Re Prep C1T1, Real Estate Law

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1. When an out-of-state subdivision is offered for sale in California, the requirements are that the subdivider:

(a) Be licensed as a real estate broker;

(b) Post a bond for $5,000;
(c) Obtain a permit;

(d) All of the above.

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1. (d) Any person who offers out-of-state subdivisions for sale in California must meet the requirements of the Subdivision Law and Article 6 (except endorsement). The Map Act does not apply to out-of-state subdivisions.

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2. The real estate commissioner requires that:

(a) A broker's books be audited once a year;
(b) A broker must keep accurate records of trust receipts, even though not held but placed in escrow;
(c) A separate ledger account for each customer and client be maintained;
(d) A separate trust account for deposits of trust funds.

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2. (b) A broker need not maintain a trust account, however, he must keep a columnar cash receipts and disbursements journal of all monies coming into his possession even though they are deposited in escrow.

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3. Which of the following would require a real estate broker's license:

(a) An attorney acting as a broker;
(b) A person selling real estate with a bona fide power of attorney;
(c) A secretary in a broker's office performing her secretarial duties;
(d) A real estate subdivider.

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3. (a) An attorney acting in his capacity as an attorney does not require a license; however, if he is acting as a broker, he must have the broker's license.

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4. If a person buys property in a California land project and then changes his mind, he can obtain a refund of his money without a specific reason within ______ calendar days.

(a) 3: (b) 5; (c) 10; (d) 14.

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4. (d) The recession period on a land project is fourteen days.

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5. There are many grounds for which a licensee may be disciplined by the Real Estate Commissioner. Which of the following grounds is an incomplete statement:

(a) Making a false promise likely to persuade or influence;
(b) Failure to include a termination date in an exclusive listing;
(c) Acting for more than one party in a transaction;
(d) Making any secret profit in a transaction.

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5. (c) Acting for more than one party without the knowledge and consent of all parties.

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6. It is unlawful for a broker to accept a commission from more than one party in a transaction unless he:

(a) Notifies the commissioner;

(b) Obtain buyer's consent;
(c) Gives seller notice;

(d) Obtains consent of all parties.

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6. (d) It is unlawful for a broker to receive monies from more than one person unless he has informed all parties that he is acting as an agent for each.

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7. A broker terminates the employment of one of his salespeople due to fraud. The broker should:

(a) Immediately call the Real Estate Commissioner and give him the details over the phone;
(b) Send a certified letter forthwith to the Real Estate Commissioner;
(c) Return the salesperson's license to the DRE;
(d) Mail a salesperson transfer from the DRE within 5 days.

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7. (b) When an agent is terminated due to fraud, the broker should immediately notify the Real Estate Commissioner by certified letter.

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8. An agency relationship between a real estate broker and his principal is most commonly established in which of the following ways:

(a) Ostensible;
(b) Expressed;

(c) Implied;

(d) Ratification.

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8. (b) An “expressed agency” is created by Contract. Implied agency is created by an act. Ostensible agency by silence.

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9. A broker must hold all papers relative to his real estate transaction for:

(a) One year;

(b) Two years;
(c) Three years;

(d) Five years.

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9. (c) The same time period for keeping a copy of the Commissioner's Public Report. Mortgage Loan Disclosure Statement - 4 years (exception to 3-year rule.)

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10. Violations of the California Real Estate Law are prosecuted by the:

(a) Attorney General;

(b) District Attorney;
(c) R. E. Commissioner;

(d) Local authorities.

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10. (b) The District Attorney prosecutes the alleged violations of all State Laws in his county. The California Real Estate Law is a state law and anyone violating it would be prosecuted by the District Attorney in the county where the alleged violation occurred. The Attorney General is the lawyer for the State of California and does not prosecute state laws. The Commissioner can do one thing by way of a penalty, suspend or revoke a license

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11. A valid Deed must contain:

(a) An acknowledgement;

(b) The grantee’s signature;
(c) A recital of consideration;

(d) A granting clause.

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11. (d) A valid Deed must contain a granting clause. This clause spells out the grantor’s intention to convey the property.

