earning more money which in turn, will increase the demand for housing and the cost of homes.

Explanation

With full employment and a high level of national production, people will be earning more money which in turn, will increase the demand for housing and the cost of homes.

2. When appraising a house built in 1910, the appraiser would use which of the following to estimate the cost new:

A national cost index adjusted in 1910

Actual cost of construction in 1910

Current replacement or reproduction cost

Current cost adjusted by the 1910 cost of living index

When applying the cost approach in the appraisal of any structure, regardless of its age, the appraiser uses todays costs to estimate the cost to reproduce or replace a like structure.

Explanation

When applying the cost approach in the appraisal of any structure, regardless of its age, the appraiser uses todays costs to estimate the cost to reproduce or replace a like structure.

3. An owner of commercial property entered into separate open listing contracts with a number of different real estate brokers. Under these circumstances, each broker will:

Have an opportunity to earn a full commission if he or she is the procuring cause

Equally share the commission if any one of the brokers sells the property

Earn a full commission if the owner sells the property herself

Have the right to exercise an option to purchase the property at the listed price

Under an open listing, the broker that is the procuring cause is the one who earns the commission. It also allows the owner to sell the property himself or herself without paying a commission.

Explanation

Under an open listing, the broker that is the procuring cause is the one who earns the commission. It also allows the owner to sell the property himself or herself without paying a commission.

4. Which of the following is not required to obtain an easement by prescription

A use of the property hostile and adverse to the true owner's title

A public confrontation with the owner before witnesses

A claim of right

Open, notorious and uninterrupted use for 5 years

Adverse use of the property must be done openly and notoriously against the will of the owner but this does not mean a public confrontation.

Explanation

Adverse use of the property must be done openly and notoriously against the will of the owner but this does not mean a public confrontation.

5. When a home has been kept in better than average condition, the effective age compared to the actual age would be:

Less

More

The same

Non of the above

The age of the property as it appears in the eye of the appraiser is referred to as effective age. If it looks better than its actual age it would have a lower effective age.

Explanation

The age of the property as it appears in the eye of the appraiser is referred to as effective age. If it looks better than its actual age it would have a lower effective age.

6. The Mt. Diablo meridian line runs:

East and West

The same as township lines

North and South

North

Base lines run East and West; Meridian lines run North and South.

Explanation

Base lines run East and West; Meridian lines run North and South.

7. A real estate broker is reviewing a profit and loss statement for an apartment house, which lists expenses under the headings shown below. Under which heading would she most likely find taxes and fire insurance?

Fixed expenses

Operating expenses

Capital expenses

Other expenses

The taxes and the fire insurance will not vary during the year and as a result, these are classified as fixed expenses.

Explanation

The taxes and the fire insurance will not vary during the year and as a result, these are classified as fixed expenses.

8. To alienate title to property one:

Secures an ALTA policy of the title insurance

Clouds the title

Records a homestead

Conveys title

When an owner alienates the title to the property it means they have conveyed it.

Explanation

When an owner alienates the title to the property it means they have conveyed it.

9. Irons, a 15 year old emancipated minor, entered into a listing with a broker to sell real property that he owned. When the broker finds a buyer and both parties have signed a purchase contract, the broker should obtain proof of the emancipation to satisfy the demands of the:

Escrow holder

Title company

Buyer

Buyer's broker

The title company will demand proof of emancipation to be sure that the grantor is competent to convey title.

Explanation

The title company will demand proof of emancipation to be sure that the grantor is competent to convey title.

10. When a real estate broker speaks of "tax shelter" he could be referring to:

The depreciation allowance on income property

An installment sale of property

A tax deferred exchange

Any of the above

A tax shelter protects part of the owner's income or profits from taxation. The use of any of the three techniques could lead to a tax savings.

Explanation

A tax shelter protects part of the owner's income or profits from taxation. The use of any of the three techniques could lead to a tax savings.

11. If a buyer defaults on his agreement to buy real property, one of the seller's remedies is rescission of the contract. If the seller elects to rescind the contract under this circumstance, he must:

Promptly attempt to sell property to keep damages suffered by him to a minimum

Publish notice of the rescission in a newspaper of general circulation

Immediately sue for damages suffered as a result of the buyer's breach

A rescission requires that all monies and property be restored and each party is put back into their original position before the contract was executed.

