Chapters 10-15 – Flashcards
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regression.
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A higher value house among less expensive homes will lose value. This illustrates the principle of:
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commercial properties.
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uses a depth table to estimate property value. determined by the width and depth of the land.
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Single-family homes It is best for single-family homes or condominiums and vacant lots because sales information is readily available and easily compared. Recognize the appraisal process and principles of valuation.
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The sales comparison approach is one of the most commonly used appraisal approaches and is best for: a. income-producing properties. b. single-family homes. c. special-purpose buildings. d. unique properties.
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Four elements that create market value
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demand, utility, scarcity, and transferability
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Appreciation
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an increase in value, usually as a result of inflation or some special supply and demand force relating to that specific property.
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income approach, or income-capitalization approach It estimates the present worth of future benefits from ownership of a property. The value of the property is based on its capacity to continue producing an income. b. produce income
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The income approach bases a property's value on its ability to: a. conform to its neighborhood. b. attract buyers. c. produce income. d. withstand market downturns.
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Economic Rent
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The price of rent based on market conditions.
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Contract Rent
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the amount actually paid by a renter for use of the premises.
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Four Levels of Real Estate Appraiser Licensing in California
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Trainee License Residential License Certified Residential License Certified General License.
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Cost Approach When using the cost approach, improvements and land are valued: separately, by more than one approach.
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looks at the value of the appraised parcel as the combination of two elements. These elements are: (1) the value of the land as if vacant, and (2) the cost to rebuild the appraised building as new on the date of valuation, less the accrued depreciation.
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Market Price
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the actual sales price of the property
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market value
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price for which the property should sell
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how to determine the value of a property using the cost approach
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first obtain the value of the land, then add the cost to build structure new, and then subtract any accrued depreciation.
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Influences of Value
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physical characteristics, economic influences, political or governmental regulations, and social ideals.
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Regression
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The principle of _____ may be illustrated by a higher value house among less expensive homes losing its value.
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The steps in the appraisal process
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state the problem, gather the data, use the appraisal approaches to estimate value, reconcile the values, and prepare the appraisal report.
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4 Changes of Neighborhood Life Cycle
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(1) growth (development) (2) maturity (stability) (3) old age (decline) (4) revitalization (renaissance)
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Demand
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the desire to buy or obtain a commodity.
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Effective demand
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is desire coupled with purchasing power. Demand and purchasing power available will affect the value of a property.
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GRM X Annual Income = Market Value b. $288,000
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Carter is using a gross rent multiplier to get a rough estimate of the value of a duplex he wants to buy. If the gross annual income is $36,000, expenses are $12,000, and the gross rent multiplier is 8, what is the estimated value of the duplex? a. $192,000 b. $288,000 c. $300,000 d. $450,000
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condition and usefulness of the property.
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Effective Age of a property is determined by:
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it's an act or process of developing an opinion of value. It usually is for a specific property's value on a given date.
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What is an appraisal? and why are they prepared?
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Method used to estimate the cost of a building
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fractal geometry method
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the power of eminent domain.
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The Takings Clause of the Fifth Amendment to the Federal Constitution deals with:
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General Plan In California, every city and county must adopt a comprehensive or master plan, known as a General Plan, for long-term physical development. Every General Plan must cover the development issues in the following seven major categories: land use, circulation, housing, conservation, open space, noise, and safety.
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For long-term physical development, every city and county must adopt a comprehensive:
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An Energy Efficient Ratio (EER) An Energy Efficient Ratio (EER) is a measurement of the efficiency of energy; used to determine the effectiveness of appliances.
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Many homebuyers express common concerns about the energy efficiency of their homes. Of the following, which is a measurement of the efficiency of energy; used to determine the effectiveness of appliances? a. BTU b. HVAC c. EER d. R-Value
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Variance
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An exception granted to existing zoning regulations
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The State Housing Law (Health and Safety Code Section 17910, et seq.)
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outlines the minimum construction and occupancy requirements for dwellings.
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Potable
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means safe to drink
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The Subdivided Lands Law it is directly administered by the Real Estate Commissioner. Its objective is to protect buyers of property in new subdivisions from fraud, misrepresentation, or deceit in the marketing of subdivided lots, parcels, units, and undivided interests.