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12. To obtain a real estate salesperson's license a person must be:

(a) A resident of California;
(b) Fingerprinted;

(c) U. S. Citizen;

(d) 21 years of age.

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12. (b) All licensees must be fingerprinted in order to assist in establishing a reputation for character and integrity.

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13. All of the following would be in violation of real estate law except:

(a) A California real estate broker participating in an exchange of real property located in California with real property located in Oregon;
(b) A licensed salesperson accepting a commission from another licensed salesperson;
(c) A real estate broker selling an Arizona subdivision in California without prior approval of the offering by the California Real Estate
Commissioner;
(d) A licensed salesperson accepting a commission from a broker who is cooperating in a transaction with the salesperson's employing broker.

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13. (a) A California broker may cooperate and share commission with any other licensed broker even though he is an out-of-state broker.

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14. A broker's trust account:

(a) Must have a minimum balance;
(b) Is not required by law;
(c) May not contain personal monies of broker;
(d) All of the above.

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14. (b) A trust account is not required by law, and may contain a maximum of $200.00 of personal funds. A minimum is not required by law.

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15. A broker approaches a seller to list a home. The seller says he won't give him a listing but will pay a 6% commission if he obtains a buyer. The broker brought a contract that was accepted. The acceptance was communicated to the buyer. After purchasing the home, the buyer discovered several defects, which the seller had told to the broker, but the broker had not disclosed to the buyer. The buyer sued both seller and broker. The broker used as a defense that he had no written Contract, so he was not responsible. Under these circumstances, the broker:

(a) Would have no responsibility due to the Statute of Frauds which requires that employment Contracts between seller and agents be in writing;
(b) Be subject to disciplinary action by the real estate commissioner, but would have no liability to the buyer;
(c) Could be sued by both seller and buyer;
(d) Could be sued by both seller and buyer and be subject to disciplinary action by the real estate commissioner.

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15. (d) All real estate contracts should be in writing. This is the best of the three answers.

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16. A loan, which is considered a balloon payment, is:

(a) Fully amortized;
(b) Partially amortized;

(c) Straight;

(d) Illegal.

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16. (b) A partially amortized Note would be a Note that would not be paid off at the end of the contract. Because of this, an extra amount of money would be necessary. This extra money would constitute a “balloon payment”.

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17. A broker accepts a check as deposit with an offer. He finds that the seller will be out of town for 5 days. The broker should:

(a) Cash the check;
(b) Put the deposit in his trust account;
(c) Hold the check until the seller return to see if he accepts;
(d) Return the check to the buyer until the seller returns.

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17. (b) The Real Estate Law requires that trust funds accepted by a broker be delivered to the principle, placed in a neutral depository, or placed in a trust fund account by the third business day. Failure to do one of these three is commingling.

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18. A broker may design forms for use in his office.
Which of the following forms does not have to be approved prior to use?

(a) Broker-Salesperson Employment Agreement;
(b) Mortgage Broker's Statement;
(c) Advanced Renter's Fee;
(d) Agency Disclosure between Broker & Principal.

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18. (a) The Sales-Broker Agreement can be.

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19. The Commissioner's Regulations:

(a) Are part of the Civil Code;

(b) Part of the Real Estate Law;
(c) Passed by the Legislature;

(d) Have force and effect of law.

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19. (d) Commissioner's Regulations are not laws but have the "force and effect of law."

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20. A broker negotiated the sale of a Note secured by a second Deed of trust. It is the broker's duty to make sure that the Trust Deed is properly:

(a) Reconveyed;

(b) Reinstated;
(c) Assigned;

(d) Subordinated.

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20. (c) Real Estate Law requires a licensee who handles the assignment of a Notes and Deed of Trust to have the assignment of the Deed of Trust recorded within ten days.

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21. If a seller’s agent, in a real property sale transaction pays part of his commission to the buyer of property the agent:

(a) Must inform the seller that he is doing so;
(b) Is subject to criminal penalties;
(c) Is always subject to disciplinary action by the Real Estate Commissioner;
(d) May be subject to all of the above.

