Complete List of 532 California Real Estate Exam Questions and Answers
Chapter 2: Laws of Agency and Fiduciary Duties (Questions 34-50)
34. A person who is not among the protected groups under the Americans with Disabilities Act (ADA) and can therefore be refused a rental is a(n):
ANSWER: c. drug addict.
35. A real estate salesperson’s license has been suspended because money was paid out of the Recovery Account. Their license will not be reinstated:
ANSWER: d. until they repay the Recovery Account for all money paid, plus interest.
36. When approached by members of minority groups who want to be shown property, a real estate salesperson avoids showing the buyers property in integrated areas. This would be an example of:
ANSWER: b. steering.
37. Which of these would create an agency relationship:
ANSWER: d. Any of the above.
38. Admiralty Escrow offers a $100 “referral fee” to any real estate agent who opens escrow during the month of May. Under the Real Estate Settlement Procedures Act (RESPA), such an offer:
ANSWER: d. is not allowed.
39. When a broker deposits their own personal or business funds in a client trust fund account, that act is referred to as:
ANSWER: d. commingling.
40. The Real Estate Commissioner is authorized to:
ANSWER: b. promulgate rules and regulations to enforce the California real estate laws.
41. If a real estate broker fires a salesperson for an illegal act, the broker should inform the Real Estate Commissioner of the firing:
ANSWER: c. Immediately in writing. It is unconditionally required.
42. Agent Andy is hired by Seller Sally to list her property for sale. Sally is under financial distress and is motivated to sell quickly. Later, Agent Andy enters under contract to help Buyer Bill purchase a suitable property. Agent Andy shows Sally’s property to Bill and lets Bill know Sally is desperate to sell and will accept a bid lower than the list price. Bill promptly decides to purchase the property. Since Bill purchased the property so quickly, Agent Andy didn’t have the opportunity to reveal to either party that he was acting in a dual agency capacity. Which of the following statements is least correct about this scenario?
ANSWER: d. Agent Andy can still timely disclose his dual agency status to both Seller Sally and Buyer Bill so long as he does so in writing within three business days of closing.
43. In regards to items of value held in trust, which of the following statements is least likely to be true?
ANSWER: d. Trust funds cannot take the form of precious gems or stones.
44. Who may withdraw money from a trust fund?
ANSWER: d. Any authorized employee of the broker.
45. If an agent discloses to their principal the race, creed, or color of a prospective buyer or tenant, has the agent committed a discriminatory act?
ANSWER: c. Yes, since the race, creed or color of the prospect does not matter.
46. In 1968, the U.S. Supreme Court barred all racial discrimination in the sale or rental of property. A person discriminated against should:
ANSWER: d. file a civil action in federal court.
47. A buyer of a property had a real estate agent write up an offer to purchase a home. The offer was contingent upon the sale of their existing home. The seller made a counter-offer accepting the buyer’s offer, but reserved the right to continue marketing the home, seeking higher offers and granting the buyer a right of first refusal to remove their contingency if a better offer came in. The buyer accepted the seller’s counteroffer and immediately listed their existing home for sale. Shortly thereafter, the seller notified the buyer’s agent that a better offer had been received without contingencies. What should the agent advise the buyer to do?
ANSWER: c. Advise the buyer of the advantages and disadvantages of removing the contingency and buying the home before the sale of their existing home.
48. All of the following are recognized purposes of the Equal Credit Opportunity Act, except:
ANSWER: b. Regulating the printing or publishing of an advertisement for the sale or rental of residential property that indicates a wrongful discriminatory preference.
49. When a deed includes the racial identity of the parties, it can be rewritten under which of the following circumstances:
ANSWER: d. by court order.
50. A real estate broker who has been appointed as a subagent for a seller, with the seller’s approval, has a fiduciary duty to:
ANSWER: d. the seller only.
Chapter 3: Property Valuation and Financial Analysis (Questions 1-58)
1. Which of the following statement regarding capitalization rates is least correct?
ANSWER: d. Decreasing the risk of loss increases the cap rate.
2. Loss of value of an expensive home due to the close proximity of lower-priced homes in a neighborhood is known as:
ANSWER: a. regression.