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the Real Estate Commissioner regulates the lot design and physical improvements of subdivided real property __________ under what law.
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There are two basic laws under which subdivisions are controlled in California—the Subdivision Map Act and the Subdivided Lands Law
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created for the protection of the consumer.
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R-value When the R-value is higher, the insulation is better. New homes have minimum insulation requirements and the R-value rating of the insulation used in the homes must be disclosed.
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a rating that measures how well insulation resists heat loss.
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R2
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Duplex zoning
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Power of Eminent Domain
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permits the government to take private property from an owner for the public good, paying fair market value (just compensation).
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The State Housing Law
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outlines the minimum construction and occupancy requirements for dwellings. Local building inspectors enforce the construction regulations while local health and code enforcement officers enforce the occupancy and sanitation regulations.
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The main objective of the Subdivision Map Act
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it defines the rules and procedures for filing maps to create subdivisions. It is directly controlled by local authorities (city and county) and is concerned with the physical aspects of a subdivision—such as building design, streets, and any adverse effects to the environment.
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Characteristics of a Condominium
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it consists of a separate fee interest in a particular specific space (the unit), plus an undivided interest in all common or public areas of the development. All owners are allowed to use any of the facilities in the common area. Each unit owner has a deed, separate financing, and pays the property taxes for his or her unit.
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A. Standard Subdivision it's a land division with no common or mutual rights of either ownership or use among the owners of the parcels created by the division.
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What type of subdivision is typically associated with a tract of single-family homes on individual lots? a. A standard subdivision b. A substandard subdivision c. A timeshare subdivision d. A vacation resort subdivision
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a. not subject to conventional zoning requirements. A planned development (previously called planned unit development) is a planning and zoning term describing land not subject to conventional zoning requirements.
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A planned development involves land that is: a. not subject to conventional zoning requirements. b. subject to conventional zoning requirements. c. subject to ownership under a stock cooperative. d. subject to zoning as a timeshare.
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b. police power Police power is the power of the state to enact laws within constitutional limits to promote the order, safety, health, morals, and general welfare of our society.
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The ability to pass laws for the general good of citizens is known as: a. political power. b. police power. c. zoning power. d. regulatory power.
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b. permitted uses and conditional uses. Usually every district is zoned for different types of uses, known as permitted uses and conditional uses.
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Most cities and counties have ordinances that create land use districts or zones. Usually every district is zoned for different types of uses, known as: a. current uses and conditional uses. b. permitted uses and grandfathered uses. c. variances and permitted uses. d. permitted uses and conditional uses.
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b. pitch A licensee should know the most desirable roof pitches and be able to distinguish a hip roof from a gable roof. The pitch of a roof is its incline or rise.
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Which term refers to the incline of a roof? a. Elevation b. Pitch c. Setback d. Schematics
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blockbusting
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Causing panic selling by telling people that value in a neighborhood will decline because of a specific event, such as the purchase of homes by minorities is illegal persuading an owner to sell or rent housing by saying that people of a particular race, religion, etc., are moving into the neighborhood.
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a. broker Since a salesperson represents his or her broker in all operations, listings belong to the broker and not to the salesperson. When a salesperson leaves the employ of a particular broker, any listings he or she has will remain with that broker.
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The reason a listing must remain with the broker when the listing agent moves to a new broker is the seller's contract is with the: a. broker. b. listing agent. c. M.L.S. board. d. buyer.
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a. State and federal agencies Real estate advertising is regulated by state and federal agencies that expect real estate companies to be truthful when advertising property or services.
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Who regulates real estate advertising? a. State and federal agencies b. Only state agencies c. Only federal agencies d. Only international agencies
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d. three business days following the receipt of the funds.
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The time allowed for the deposit of trust funds is: a. four business days following the receipt of the funds. b. two business days following the receipt of the funds. c. the next business day following the receipt of the funds. d. three business days following the receipt of the funds.
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activities of a brokerage (5)
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securing listings finding buyers negotiating transactions arranging financing closing transactions.
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Employment Status
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refers to the relationship between a salesperson and his or her broker—as an employee or self-employed. The compensation earned depends primarily on the salesperson's employment status.
