CA Real Estate Salesperson Exam Preparation Test
(127).jpg "CA Real Estate Salesperson Exam Preparation Test - Quiz")
Are you living in California state and aspiring to become a real estate salesperson? You need to clear the final exam first, and that is not going to be easy anyway. It would help if you had a solid preparation and knowledge of all the concepts, laws, and policies. This test provides you material for clearing out the final exam.
- 1.
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?
- A.
Fixed expenses
- B.
Operating expenses
- C.
Capital expenses
- D.
Other expenses
Correct Answer
A. Fixed expensesExplanation
The taxes and the fire insurance will not vary during the year and as a result, these are classified as fixed expenses.Rate this question:
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- 2.
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?
- A.
$81,000
- B.
$196,000
- C.
$504,000
- D.
$720,000
Correct Answer
C. $504,000Explanation
Expenses = 60% or $94,500
$157,500 Gross Income
------------
.60 / $ 94,500
$157,500 Gross Income
94,500 Expenses
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$63,000 divided by 12 1/2% = 504,000Rate this question:
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- 3.
The Mt. Diablo meridian line runs:
- A.
East and West
- B.
The same as township lines
- C.
North and South
- D.
North
Correct Answer
C. North and SouthExplanation
Base lines run East and West; Meridian lines run North and South.Rate this question:
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- 4.
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:
- A.
$16,200
- B.
$16,266
- C.
$16,430
- D.
$16,485
Correct Answer
D. $16,485Explanation
Selling Price (100%) = $15,290 + $215.30 + 6%
%15,290 + $215.30 = $15,505.30 or 94%
$15,505.30 divided by 94% = $16,495Rate this question:
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- 5.
When a home has been kept in better than average condition, the effective age compared to the actual age would be:
- A.
Less
- B.
More
- C.
The same
- D.
Non of the above
Correct Answer
A. LessExplanation
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.Rate this question:
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- 6.
A single family dwelling that is considered to be an improper improvement in relation to its site suffers a loss in value described as:
- A.
Incurable location obsolescence
- B.
Curable functional obsolescence
- C.
Incurable functional obsolescence
- D.
Curable physical obsolescence
Correct Answer
C. Incurable functional obsolescenceExplanation
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.Rate this question:
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- 7.
Which of the following would help to prevent economic obsolescence on an income property?
- A.
All of the surrounding properties are prospering
- B.
Proper management of the income property
- C.
Excellent maintenance on the building
- D.
All of the above
Correct Answer
A. All of the surrounding properties are prosperingExplanation
Economic obsolescence results from outside influences. The only one mentioned in the choices is under item "A".Rate this question:
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- 8.
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?
- A.
No affect
- B.
$125.00 loss
- C.
$250.00 loss
- D.
$12,500 gain
Correct Answer
C. $250.00 lossExplanation
Cost $48,000
Additions $12,750
Book Value $60,750
Selling Price $60,500
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Loss $ 250Rate this question:
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- 9.
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:
- A.
15 days
- B.
30 days
- C.
45 days
- D.
60 days
Correct Answer
C. 45 daysExplanation
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.Rate this question:
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- 10.
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:
- A.
28%
- B.
35%
- C.
55%
- D.
65%
Correct Answer
B. 35%Explanation
Face Amount $4,200
Net Amount $2,730
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Discount $1,470
$1,470 Divided by $4,200 = 35%Rate this question:
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- 11.
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:
- A.
Rate of depreciation exceeds 4% per annum
- B.
Time of depreciation to date is over 10 years
- C.
Present book value of the building is $120,000
- D.
Rate of depreciation cannot be determined from the data given
Correct Answer
A. Rate of depreciation exceeds 4% per annumExplanation
100% - 37 !/2% = 62 1/2% Remaining to depreciate
62 1/2% divided by 15 years = 4.17% per yearRate this question:
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- 12.
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:
- A.
$6,100
- B.
$8,100
- C.
$9,100
- D.
$15,100
Correct Answer
C. $9,100Explanation
Duplex Four-plex
$120,000 M.V. $195,000
80,000 Loan 146,000
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$ 40,000 Equity $ 49,000Rate this question:
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- 13.