Explanation

A rescission requires that all monies and property be restored and each party is put back into their original position before the contract was executed.

12. A policy manual is:

An outline of the Code of Ethics

A book describing the insurance coverage for the employees

A floor schedule for employee

An outline of the procedures under which an office operates

A policy manual is the outline of the office procedures.

Explanation

A policy manual is the outline of the office procedures.

13. On June 10, a prospective buyer gave a deposit to a broker and signed the usual form of an offer to purdchase property. The deposit form included the statement "This offer is irrevocable for five days." On June 11, and before the offer had been accepted by the seller, the buyer contracted the broker and withdrew his offer and demanded the return of his deposit. The broker:

Has until June 16 to obtain the seller's acceptance

Has until June 15 to obtain the seller's acceptance

Must return the deposit to the buyer as demanded

Must place the deposit in a neutral escrow until the five day period expires

An offeror may withdraw their offer at any time and do not have to wait until the time runs out as specified in the original contract. In this instance they have a right to revoke the offer and demand the return of their deposit.

Explanation

An offeror may withdraw their offer at any time and do not have to wait until the time runs out as specified in the original contract. In this instance they have a right to revoke the offer and demand the return of their deposit.

14. Because of the long term nature of their assets, investments in amortized real estate loans make particularly good investments for:

National banks

Credit Unions

Life insurance companies

Individuals

When people buy life insurance, they generally pay for it over a long term. Insurance companies must invest these funds and real estate loans are very suitable investments.

Explanation

When people buy life insurance, they generally pay for it over a long term. Insurance companies must invest these funds and real estate loans are very suitable investments.

15. Mrs. King borrowed money using a fully-amortized loan to finance the remodeling of her real property. If equal monthly payments include both principal and interest, the amount of the payment on the principal will:

Increase at a constant amount

Decline while the amount credited to interest increases

Cause the amount credited to interest to remain constant

Increase while the amount credited to interest decreases

As the loan is paid off, the amount due for interest will decrease thereby allowing more to be applied to the principal.

Explanation

As the loan is paid off, the amount due for interest will decrease thereby allowing more to be applied to the principal.

16. A balloon note is also known as:

A fully-amortized loan

A static loan

A self-liquidating loan

A partially-amortized loan

A balloon note refers to a note that has a balloon payment at the end of its term. This means the note is not completely paid off at the end of its term and is only partially amortized.

Explanation

A balloon note refers to a note that has a balloon payment at the end of its term. This means the note is not completely paid off at the end of its term and is only partially amortized.

17. A seller of a home suffered damages due to misrepresentations made by the broker with whom the seller had been dealing with. In the lawsuit filed against the broker by the seller, the broker contended that he was not liable since the listing contract had been an oral and not a written agreement as required under the statute of frauds. Under these circumstances the court would likely rule that:

Since the contract was not in writing, the statute of frauds would relieve the broker of any liability

The broker would not be liable for any damages if escrow had closed before damages had been established

The broker is liable and the statute of frauds is not the issue

The broker is only liable if the misrepresentations had been given in written from

If the seller allowed the broker to represent him in dealings with third parties, the seller is responsible for all acts including any misrepresentation made by the broker. The creation of an agency relationship is not dependent upon a written contract. It is true, however, that a broker must have written agreement in a suit for a commission.

Explanation

If the seller allowed the broker to represent him in dealings with third parties, the seller is responsible for all acts including any misrepresentation made by the broker. The creation of an agency relationship is not dependent upon a written contract. It is true, however, that a broker must have written agreement in a suit for a commission.

18. In order for it to become effective and to transfer title, a deed must:

Be acknowledged

Be executed on a day other than Sunday

Have a proper description of the property

Contain the phrase "To have and to hold"

Of the item listed a property description of the property is the only essential requirement for an effective and valid deed.

Explanation

Of the item listed a property description of the property is the only essential requirement for an effective and valid deed.