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How does the IRS determine whether someone is an independent contractor?
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if the payer has the right to control or direct only the result of the work and not what will be done or how it will be done.
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a. by the broker Sales associates will receive their share of the commission from their brokers when a transaction for which they are responsible closes. To receive compensation from a real estate transaction, the person must have a real estate license and must be supervised by a licensed real estate broker.
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Real estate salespeople are paid: a. by the broker. b. by the buyer. c. on a sliding scale. d. by the seller.
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b. trust funds are mixed with personal funds. Trust funds may not be commingled (mixed) with funds belonging to the broker. Commingling is strictly prohibited by real estate law and may be punished by revocation or suspension of a real estate license.
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Commingling is strictly prohibited by real estate law and occurs when: a. an agent discloses confidential information to clients. b. trust funds are mixed with personal funds. c. commissions are withheld. d. disclosures are not done properly.
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d. Anytime Real estate licensees and unlicensed assistants may make cold calls providing the calls are made only between 8:00 a.m. and 9:00 p.m. These calling restrictions do not apply if the person is already your customer, if you have written permission to call them, or if you have a personal relationship with them.
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Salesperson Sally listed seller Sam's home. According to the Do-Not-Call Rules, when can Sally call Sam? a. Only between 8:00 a.m. and 9:00 p.m. b. Anytime on weekends but only after 9:00 a.m. on weekdays c. Only between 9:00 a.m. and 8:00 p.m. d. Anytime
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Steering
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is the illegal practice of only showing property in certain areas to buyers.
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how a real estate brokerage can be set up
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sole proprietorship, partnership, corporation, or Limited Liability Company (LLC).
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d. A broker must disclose its license status in all advertising.
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Which of the following statements is correct regarding real estate advertising? a. A broker must disclose its license status only in email. b. broker must disclose its license status only on internet ads. c. A broker must disclose its license status only on real estate signs. d. A broker must disclose its license status in all advertising.
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a. implements a high standard of ethics.
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It is imperative to choose a brokerage that: a. implements a high standard of ethics. b. offers the highest commission. c. gives their employees the best perks. d. pays for all a salesperson's expenses.
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b. 3 years
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A licensed broker must keep real estate records for: a. 2 years. b. 3 years. c. 4 years. d. 5 years.
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a. agent
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In a real estate brokerage, the negotiator is the: a. agent. b. principal. c. product. d. lender.
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a. elderly This section of the Civil Code prohibits discrimination in the rental, leasing, or sale of housing accommodations to the blind, visually handicapped, deaf, or otherwise physically disabled. It also precludes restrictions on seeing-eye dogs and signal dogs from no pet clauses.
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Section 54-55.1 of the California Civil Code prohibits discrimination in the rental, leasing, or sale of housing accommodations to all of the following except the: a. elderly. b. physically disabled. c. deaf. d. blind.
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c. $200 A broker may keep up to $200 of personal funds in the trust fund account to pay for bank charges or service fees related to the trust account.
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Broker Bill wanted to keep some money in his trust account to cover any bank charges or unexpected fees. What is the maximum amount he can keep in his trust account without being in violation of the law? a. $50 b. $75 c. $200 d. $100
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Security Agreement
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The instrument used to secure the financing when personal property is sold
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leverage.
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When a buyer invests a small down payment and obtains a loan to purchase property, he or she is using the lender's money to finance the sale. The use of borrowed capital to buy real estate, and is a process that permits the buyer to use little of one's own money and large amounts of someone else's.
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d. Sale of business
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The Uniform Commercial Code regulates which of the following? a. Sale of residence b. Sale of real property c. Sale of a mobile home d. Sale of a business
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Timeshare
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Is the common ownership of a single piece of property by an association of people with each owner having the exclusive right to occupy a unit for a specified period each year. They are usually for specific blocks of time per year.
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infill development
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the development of vacant parcels in existing urban and suburban areas.
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three elements that a real estate agent will deal with
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1. the real property or a lease 2. the personal property or the inventory and equipment 3. the goodwill or the reputation enjoyed by the business.