In single-family house construction the term "footing" refers to:
- A.
A beam under the floor boards
- B.
A girder, running along the foundation, to which the ends of the floor boards are fixed
- C.
The spreading part at the base of the foundation wall or pier
- D.
Reinforced concrete slab over which asphalt tile may be laid
Correct Answer
C. The spreading part at the base of the foundation wall or pierExplanation
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.Rate this question:
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- 14.
In order for it to become effective and to transfer title, a deed must:
- A.
Be acknowledged
- B.
Be executed on a day other than Sunday
- C.
Have a proper description of the property
- D.
Contain the phrase "To have and to hold"
Correct Answer
C. Have a proper description of the propertyExplanation
Of the item listed a property description of the property is the only essential requirement for an effective and valid deed.Rate this question:
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- 15.
To alienate title to property one:
- A.
Secures an ALTA policy of the title insurance
- B.
Clouds the title
- C.
Records a homestead
- D.
Conveys title
Correct Answer
D. Conveys titleExplanation
When an owner alienates the title to the property it means they have conveyed it.Rate this question:
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- 16.
Because of the long term nature of their assets, investments in amortized real estate loans make particularly good investments for:
- A.
National banks
- B.
Credit Unions
- C.
Life insurance companies
- D.
Individuals
Correct Answer
C. Life insurance companiesExplanation
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.Rate this question:
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- 17.
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:
- A.
Increase at a constant amount
- B.
Decline while the amount credited to interest increases
- C.
Cause the amount credited to interest to remain constant
- D.
Increase while the amount credited to interest decreases
Correct Answer
D. Increase while the amount credited to interest decreasesExplanation
As the loan is paid off, the amount due for interest will decrease thereby allowing more to be applied to the principal.Rate this question:
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- 18.
When appraising a house built in 1910, the appraiser would use which of the following to estimate the cost new:
- A.
A national cost index adjusted in 1910
- B.
Actual cost of construction in 1910
- C.
Current replacement or reproduction cost
- D.
Current cost adjusted by the 1910 cost of living index
Correct Answer
C. Current replacement or reproduction costExplanation
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.Rate this question:
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- 19.
When a purchase money deed of trust is used to obtain a loan from an institutional lender, the trustor:
- A.
Holds the deed of trust
- B.
Receives a note for the amount borrowed
- C.
Signs a note for the amount borrowed
- D.
Loans the funds
Correct Answer
C. Signs a note for the amount borrowedExplanation
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.Rate this question:
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- 20.
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.
A tax free exchange
- B.
Involuntary conversion
- C.
Subrogation
- D.
Economic obsolescence
Correct Answer
B. Involuntary conversionExplanation
For income tax purposes, eminent domain proceedings are known as involuntary conversion.Rate this question:
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- 21.
During a period of time in which unemployment is declining and the gross national product is increasing:
- A.
The value of single family residences would tend to increase in value
- B.
New home sales would tend to increase
- C.
Demand for existing housing would increase
- D.
All of the above would be true
Correct Answer
D. All of the above would be trueExplanation
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.Rate this question:
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- 22.
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:
- A.
Have an opportunity to earn a full commission if he or she is the procuring cause
- B.
Equally share the commission if any one of the brokers sells the property
- C.
Earn a full commission if the owner sells the property herself
- D.
Have the right to exercise an option to purchase the property at the listed price
Correct Answer
A. Have an opportunity to earn a full commission if he or she is the procuring causeExplanation
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.Rate this question:
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- 23.
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:
- A.
Escrow holder
- B.
Title company
- C.
Buyer
- D.
Buyer's broker
Correct Answer
B. Title companyExplanation
The title company will demand proof of emancipation to be sure that the grantor is competent to convey title.Rate this question:
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- 24.
The relationship of the escrow holder to the parties in the sale and purchase of real property is that of an:
- A.
Advocate
- B.
Independent contractor
- C.
Employee
- D.
Agent
Correct Answer
D. AgentExplanation
The escrow holder is the agent for both parties to the transaction. This relationship is greater than that of an employee.Rate this question:
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- 25.
Most of the junior loans that are available today are secured through:
- A.
Savings and loan associations
- B.
Private Investors
- C.