19. A single family dwelling that is considered to be an improper improvement in relation to its site suffers a loss in value described as:

Incurable location obsolescence

Curable functional obsolescence

Incurable functional obsolescence

Curable physical obsolescence

If a home is placed on a lot in a position that does not take advantage of a nice view or whatever amenities the property holds, it is a poor job of planning and would be considered functional obsolescence. Since it is difficult to move the home it would be considered incurable.

Explanation

If a home is placed on a lot in a position that does not take advantage of a nice view or whatever amenities the property holds, it is a poor job of planning and would be considered functional obsolescence. Since it is difficult to move the home it would be considered incurable.

20. Mayer sold his house and took back a note for $4,200 secured by a second deed of trust. He promptly sold the note for $2,730. This represents a discount of:

28%

35%

55%

65%

Face Amount $4,200
Net Amount $2,730
-----------
Discount $1,470

$1,470 Divided by $4,200 = 35%

Explanation

Face Amount $4,200
Net Amount $2,730
-----------
Discount $1,470

$1,470 Divided by $4,200 = 35%

21. If the Federal Reserve wants to increase the amount available to member banks to ease a tight money market it could:

Raise the discount rate to its member banks

Lower the minimum reserves required by its member banks

Raise the minimum reserves required by its member banks

Sell government bonds

If the Fed allows the member banks to reduce their minimum reserves, this means more cash would be available for loans and would ease a tight money market.

Explanation

If the Fed allows the member banks to reduce their minimum reserves, this means more cash would be available for loans and would ease a tight money market.

22. A duplex with a fair market value of $120,000 and an outstanding $80,000 loan balance, was exchanged for a four plex with a market value of $195,000 and an outstanding $146,000 loan balance. The owner of the duplex would pay in cash or secondary financing most nearly:

$6,100

$8,100

$9,100

$15,100

Duplex Four-plex

$120,000 M.V. $195,000
80,000 Loan 146,000
------------- ---------------
$ 40,000 Equity $ 49,000

Explanation

Duplex Four-plex

$120,000 M.V. $195,000
80,000 Loan 146,000
------------- ---------------
$ 40,000 Equity $ 49,000

23. Mr. and Mrs. Smith acquired a home in 1977 for $48,000. Some years later they sold their home for $60,500 and moved into an apartment unit. During the ten year period of ownership, permanent improvements totaling $12,750 were made to their house. If Mr. Smith's income consisted entirely of wages, how would the sale of the home affect his federal income tax return in the year of sale?

No affect

$125.00 loss

$250.00 loss

$12,500 gain

Cost $48,000
Additions $12,750
Book Value $60,750
Selling Price $60,500
-------------
Loss $ 250

Explanation

Cost $48,000
Additions $12,750
Book Value $60,750
Selling Price $60,500
-------------
Loss $ 250

24. When a purchase money deed of trust is used to obtain a loan from an institutional lender, the trustor:

Holds the deed of trust

Receives a note for the amount borrowed

Signs a note for the amount borrowed

Loans the funds

The trustor is the borrower and is the party that signs the note and trust deed. The beneficiary is the lender who holds the note and trust deed.

Explanation

The trustor is the borrower and is the party that signs the note and trust deed. The beneficiary is the lender who holds the note and trust deed.

25. The size of the population needed to support a successful neighborhood shopping center is:

3,000 to 5,000

5,000 to 10,000

30,000 minimum

100,000

A neighborhood shopping center usually contains a key tenant such as a supermarket and has other small shops or stores in the adjoining area. The number of people to support this type of shopping center should be between 5,000 and 10,000.

Explanation

A neighborhood shopping center usually contains a key tenant such as a supermarket and has other small shops or stores in the adjoining area. The number of people to support this type of shopping center should be between 5,000 and 10,000.

26. Commercial banks consider liquidity and marketability of loans to be of paramount importance when they make mortgage investments secured by real property. Such banks are referring to:

Activities of secondary mortgage markets

Superiority of short term loans over long term loans

Resale of homes

Effects of the security offered by the Federal Deposit Insurance Corporation

To be in a liquid position, the bank must be able to sell the existing loan quickly and without loss. This usually can be done in the secondary mortgage market.

Explanation

To be in a liquid position, the bank must be able to sell the existing loan quickly and without loss. This usually can be done in the secondary mortgage market.