3. An apartment building produces a monthly rent of $16,000. A similar property with monthly rents of $21,000 recently sold for $2,940,000. Using this as the only data, the appraiser would say that the first apartment building is worth:
ANSWER: d. $2,240,000.
4. Demand has no effect on value unless there is also:
ANSWER: d. purchasing power which enables the ability to buy the thing in demand.
5. The vacancy rate of an apartment building under normal competitive conditions is primarily the result of:
ANSWER: b. housing supply and demand in the area.
6. The period for which a property can show a return attributable to the improvements is known as the property’s:
ANSWER: a. economic life.
7. A property is valued at $300,000 with a 3% capitalization rate (cap rate). If the prospective buyer wants an 8% return on their money, the property’s valued would be:
ANSWER: a. $187,500.
8. All of the following are elements of value, except:
ANSWER: a. cost and age.
9. Each unit in a duplex rents for $1,000 per month. With a price of $240,000, the monthly gross multiplier is:
ANSWER: b. 120.
10. In using the market comparison approach in appraising a single family residence (SFR), comparisons should be made based on:
ANSWER: d. the entire property.
11. The relationship between the thing desired and the potential purchaser could be described as:
ANSWER: a. value.
12. All of the following statements define value, except:
ANSWER: c. The price an unreasonable, pressured buyer would offer for a property.
13. All of the following are good reasons for making a separate site valuation, except:
ANSWER: d. to apply the gross rent multiplier (GRM) technique.
14. The most common approach used by an appraiser in the appraisal of a single family residence (SFR) is:
ANSWER: c. market comparison.
15. All of the following are included in the narrative form of an appraiser’s report, except:
ANSWER: d. the financial terms of the sale.
16. An appraiser describes “replacement cost” as:
ANSWER: c. the current cost to build a structure of similar utility using modern methods and materials.
17. Restoring a property to a satisfactory condition without changing the floor plan, form, or style of the building is known as:
ANSWER: d. rehabilitation.
18. To arrive at a final estimate of value secured under each of the three appraisal approaches, an appraiser:
ANSWER: d. explains why or why not the other approaches were not used, then chooses the approach the appraiser believes to be the most appropriate.
19. When an appraiser relies on the principle of substitution, they assume that one property may be substituted for another in terms of all of the below, except:
ANSWER: b. nostalgic significance.
20. The premise that no prudent person would pay more for a parcel of real property than the price of a reasonably close alternative which is available without undue delay refers to the principle of:
ANSWER: c. substitution.
21. All of the following are examples of functional obsolescence, except:
ANSWER: b. proximity of obnoxious nuisances.
22. Which of these most nearly refers to a loss in value due to economic obsolescence:
ANSWER: b. a zoning change.
23. All of the following factors contribute to obsolescence, except:
ANSWER: d. Worn out carpeting.
24. Which of the following appraisal reports is the most detailed?
ANSWER: c. Narrative report.
25. The ultimate test to determine the functional utility of a property is the:
ANSWER: b. property’s marketability.
26. All of the following a property owner shows as an expense, except:
ANSWER: b. depreciation.
27. In using the capitalization process, all of the following can be deducted to determine the net income, except:
ANSWER: d. Debt service.
28. The gross rent multiplier (GRM) is calculated by dividing:
ANSWER: d. sales price by gross monthly rents.
29. To calculate a capitalization rate (cap rate), the appraiser uses which of the following methods:
ANSWER: d. Any of the above.
30. An analysis of rental income does not determine the income’s:
ANSWER: d. suitability for reinvestment.
31. John is considering an extensive modernization program for an older apartment building he owns. His decision should give most emphasis to:
ANSWER: d. effect on the net income.
32. The term “highest and best use” can best be defined as:
ANSWER: d. the use that creates the greatest net return.
33. An appraiser uses a site analysis to determine the:
ANSWER: a. highest and best use of a property.
34. All of the following are forces that influence value, except:
ANSWER: c. Demand.
35. Which of the following is ethical for an appraiser to do?
ANSWER: d. Appraise a property in which the appraiser has an interest, provided they first disclose their interest in the property.
36. All of the following are essential elements of value, except:
ANSWER: a. anticipation.
37. When comparing the economic life and the physical life of an improvement:
ANSWER: a. economic life is shorter.