Commercial Banks
- D.
Mortgage bankers
Correct Answer
B. Private InvestorsExplanation
Most second and third trust deeds today are only available through private investors and individuals.Rate this question:
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- 26.
The size of the population needed to support a successful neighborhood shopping center is:
- A.
3,000 to 5,000
- B.
5,000 to 10,000
- C.
30,000 minimum
- D.
100,000
Correct Answer
B. 5,000 to 10,000Explanation
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.Rate this question:
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- 27.
The Federal National Mortgage Association (FNMA) was created for the primary purpose of:
- A.
Advancing funds to mas production builders in or near urbanized areas
- B.
Lending money on FHA Title II loans when banks, Savings and Loan Associations or private lenders are unwilling to do so
- C.
Increasing the amount of housing credit available to the economy
- D.
Supervise public lending agency associations
Correct Answer
C. Increasing the amount of housing credit available to the economyExplanation
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.Rate this question:
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- 28.
The main benefit for the lender under FHA financing over conventional financing is the:
- A.
Mortgage insurance
- B.
Higher yield
- C.
Ease of sale in the secondary money market
- D.
Higher loan to value ration
Correct Answer
A. Mortgage insuranceExplanation
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.Rate this question:
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- 29.
An alienation clause is not permitted under which of the following types of financing?
- A.
Conventional
- B.
Cal-Vet
- C.
FHA
- D.
Private loan
Correct Answer
C. FHAExplanation
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.Rate this question:
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- 30.
If the Federal Reserve wants to increase the amount available to member banks to ease a tight money market it could:
- A.
Raise the discount rate to its member banks
- B.
Lower the minimum reserves required by its member banks
- C.
Raise the minimum reserves required by its member banks
- D.
Sell government bonds
Correct Answer
B. Lower the minimum reserves required by its member banksExplanation
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.Rate this question:
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- 31.
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:
- A.
.006
- B.
.6
- C.
7.2% and divide by 12
- D.
12 and divide by .072
Correct Answer
A. .006Explanation
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 monthRate this question:
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- 32.
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:
- A.
Has until June 16 to obtain the seller's acceptance
- B.
Has until June 15 to obtain the seller's acceptance
- C.
Must return the deposit to the buyer as demanded
- D.
Must place the deposit in a neutral escrow until the five day period expires
Correct Answer
C. Must return the deposit to the buyer as demandedExplanation
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.Rate this question:
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- 33.
Mr. John Adams grants an option to Mr. Frank Jason to purchase the former's ranch. This option most clearly constitutes a:
- A.
Voluntary lien on Adam's ranch
- B.
Contract to keep an offer open
- C.
Fiduciary agreement
- D.
Offer to enter into a contract
Correct Answer
B. Contract to keep an offer openExplanation
An option is a contract that keeps an offer open. It does not constitute a lien.Rate this question:
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- 34.
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:
- A.
Promptly attempt to sell property to keep damages suffered by him to a minimum
- B.
Promptly notify the buyer and restore or offer to restore to him everything of value that was received upon condition that the buyer do likewise
- C.
Publish notice of the rescission in a newspaper of general circulation
- D.
Immediately sue for damages suffered as a result of the buyer's breach
Correct Answer
B. Promptly notify the buyer and restore or offer to restore to him everything of value that was received upon condition that the buyer do likewiseExplanation
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.Rate this question:
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- 35.
When a real estate broker speaks of "tax shelter" he could be referring to:
- A.
The depreciation allowance on income property
- B.
An installment sale of property
- C.
A tax deferred exchange
- D.
Any of the above
Correct Answer
D. Any of the aboveExplanation
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.Rate this question:
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- 36.
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:
- A.
Activities of secondary mortgage markets
- B.
Superiority of short term loans over long term loans
- C.
Resale of homes
- D.
Effects of the security offered by the Federal Deposit Insurance Corporation
Correct Answer
A. Activities of secondary mortgage marketsExplanation
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.Rate this question:
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- 37.
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:
- A.
Since the contract was not in writing, the statute of frauds would relieve the broker of any liability
- B.
The broker would not be liable for any damages if escrow had closed before damages had been established
- C.