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21. (a) An agent must inform both parties that he/she is representing each of them. By not telling one party that he/she is helping the other, it would indicate n o t representing both equally.

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22. A licensee must give a copy to the person signing:

(a) Any Contract;
(b) An Open Listing;
(c) An Exclusive Authorization and Right to Sell;
(d) An Exclusive Agency Listing.

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22. (a) The law demands that a licensee shall: (1) Give a copy of any Contract, (2) to the person signing, and (3) at the time the signature is obtained.

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23. As a result of the mishandling of funds by a real estate licensee, a seller was defrauded of $20,000. He obtained a judgment for this amount, but the licensee was shown to be totally without funds. Under the provisions of the Real Estate Education Research and Recovery Fund, the seller could be paid out of such fund the amount of:

(a) $5,000;
(b) $10,000;

(c) $15,000;

(d) $20,000.

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23. (d) The amount that may be collected is $20,000.00.

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24. A broker is least likely not to be disciplined for a violation of the Real Estate Act:

(a) If he accepts a deposit without authority of his principal;
(b) Collects a commission from all parties in the transaction with their consent;
(c) Fails to include a terminate date in an Exclusive Listing;
(d) All of these.

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24. (b) "Least likely not to be" means the same as "most likely not to be." It is given to test an examinee on his ability to analyze the meaning of a question.

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25. A broker need not maintain a record of funds received by him, except which of the following:

(a) When a check is received payable to an escrow company and delivered immediately;
(b) When a check is received payable to seller and delivered immediately;
(c) When there is a deposit and offer to purchase with a contingency;
(d) All of the above.

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25. (d) A broker must keep a record of all monies handled by him. This does not mean that he must maintain a trust account for placement of the funds, but he must keep a record of every penny handled by himself or his salesmen.

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26. Broker Knorr advertised in the newspaper that anyone who bought a property listed with the broker would receive a free microwave oven valued at $500.00. Such actions is considered:

(a) Legal, if full disclosure is made to all interested parties;
(b) Illegal under any circumstances;
(c) Legal, if a chance to win the microwave in a drawing is actually given only to the buyer;
(d) Illegal, since the value of such gift cannot exceed $100.00.

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26. (a) If disclosure is made to all, this is permissible.

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27. A broker negotiated a loan for $4,000.00, secured by a second Trust Deed, to be paid in five semiannual installments. What is the maximum commission the broker is permitted to charge?

(a) $200;
(b) $400;

(c) $600;

(d) Any amount agreed upon.

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27. (b) Junior Trust Deeds less than $10,000.00 under Article 7; more than two years but less than three years-10%.

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28. A patent is:

(a) A Deed;
(b) A security device;

(c) A Grant by a sovereign;

(d) None of the above.

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28. (c) A land patent is an official document reflecting a grant by a sovereign that is made public, or ‘patent.' Statement of Fact.

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29. Two Realtors have a dispute concerning an agreement to share a commission. What is the first procedure to be followed to settle the dispute?

(a) Take the matter before the Department of Real Estate;
(b) File a court action to settle the dispute;
(c) Take the matter before the Fair Employment Practices Commission;
(d) Present the matter to the arbitration committee of their local real estate board to settle or determine if there are grounds for a civil action.

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29. (d) The Code of Ethics of NAR provide for arbitration prior to civil action.

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30. A real estate salesman canvasses an area to secure listings. He tells the prospective sellers that minority groups are moving into the area and it would be advantageous to sell at this time. He would:

(a) Not be disciplined by the Real Estate Commissioner if he didn't say that prices were going to decrease;
(b) Not be disciplined by the Real Estate Commissioner if his broker had instructed him to canvass in this manner;
(c) Not be disciplined by the Real Estate Commissioner if the prospective sellers were members of a minority group;
(d) Be disciplined by the Real Estate Commissioner for canvassing in this manner.

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30. (d) Real Estate Law prohibits any solicitation based upon the entry into a neighborhood of a person of another race, color, creed or national origin.