38. An appraiser defines depreciation as:
ANSWER: b. loss in value from any cause.
39. To depreciate real estate, it needs to be:
ANSWER: c. improved.
40. All of the following are costs NOT associated with homeownership, except:
ANSWER: c. loss of interest on owner’s equity.
41. Which of the following approaches to valuation yields the highest estimate of value?
ANSWER: a. market comparison.
42. When appraising a special purpose property, an appraiser uses the:
ANSWER: a. cost approach.
43. To calculate replacement cost, compute the cost to replace:
ANSWER: a. an equally desirable property with the same utility value.
44. All of the following are part of the cost approach appraisal method, except:
ANSWER: b. Capitalization.
45. Appraisers attempt to estimate the value of real estate. The value is:
ANSWER: d. based on an analysis of facts as of a specified date.
46. When conducting an appraisal, all of the following are considered by an appraiser, except:
ANSWER: c. the assessed value of a property.
47. The first step in the appraisal process is to:
ANSWER: c. define the problem.
48. An appraisal is made as of a given date to indicate:
ANSWER: c. the market condition at the time the appraisal was completed.
49. Based on recent comparable sales, an agent’s opinion of a property’s fair market value (FMV) is referred to as a(n):
ANSWER: a. broker price opinion (BPO).
50. The statement “more buildings are torn down than wear out” is an illustration of:
ANSWER: c. economic obsolescence.
51. The capitalization method of the income approach determines:
ANSWER: a. the value of a property based on its net operating income (NOI).
52. When comparable sales are unavailable or inadequate and a property generates no income, an appraiser would likely use the:
ANSWER: c. cost approach.
53. When a residence has a physical age of 20 years, but the appraiser notes the building has the appearance of being only 10 years old, the appraiser is referring to:
ANSWER: a. effective age.
54. All of the following are included in the laws governing the government power of eminent domain, except:
ANSWER: d. the exercise of zoning authority.
55. The loan-to-value ratio (LTV) is best described as:
ANSWER: b. the ratio of the loan to the appraised value of the property.
56. Compared to a property’s physical life, economic life is generally:
ANSWER: a. shorter.
57. Return on investment (ROI) comes in the form of profit, while return of investment comes in the form of:
ANSWER: c. depreciation.
58. When an appraiser values a property under the cost approach, they add the value of the site to the depreciated cost new of improvements. If the value of a site is $150,000, the cost to build a new house is $300,000, the cost to build a new garage is $75,000, and the value of site improvements such as landscaping and the driveway are $75,000, what is the final value of the property under the cost approach when a 20% physical depreciation factor is applied?
ANSWER: b. $480,000.
Chapter 4: Financing (Questions 1-62)
1. The priority of trust deeds is determined by:
ANSWER: c. the time and date of recording.
2. A promissory note and trust deed:
ANSWER: d. are not always the instruments used to finance a real estate purchase.
3. To hypothecate a property is to:
ANSWER: a. offer it as security for a loan.
4. Which of the following benefits the most from a subordination clause in a trust deed?
ANSWER: b. the borrower.
5. The minimum time period for a trustee’s sale to be completed is:
ANSWER: d. just under four months.
6. The beneficiary of a trust deed is the:
ANSWER: b. bank.
7. When a lender takes an assignment of rents clause in a trust deed, the lender may:
ANSWER: d. collect rents on default.
8. In an amortized loan:
ANSWER: c. the principal portion increases with each payment.
9. Points are also known as:
ANSWER: b. prepaid interest.
10. When a lender delivers a statement to escrow showing the amount needed to pay off a loan, it is called:
ANSWER: c. a beneficiary statement.
11. A CalVET loan is:
ANSWER: b. a purchase money land contract with the state as the vendor.
12. Which of the following is recorded in the public record?
ANSWER: d. Reconveyance deed.
13. In a period of deflation:
ANSWER: a. the value of money increases.
14. When the Federal Reserve (the Fed) increases the reserve requirements, referred to as tight money policy, it will:
ANSWER: d. decrease loan activity.
15. If a lender accepts a deed-in-lieu of foreclosure, the lender:
ANSWER: d. assumes any junior liens.