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d. a grant deed. In dealing with the sale of a business, a real estate agent usually will be dealing with three elements: the real property or a lease, the personal property or the inventory and equipment, and the goodwill or the reputation enjoyed by the business. An inventory is taken of stock, fixtures, and any other personal property that will be transferred by the sale and the seller executes a bill of sale, which transfers ownership of all personal property belonging to the business.
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In the sale of a business, an agent must deal with all of the following, except: a. a lease. b. inventory. c. a bill of sale. d. a grant deed.
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Goodwill A business opportunity is any type of business that is for lease or sale. It also includes the intangible but salable asset of goodwill, which is the expectation of the continued patronage of an existing business.
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another name for reputation
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agency, contracts, fair housing, rentals, and leases, business administration, marketing, insurance, repairs and maintenance, and taxes.
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What does a property manager need to know?
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d. it excludes goodwill A business opportunity is any type of business that is for lease or sale. It also includes the intangible but salable asset of goodwill, which is the expectation of the continued patronage of an existing business.
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All of the following are true regarding a business opportunity, except: a. it includes any type of business that is for sale. b. it includes any type of business that is for lease. c. it includes goodwill. d. it excludes goodwill.
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Probate probate proceedings are held in the superior court to determine creditors' claims and beneficiaries' interests in an estate upon the owner's death.
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__________ is the legal process that validates or invalidates a will.
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b. Board of Equalization. Before assuming the ownership of a business, a buyer should obtain a copy of the seller's permit and a tax clearance receipt stating that the business is current on sales taxes from the State Board of Equalization.
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When a business is sold a tax clearance receipt should be obtained from the: a. Department of Bulk Sales. b. Board of Equalization. c. HUD. d. ABC.
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a. Depreciation The four main benefits of real estate investments are: (1) appreciation, (2) equity buildup, (3) income, and (4) tax benefits.
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For federal income tax purposes, what deduction can an owner of a fourplex claim that a homeowner cannot? a. Depreciation b. Mortgage interest c. Property taxes d. Both homeowners and investors are allowed to claim all of the deductions.
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b. Equity reduction The four main benefits of real estate investments are: (1) appreciation, (2) equity buildup, (3) income, and (4) tax benefits
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What is not one of the main benefits of investing in commercial real estate? a. Appreciation b. Equity reduction c. Income d. Tax benefits
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a. Advocacy Program. A complaint that involves simple disputes or minor issues between consumers and licensees is usually handled by the Advocacy Program as an alternative to setting up formal investigations.
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Complaints involving minor disputes between consumers and licensees is handled by the: a. Advocacy Program. b. Department of Justice. c. Supreme Court. d. Department of Housing and Urban Development.
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Conversion
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misappropriating and using principal's funds.
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d. a certified written statement of the facts to the Commissioner. When any real estate salesperson is discharged by his or her employer for a violation of any of the provisions of the Real Estate Law, a certified written statement of the facts with reference thereto shall be filed forthwith with the Commissioner by the employer.
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An employing broker who discharges a salesperson for violating the Real Estate Law must provide: a. actual video footage of the salesperson committing the wrongful act. b. at least 10 witnesses who can attest to the licensee's wrongful acts. c. an accurate and detailed phone message to the Commissioner. d. a certified written statement of the facts to the Commissioner.
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d. the Real Estate Commissioner at special hearings. The Real Estate Law is not upheld in a court of law, but is enforced by the Real Estate Commissione
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The Real Estate Law is upheld and enforced by: a. the judge and/or jury of a superior court. b. the judge and/or jury of a district court. c. the judge of a small claims court. d. the Real Estate Commissioner at special hearings.
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d. licenses to partnerships. CalBRE does not issue partnership licenses.
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The Bureau of Real Estate does not issue: a. broker licenses. b. branch office licenses. c. licenses to corporations. d. licenses to partnerships.
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c. Four CalBRE issues real estate broker and salesperson licenses for a 4-year period.
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The Bureau of Real Estate issues real estate licenses for a ___________-year period. a. two b. three c. four d. five
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a. Settling commission disputes The responsibilities of the Real Estate Commissioner include examining complaints against licensees, screening applicants for licensing, and regulating specific aspects of the sale of subdivisions.