27. A prospect is considering the purchase of an income property which has an operating statement showing $94,500.00 deducted from gross income to arrive at the net income. The deductions amount to 60% of the gross income. If the prospect wants a 12 1/2% return on the purchase price of any investment he makes, what should he pay for the property?

$81,000

$196,000

$504,000

$720,000

Expenses = 60% or $94,500
$157,500 Gross Income
------------
.60 / $ 94,500

$157,500 Gross Income
94,500 Expenses
-----------

$63,000 divided by 12 1/2% = 504,000

Explanation

Expenses = 60% or $94,500
$157,500 Gross Income
------------
.60 / $ 94,500

$157,500 Gross Income
94,500 Expenses
-----------

$63,000 divided by 12 1/2% = 504,000

28. The event for income tax purposes, where money is paid to an owner of real property that is taken as a result of condemnation proceedings, is known as:

A tax free exchange

Involuntary conversion

Subrogation

Economic obsolescence

For income tax purposes, eminent domain proceedings are known as involuntary conversion.

Explanation

For income tax purposes, eminent domain proceedings are known as involuntary conversion.

29. The relationship of the escrow holder to the parties in the sale and purchase of real property is that of an:

Advocate

Independent contractor

Employee

Agent

The escrow holder is the agent for both parties to the transaction. This relationship is greater than that of an employee.

Explanation

The escrow holder is the agent for both parties to the transaction. This relationship is greater than that of an employee.

30. The main benefit for the lender under FHA financing over conventional financing is the:

Mortgage insurance

Higher yield

Ease of sale in the secondary money market

Higher loan to value ration

The Mortgage insurance protects the lender in the event of a loss due to foreclosure. Although the lender can sell the loan to FNMA, a secondary money market, it is not the main advantage.

Explanation

The Mortgage insurance protects the lender in the event of a loss due to foreclosure. Although the lender can sell the loan to FNMA, a secondary money market, it is not the main advantage.

31. Archer sold his home to Baker who decided not to record his deed but took possession of the property as her residence. Archer sold the same property to Carter, who examined the county recorder's files but did not inspect the property. Carter received a deed from Archer and recorded it. Concerning the title to the property, which of the following is correct?

Title vests with Carter

The priority of recordation prevails

Carter has recourse against Baker for failure to record

Baker remains the owner

Since Baker gave notice of an interest in the property by taking possession, his rights will prevail. It is essential that an interest buyer not only check the records but also investigate the interest of anyone in possession.

Explanation

Since Baker gave notice of an interest in the property by taking possession, his rights will prevail. It is essential that an interest buyer not only check the records but also investigate the interest of anyone in possession.

32. Most of the junior loans that are available today are secured through:

Savings and loan associations

Private Investors

Commercial Banks

Mortgage bankers

Most second and third trust deeds today are only available through private investors and individuals.

Explanation

Most second and third trust deeds today are only available through private investors and individuals.

33. When real property is used as the security for a loan, the property is said to be:

Pledge

Hypothecated

Assigned

Warranted

To hypothecate property means to borrow money and use it as the security for the debt.

Explanation

To hypothecate property means to borrow money and use it as the security for the debt.

34. In single-family house construction the term "footing" refers to:

A beam under the floor boards

A girder, running along the foundation, to which the ends of the floor boards are fixed

The spreading part at the base of the foundation wall or pier

Reinforced concrete slab over which asphalt tile may be laid

A footing is the heavy concrete section under the foundation. It is generally wider than the foundation wall itself and carries the weight of the structure.

Explanation

A footing is the heavy concrete section under the foundation. It is generally wider than the foundation wall itself and carries the weight of the structure.