16. Gale is the beneficiary of a $1,500,000 deed of trust on a single family home. Frank, the trustor, made $200,000 in payments before going into default. At the trustee’s sale, the property sold for $1,000,000, resulting in a $300,000 deficiency. In California, a deficiency judgment cannot be obtained:
ANSWER: d. Any of the above.
17. When a borrower defaults on a loan and the lender initiates judicial foreclosure, the right of possession to the property is held by the during the redemption period:
ANSWER: c. mortgagor.
18. An owner’s right to bring current any monetary or curable default stated in the notice of default (NOD) prior to five business days before the date of the sale is called:
ANSWER: c. reinstatement.
19. Bruce sold his home for $215,000 to Maria and carried back a $150,000 note with interest at 6% per annum. The note was secured by a first trust deed. The home had a fair market value (FMV) of $200,000. Later, Bruce sold the trust deed and note at a discounted price of $135,000 to Syndi. On the back of the note, Bruce wrote, “I hereby assign the within note to Syndi without recourse.” If Maria defaults before any principal payments are made, Syndi’s best legal remedy is to:
ANSWER: d. foreclose to enforce payment of the $150,000.
20. The power to sell a property in the event of a default under the terms of the trust deed is given by:
ANSWER: d. trustor to the trustee.
21. All of the following entities buy loans in the secondary mortgage market, except:
ANSWER: d. Federal Housing Administration (FHA).
22. Which of the following loans would be most likely to qualify for Federal Housing Administration (FHA) insurance but not for a Veterans Administration (VA) loan guarantee?
ANSWER: b. A loan to fund the purchase of one-to-four units of residential rental property.
23. The primary purpose behind the creation of the Federal National Mortgage Association (FNMA) was:
ANSWER: a. to increase the money available to housing.
24. In real estate loans, the term “impounds” most nearly means:
ANSWER: b. reserves.
25. Inflation can be seen in the:
ANSWER: a. increase in the cost of living.
26. Marta borrowed $25,000 on a straight note. In eight months, she paid $1,500. What was the interest rate:
ANSWER: b. 9%.
27. All of the following directly affect the level and movement of mortgage interest rates, except:
ANSWER: d. unemployment rate.
28. The term warehousing in reference to mortgage financing describes:
ANSWER: d. a mortgage broker who packages loans prior to their sale on the secondary market.
29. The release clause in a trust deed is there to release:
ANSWER: d. some properties upon partial payment, when more than one property is used as security for the debt.
30. A homebuyer may rescind a purchase contract on a property for:
ANSWER: b. 3 days.
31. One of the primary purposes of the Real Estate Settlement Procedures Act (RESPA) is to:
ANSWER: c. provide consumers with enough information to enable them to effectively shop for settlement services.
32. Most junior loans are originated by:
ANSWER: a. private sources.
33. The phrase “the secondary mortgage market” refers to:
ANSWER: d. a resale marketplace for existing trust deed loans.
34. A note payable for “interest only” is called a(n):
ANSWER: a. straight note.
35. When the buyer takes title to the property subject to the existing loan, “subject to” most nearly means:
ANSWER: d. the buyer will not be personally liable for the loan.
36. A(n) provision in a trust deed allows future loans on the property to have priority:
ANSWER: c. subordination clause.
37. Under the Federal Truth-in-Lending Act (TILA), the cost of credit is expressed as:
ANSWER: b. an annual percentage rate.
38. Regulation Z (Reg Z) of the Federal Truth-in-Lending Act (TILA) gives the borrower a 3 day right of rescission when the loan is:
ANSWER: b. a loan to refinance the borrower’s personal residence.
39. The real estate loan that allows interest rates to increase or decrease depending on money market conditions is called a(n):
ANSWER: c. adjustable interest rate loan.
40. The loan program that requires payment of mortgage insurance premiums (MIPS) and will make loan payments for up to six months if the borrower becomes involuntarily unemployed is called:
ANSWER: d. California Housing Finance Agency (CalHFA).
41. A graduated payment adjustable mortgage (GPAM) provides for:
ANSWER: a. deferment of certain payments on the principal during the early years of the loan.
42. All of the following are NOT true concerning a hard money loan, except:
ANSWER: d. It is a cash loan.
43. A mortgage which provides for securing the amount of the initial loan together with any sums later loaned to the mortgagor is known as a(n):
ANSWER: b. open-ended mortgage.