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Which of the following is not a job of the Real Estate Commissioner? a. Settling commission disputes b. Investigating complaints against licensees c. Regulating subdivisions d. Screening applicants for licensing
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b. Restricted license The Commissioner will sometimes issue a restricted license. A restricted license is a type of probationary license issued when a license has been suspended, revoked, or denied after a hearing.
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What type of license is issued when a license has been suspended, revoked or denied after a hearing? a. Grace period license b. Restricted license c. Conditional license d. None of the choices apply
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c. Salesperson Smith only had 1 sale in the previous 6 months and did not have enough money to pay for his NAR membership. Since he still had a full box of business cards, he continued to use them even though the card indicated a REALTOR membership. Only active members of the National Association of REALTORS may use the term REALTOR. [Section 10177(e) - Misuse of Trade Name].
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Which of the following activities violates Section 10177 of the Business and Professions Code? a. When escrow closed on the manufactured home that broker Baker listed, he made sure that the seller delivered a properly endorsed certificate of ownership to the buyer. b. Salesperson Cook has several friends in real estate related businesses and frequently refers her customers to them, but receives no commission, fee, or other compensation. c. Salesperson Smith only had 1 sale in the previous 6 months and did not have enough money to pay for his NAR membership. Since he still had a full box of business cards, he continued to use them even though the card indicated a REALTOR membership. d. All of the activities are violations.
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d. The Real Estate Commissioner The license law is only effective if it can be enforced. The Commissioner enforces the provisions of the Real Estate Law and has the power to restrict, suspend, or revoke a person's real estate license.
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Who enforces the provisions of the Real Estate Law? a. The employing broker b. The President of the United States c. The Department of Housing and Urban Development d. The Real Estate Commissioner
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d. $2,500 The Commissioner can issue citations and fines to both licensees and unlicensed persons for minor violations of the Real Estate Law. The citation describes the basis of the complaint and contains an order to correct the violation and a reasonable time period in which to correct it. In addition, the Commissioner may assess an administrative fine not to exceed $2,500 per citation.
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The Commissioner can issue citations and fines to both licensees and unlicensed persons for minor violations of the Real Estate Law. The Commissioner may assess an administrative fine not to exceed __________ per citation. a. $500 b. $1,500 c. $2,000 d. $2,500
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d. Two years A real estate license that has expired may be renewed within 2 years of the expiration date. A two-year grace period for renewal is allowed as long as all real estate activity has ceased during that time and a late fee is paid at the time of renewal.
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What is the grace period for the renewal of a salesperson's or broker's license? a. Six months b. One year c. Five years d. Two years
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b. SAFE Act. As of January 1, 2011 a MLO Endorsement must be obtained in compliance with the federal Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act).
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As of January 1, 2011 a Mortgage Loan Originator License Endorsement must be obtained before a real estate licensee can solicit or originate a loan application, or negotiate or offer to negotiate any residential mortgage loans in accordance with the: a. Mortgage Broker Licensing Act. b. SAFE Act. c. MLO Endorsement Act. d. Truth in Lending Act.
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a. Consumer Recovery Account The Consumer Recovery Account is a separate account funded through collection of up to 12% of license fees collected. This fund assures the payment of otherwise non-collectable court judgments against licensees who have committed fraud, misrepresentation, deceit, or conversion of trust funds in a transaction.
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Which fund assures the payment of otherwise non-collectable court judgments against licensees who have committed fraud, misrepresentation, deceit, or conversion of trust funds in a transaction? a. Consumer Recovery Account b. Education and Research Account c. Real Estate Fund d. Consumer Education Fund
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b. the licensing and conduct of real estate licensees. The Real Estate Law, sometimes referred to as the license law, is designed mainly for the protection of the public in real estate transactions where a licensee is involved. When you hear the term, "Real Estate Law", it means the law that affects the licensing and conduct of real estate brokers and salespeople.
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The Real Estate Law is that law that governs: a. the rights of property owners. b. the licensing and conduct of real estate licensees. c. leasing real property. d. the terms of an agreement in a real estate transaction.
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a. receipt of a verified written complaint. Usually an investigation of the actions of a licensee is based upon receipt of a verified written complaint from someone who believes a licensee, while acting as an agent, has wronged them.