The broker is liable and the statute of frauds is not the issue
- D.
The broker is only liable if the misrepresentations had been given in written from
Correct Answer
C. The broker is liable and the statute of frauds is not the issueExplanation
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.Rate this question:
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- 38.
Which of the following is not required to obtain an easement by prescription
- A.
A use of the property hostile and adverse to the true owner's title
- B.
A public confrontation with the owner before witnesses
- C.
A claim of right
- D.
Open, notorious and uninterrupted use for 5 years
Correct Answer
B. A public confrontation with the owner before witnessesExplanation
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.Rate this question:
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- 39.
A balloon note is also known as:
- A.
A fully-amortized loan
- B.
A static loan
- C.
A self-liquidating loan
- D.
A partially-amortized loan
Correct Answer
D. A partially-amortized loanExplanation
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.Rate this question:
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- 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:
- A.
Escrow agent
- B.
Trustee
- C.
Trustor
- D.
Beneficiary
Correct Answer
C. TrustorExplanation
The trustor (owner and borrower) remains in possession of the property until the final sale by the trustee at the trustee's sale.Rate this question:
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- 41.
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?
- A.
Title vests with Carter
- B.
The priority of recordation prevails
- C.
Carter has recourse against Baker for failure to record
- D.
Baker remains the owner
Correct Answer
D. Baker remains the ownerExplanation
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.Rate this question:
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- 42.
It is proper business practise for real property managers to be compensated in all of the following ways except by a:
- A.
Percentage of gross receipts
- B.
Commission on new leases
- C.
Commission on major repairs or alterations
- D.
Receipt of discount on purchase of supplies
Correct Answer
D. Receipt of discount on purchase of suppliesExplanation
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.Rate this question:
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- 43.
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?
- A.
$3,186.18
- B.
$3,466.83
- C.
$3,861.17
- D.
$3,790.00
Correct Answer
C. $3,861.17Explanation
$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 = $3,861.17Rate this question:
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- 44.
A policy manual is:
- A.
An outline of the Code of Ethics
- B.
A book describing the insurance coverage for the employees
- C.
A floor schedule for employee
- D.
An outline of the procedures under which an office operates
Correct Answer
D. An outline of the procedures under which an office operatesExplanation
A policy manual is the outline of the office procedures.Rate this question:
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- 45.
After subtracting $140.00 escrow fees and 6% commission on gross sales price, a seller receives $13,584. What is the selling price?
- A.
$12,770.00
- B.
$14,440.00
- C.
$14,540.00
- D.
$14,600.00
Correct Answer
D. $14,600.00Explanation
Selling Price (100%) = $13,584 + $140 + 6%
$13,584 + $140 = 94% or $13,724
$13,724 divided by 94% = $14,600Rate this question:
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- 46.
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?
- A.
10%
- B.
20%
- C.
25%
- D.
40%
Correct Answer
C. 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%Rate this question:
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- 47.
It is common procedure to record all of the following instruments, except:
- A.
A real property sales contract
- B.
A notice of completion
- C.
Assignment of deed of trust or mortgage
- D.
A promissory note secured by a deed of trust or mortgage
Correct Answer
D. A promissory note secured by a deed of trust or mortgageExplanation
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.Rate this question:
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- 48.
When real property is used as the security for a loan, the property is said to be:
- A.
Pledge
- B.
Hypothecated
- C.
Assigned
- D.
Warranted
Correct Answer
B. HypothecatedExplanation
To hypothecate property means to borrow money and use it as the security for the debt.Rate this question:
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- 49.
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:
- A.
$13,000.00
- B.
$6,366.67
- C.
$5,433.33
- D.
$4,633.00
Correct Answer
B. $6,366.67Explanation
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
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$39,000.01Rate this question:
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- 50.
The loan instrument which allows for future additional advances, but uses the same instrument for security is which of the following?
- A.
Acceleration clause
- B.
Reconveyance deed
- C.
Exculpatory clause
- D.
Open End trust deed
Correct Answer
D. Open End trust deedExplanation
the statement of the question is a good definition of an open end trust deed or mortgage.Rate this question:
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Mar 22, 2023Quiz Edited by
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May 03, 2011Quiz Created by
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