44. The charging by a private lender of more than the maximum amount of interest allowed by law is known as:
ANSWER: c. usury.
45. A buyer is most likely able to borrow 100% of the purchase price with which of the following types of financing?
ANSWER: b. Veterans Administration (VA).
46. All of the following are circumstances under which a lender will generally enforce the due-on sale clause in a promissory note, except:
ANSWER: d. All of the above.
47. Any final payment on a note which is greater than twice the amount of any one of the six regularly scheduled preceding payments is known as a:
ANSWER: b. balloon payment.
48. A blanket encumbrance created for a real estate loan would most likely benefit the:
ANSWER: c. beneficiary.
49. The maturity date of a construction loan begins from:
ANSWER: a. the date of the note.
50. Compared to a loan insured by a government entity, a conventional loan has a:
ANSWER: b. lower loan-to-value (LTV) ratio.
51. Lenders use a debt-to-income ratio (DTI) to determine:
ANSWER: b. whether a borrower qualifies for a loan.
52. A loan broker arranged a home equity loan for $9,600. The broker must provide the borrower with which of the following?
ANSWER: a. Mortgage loan disclosure statement.
53. The mortgage insurance premium (MIP) paid on a Federal Housing Administration (FHA) loan protects:
ANSWER: d. the lender.
54. A negative amortizing loan allows unpaid interest to be added to the principal balance. This is an example of:
ANSWER: a. compounding interest.
55. A prepayment penalty is the opposite of a(n):
ANSWER: b. “or more” clause.
56. In real estate financing, the acronym “PMI” means:
ANSWER: b. private mortgage insurance.
57. A “seasoned” loan is a(n):
ANSWER: d. loan in which there is a record of consistent and timely payments made on the loan.
58. A shared appreciation mortgage (SAM) is most beneficial when:
ANSWER: a. prices of homes are steadily appreciating.
59. A lender most likely to make a loan to a borrower with a FICO score of 500 would be:
ANSWER: b. a subprime lender.
60. The sale of property in which the amount of the net proceeds is less than the principal balance owed but is accepted by the lender in full satisfaction of the loan is called a(n):
ANSWER: b. short sale.
61. An all-inclusive trust deed (AITD), also known as a(n) reduces the seller’s risk of loss and defers more profit taxes than a regular second trust deed note:
ANSWER: b. wraparound mortgage.
62. The buyer in a sale leaseback transaction would be least concerned with the:
ANSWER: a. original cost to construct the building.
Chapter 5: Transfer of Property (Questions 1-23)
1. All of the following persons or entities may engage in the escrow business, except:
ANSWER: c. A principal in the transaction.
2. Escrow calculates prorations based on days in a year:
ANSWER: b. 360.
3. Which of the following would most likely result in the termination of a real estate sales escrow?
ANSWER: a. The mutual agreement of the buyer and the seller.
4. All of the following will terminate an escrow, except:
ANSWER: b. The broker’s order to terminate escrow.
5. In an escrow statement, the term “recurring costs” is in reference to:
ANSWER: c. impound account items.
6. Escrow closes on the 16th day of February (28 days). The seller receives $500 in rent for the month of February. The seller:
ANSWER: b. owes the buyer more than $250.
7. All of the following are true of a tenancy in common, except:
ANSWER: b. A tenant in common may not will their interest in the property to others on their death.
8. A person holding title to real property in severalty:
ANSWER: d. has sole ownership of the property.
9. Unless otherwise licensed, a real estate licensee is prohibited from doing all of the following, except:
ANSWER: a. sell real estate.
10. Sara and Marshal are joint tenants. Marshal obtains a loan from a lender secured by his interest in the property. When Marshal dies:
ANSWER: b. Sara owns the property free and clear of the encumbrance.
11. The words “time, title, interest and possession” are most closely related to which of the following concepts:
ANSWER: b. joint tenancy.
12. The California Land Title Association (CLTA) standard policy and the American Land Title Association (ALTA) policy does not protect the insured against:
ANSWER: c. encumbrances which are created or become encumbrances after issuance of the policy.
13. A standard policy of title insurance covers:
ANSWER: c. zoning restrictions.