35. An owner depreciated an improvement based on a cost basis of $160,000, using the straight-line method. The improvements have been depreciated 37.5% to date and the remaining economic life is estimated to be 15 years. Which of the following is a correct statement? The:

Rate of depreciation exceeds 4% per annum

Time of depreciation to date is over 10 years

Present book value of the building is $120,000

Rate of depreciation cannot be determined from the data given

100% - 37 !/2% = 62 1/2% Remaining to depreciate
62 1/2% divided by 15 years = 4.17% per year

Explanation

100% - 37 !/2% = 62 1/2% Remaining to depreciate
62 1/2% divided by 15 years = 4.17% per year

36. The Federal National Mortgage Association (FNMA) was created for the primary purpose of:

Advancing funds to mas production builders in or near urbanized areas

Increasing the amount of housing credit available to the economy

Supervise public lending agency associations

FNMA was created originally as a secondary mortgage market. The idea was to purchase existing FHA and VA loans from lenders and thus make more money available in the housing market.

Explanation

FNMA was created originally as a secondary mortgage market. The idea was to purchase existing FHA and VA loans from lenders and thus make more money available in the housing market.

37. It is proper business practise for real property managers to be compensated in all of the following ways except by a:

Percentage of gross receipts

Commission on new leases

Commission on major repairs or alterations

Receipt of discount on purchase of supplies

Any discount allowed on the purchase of supplies or other materials by the supplier, belong to the owner and the broker cannot take this money.

Explanation

Any discount allowed on the purchase of supplies or other materials by the supplier, belong to the owner and the broker cannot take this money.

38. As a matter of good business practice, a real estate licensee should inform the buyer that as soon as the deed is recorded, they should file a change of ownership statement with the county tax assessor within:

15 days

30 days

45 days

60 days

The Revenue and Taxation Code requires the person acquiring the property to file the statement within 45 days of the recording date of the deed.

Explanation

The Revenue and Taxation Code requires the person acquiring the property to file the statement within 45 days of the recording date of the deed.

39. The loan instrument which allows for future additional advances, but uses the same instrument for security is which of the following?

Acceleration clause

Reconveyance deed

Exculpatory clause

Open End trust deed

the statement of the question is a good definition of an open end trust deed or mortgage.

Explanation

the statement of the question is a good definition of an open end trust deed or mortgage.

40. When a borrower defaults under a note secured by deed of trust, the trustor is allowed a specific period of time to redeem the property. During the redemption period, the right of possession is held by the:

Escrow agent

Trustee

Trustor

Beneficiary

The trustor (owner and borrower) remains in possession of the property until the final sale by the trustee at the trustee's sale.

Explanation

The trustor (owner and borrower) remains in possession of the property until the final sale by the trustee at the trustee's sale.

41. Which of the following would help to prevent economic obsolescence on an income property?

All of the surrounding properties are prospering

Proper management of the income property

Excellent maintenance on the building

All of the above

Economic obsolescence results from outside influences. The only one mentioned in the choices is under item "A".

Explanation

Economic obsolescence results from outside influences. The only one mentioned in the choices is under item "A".

42. Lots "A", "B" and "C" sold for a total price of $39,000. If Lot "B" was priced at $6,400 more than Lot "A", and Lot "C" was priced at $7,100 more than Lot "B", the price of Lot "A" was:

$13,000.00

$6,366.67

$5,433.33

$4,633.00

This is an algebra problem. If you cannot find the solution with algebra go to the trial and error method.

B = $6,400 + $6,366.67 = $12,766.67
C = $7,100 + $12,766.67 = $19.866.67
A = $6,366.67 $ 6,366.67
------------------
$39,000.01

Explanation

This is an algebra problem. If you cannot find the solution with algebra go to the trial and error method.

B = $6,400 + $6,366.67 = $12,766.67
C = $7,100 + $12,766.67 = $19.866.67
A = $6,366.67 $ 6,366.67
------------------
$39,000.01

43. A man purchased a property at 20% less than the listed price and later sold the property for the original listed price. What was the percentage of profit?

10%

20%

25%

40%

Assume that the property was listed at $10,000. Listed price less 20% = $8,000 purchase price. If it was sold at the listed price of $10,000, the owner made $2,000 profit. $2,000 profit divided by $8,000 cost = 25%

Explanation

Assume that the property was listed at $10,000. Listed price less 20% = $8,000 purchase price. If it was sold at the listed price of $10,000, the owner made $2,000 profit. $2,000 profit divided by $8,000 cost = 25%

44. Mr. John Adams grants an option to Mr. Frank Jason to purchase the former's ranch. This option most clearly constitutes a:

Voluntary lien on Adam's ranch

Contract to keep an offer open

Fiduciary agreement

Offer to enter into a contract

An option is a contract that keeps an offer open. It does not constitute a lien.