14. A standard policy of title insurance does not cover:
ANSWER: d. All of the above.
15. On April 1, 2020, an escrow agent opened a preliminary title report order for the sale of a property. The seller purchased the home in 1998, financing it with a Federal Housing Administration (FHA) loan on which they are currently making payments. A preliminary title report dated April 5, 2020 will:
ANSWER: b. show a deed of trust with the seller as trustor.
16. An American Land Title Association (ALTA) policy of title insurance goes beyond the protection afforded by a California Land Title Association (CLTA) policy in guarding against:
ANSWER: c. the location of property lines according to a formal survey.
17. When the public records have been examined, a written summary of the chain of title is known as a(n):
ANSWER: a. abstract of title.
18. A deed is recorded and indexed based on:
ANSWER: c. the grantor and grantee names alphabetically.
19. Recording is not required for a:
ANSWER: d. grant deed.
20. Which of these is most correct concerning delinquent taxes and redemption rights?
ANSWER: a. The effect of a “sale to the state” by the tax collector is to start the redemption period running.
21. The annual property taxes an owner of a home needs to pay are determined by:
ANSWER: b. assessing the land and improvements together, then multiplying by one tax rate.
22. Which of the following is an ad valorem tax?
ANSWER: c. Real estate tax.
23. During a sales escrow, the escrow officer receives two structural pest control reports. The escrow officer is to:
ANSWER: c. notify the buyer and seller of the discrepancy and obtain written instructions as to which report to use.
Chapter 8: Real Estate Participants (Questions 1-13)
1. The holder of a note secured by a trust deed and entitled to the performance of the provisions in the trust deed is the:
ANSWER: c. beneficiary.
2. The seller under a land sales contract sale is the:
ANSWER: d. vendor.
3. The property owner who has given another party the option to purchase their property at a later date is the:
ANSWER: a. optionor.
4. The borrower of mortgage funds is the:
ANSWER: c. mortgagor.
5. The buyer under a land sales contract is the:
ANSWER: c. vendee.
6. The person who transfers property by a grant deed is the:
ANSWER: a. grantor.
7. A party to a note and trust deed with the authority to sell the property on instructions from the beneficiary is the:
ANSWER: d. trustee.
8. The tenant who rents an apartment under a month-to-month rental agreement is the:
ANSWER: c. lessee.
9. The entity that lends mortgage money to a borrower for the purpose of purchasing property is the:
ANSWER: b. mortgagee.
10. The person who holds an option to purchase property is the:
ANSWER: c. optionee.
11. One who borrows money secured by a note and trust deed from a lender is the:
ANSWER: a. trustor.
12. The owner of a rental property is the:
ANSWER: c. lessor.
13. The recipient of title to a property by deed is the:
ANSWER: d. grantee.
Chapter 9: Real Estate Mathematics (Questions 1-10)
1. The SW 1/4 of the N 1/2 of Section 18 contains how many acres and how many square feet?
ANSWER: a. 80; 3,484,800.
2. The NW 1/4 of the SE 1/4 of Section 21 sold for $4.00 per square foot. What was the sales price?
ANSWER: b. $6,969,600.
3. A salesperson working under a broker had an employment contract calling for a 50/50 split of any commissions received. The salesperson negotiated a sale representing the buyer. The sales price was $490,000. The purchase agreement called for a fee of 3% of the sales price to be paid to the buyer’s broker. How much did the salesperson receive from their broker?
ANSWER: c. $7,350.
4. An experienced salesperson arranged an employment contract calling for a 70/30 split of any commissions received. The salesperson completed a sale representing both the buyer and seller. The sales price was $650,000. The escrow instructions called for a 5% fee paid to the broker. How much did the salesperson receive from their broker?
ANSWER: a. $22,750.
5. The local and state property taxes on a particular property amount to 1.2% of the tax assessment value of the property. The tax rolls indicate a current value of $385,000. What is the first half of the current year’s tax bill?
ANSWER: b. $2,310.
6. At the close of escrow for the sale of a property, the title insurance company obtained transfer tax stamps for the purchase price of $387,600. How much was the transfer tax charged?
ANSWER: a. $426.80.
7. At the close of escrow on the sale of a property, the title insurance company obtained transfer tax stamps