Explanation

An option is a contract that keeps an offer open. It does not constitute a lien.

45. Paul Brown, a licensed real estate broker, took an offer from Mr. Green on a parcel of land for $6,000 on the following terms: $2,000 down and a purchase money trust deed and note for the balance, payable $70 per month including interest at 7.2%. If the offer was accepted by the seller what is the balance of the loan after the first three monthly payments?

$3,186.18

$3,466.83

$3,861.17

$3,790.00

$6,000 Price - $2,000 Down = $4,000 first trust deed
$4,000 x .006 = $24.00 Interest, first month
70 - $24 = $46.00 Applied to Principal
$4,000 - $46.00 = $3,954 Balance after first month
$3,954 x .006 = $23.72 Interest second month
$3,954 - $46.28 =$3,907.72 Balance after second month
$3,907.72 x .006 = $23.45
$70 - $23.45 = $46.55 Applied to principal
$3,907.72 - 46.55 = $3,861.17

Explanation

$6,000 Price - $2,000 Down = $4,000 first trust deed
$4,000 x .006 = $24.00 Interest, first month
70 - $24 = $46.00 Applied to Principal
$4,000 - $46.00 = $3,954 Balance after first month
$3,954 x .006 = $23.72 Interest second month
$3,954 - $46.28 =$3,907.72 Balance after second month
$3,907.72 x .006 = $23.45
$70 - $23.45 = $46.55 Applied to principal
$3,907.72 - 46.55 = $3,861.17

46. After subtracting $140.00 escrow fees and 6% commission on gross sales price, a seller receives $13,584. What is the selling price?

$12,770.00

$14,440.00

$14,540.00

$14,600.00

Selling Price (100%) = $13,584 + $140 + 6%
$13,584 + $140 = 94% or $13,724
$13,724 divided by 94% = $14,600

Explanation

Selling Price (100%) = $13,584 + $140 + 6%
$13,584 + $140 = 94% or $13,724
$13,724 divided by 94% = $14,600

47. Master sold his residence which was unencumbered. Total deductions in escrow amounted to $215.30 in addition to a broker's commission of 6% of the selling price. The selling price was the only credit item. Masters received a check from escrow amounting to $15,290. The selling price was most nearly:

$16,200

$16,266

$16,430

$16,485

Selling Price (100%) = $15,290 + $215.30 + 6%
%15,290 + $215.30 = $15,505.30 or 94%
$15,505.30 divided by 94% = $16,495

Explanation

Selling Price (100%) = $15,290 + $215.30 + 6%
%15,290 + $215.30 = $15,505.30 or 94%
$15,505.30 divided by 94% = $16,495

48. An alienation clause is not permitted under which of the following types of financing?

Conventional

Cal-Vet

FHA

Private loan

An alienation clause permits the lender to call the loan or make it all due and payable if the property is conveyed. This is not allowed under FHA financing.

Explanation

An alienation clause permits the lender to call the loan or make it all due and payable if the property is conveyed. This is not allowed under FHA financing.

49. The fastest way to calculate one month's interest on a real estate loan with an interest rate of 7.2% interest per annum is to multiply the principal balance by:

.006

.6

7.2% and divide by 12

12 and divide by .072

By dividing the 7.2% rate by 12 first, you can find one month's interest by multiplying the loan amount by .006

7.2% divided by 12 = .006, rate for one month

Explanation

By dividing the 7.2% rate by 12 first, you can find one month's interest by multiplying the loan amount by .006

7.2% divided by 12 = .006, rate for one month

50. It is common procedure to record all of the following instruments, except:

A real property sales contract

A notice of completion

Assignment of deed of trust or mortgage

A promissory note secured by a deed of trust or mortgage

A promissory note is never recorded. The trust deed or mortgage and the other documents mentioned in choices "A", "B" and "C" will however be recorded.

Explanation

A promissory note is never recorded. The trust deed or mortgage and the other documents mentioned in choices "A", "B" and "C" will however be recorded.