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An investigation of a licensee's actions is typically initiated by: a. receipt of a verified written complaint. b. a verbal complaint to the CalBRE Call Center. c. a recommendation from the Federal Bureau of Investigation. d. a recommendation from the local police.
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d. tithing. The laws prohibit businesses from forming a monopoly and restrict the way businesses interact with their competitors and customers. Many specific actions are covered by these laws, including price fixing, boycotting, dividing the market, and tying.
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A broker can violate the antitrust laws relating to real estate, by participating in any of the following, except: a. dividing the market. b. group boycotting. c. price fixing. d. tithing.
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a. The practice causes an insignificant consumer injury. The FTC Act's three tests of unfair business practices are (1) the practice causes a substantial consumer injury, (2) the harm of the injury outweighs a countervailing benefit, and (3) the consumer could not reasonably avoid the injury.
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Which is not one of the three tests used by the Federal Trade Commission to determine if something constitutes an unfair business practice? a. The practice causes an insignificant consumer injury. b. The harm of the injury outweighs a countervailing benefit. c. The practice causes a substantial consumer injury. d. The consumer could not reasonably avoid the injury.
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b. Licensees must identify themselves before making the solicitation Licensees must identify themselves before making the solicitation and must identify that the call is a solicitation. Licensees may NOT use caller ID blocking. The other choices deal with the Do Not Fax Rules and the CAN-Spam Act.
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Which of the following is one of the Do Not Call Rules? a. Licensees may use caller ID blocking. b. Licensees must identify themselves before making the solicitation. c. Sender must have voluntarily received recipient's fax number. d. Transactional e-mail messages are excluded from the Act.
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c. Fair Credit Reporting Act Hint: The Fair Credit Reporting Act establishes procedures for correcting mistakes on a person's credit record and requires that a consumer's record only be provided for legitimate business needs.
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The __________ establishes procedures for correcting mistakes on a person's credit record and requires that a consumer's record only be provided for legitimate business needs. a. Rights to Financial Privacy Act b. Fair Trade Commission Act c. Fair Credit Reporting Act d. Home Equity Loan Consumer Protection Act
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a. 12 months The Fair and Accurate Credit Transactions Act of 2003 allows consumers to request and obtain a free credit report once every 12 months from each of the three nationwide consumer-credit reporting companies—Equifax®, Experian®, and TransUnion®.
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The Fair and Accurate Credit Transactions Act of 2003 allows consumers to request and obtain a free credit report once every __________ from each of the three nationwide consumer credit reporting companies—Equifax®, Experian®, and TransUnion®. a. 12 months b. 6 months c. 3 months d. month
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c. Consumer Credit Protection Act of 1968. The federal Truth in Lending Act (TILA) is Title 1 of the Consumer Credit Protection Act of 1968.
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The Truth in Lending Act is Title 1 of the: a. 1866 Civil Rights Act. b. Civil Rights Act of 1968. c. Consumer Credit Protection Act of 1968. d. Equal Credit Opportunity Act.
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b. Annual percentage rate TILA requires disclosure of the finance charge, the annual percentage rate, and certain other costs and terms of credit. The annual percentage rate (APR) is the relative cost of credit expressed as a yearly rate. Expressed as a percentage, it is the relationship of the total finance charge to the total amount financed.
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Which of the following must be disclosed under TILA and is the relative cost of credit expressed as a yearly rate? a. Finance charge b. Annual percentage rate c. Payment terms d. Total amount financed
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d. The Holden Act The Holden Act bans the consideration of race, color, religion, sex, marital status, national origin or ancestry, as well as trends, characteristics, or conditions in the neighborhood or geographic area where a house is located, with regard to the making of a real estate loan. In particular, the act forbids redlining—the practice of disapproving real estate loans in economically or physically blighted areas—unless it is based on sound business practice.
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A lender refuses to make loans to real property in a certain part of a city. Which of the following statutes has the lender likely violated? a. The Truth in Lending Act b. The Real Estate Settlement Procedures Act c. The Federal Trade Commission Act d. The Holden Act
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a. Annual Escrow Loan Statement When a potential homebuyer applies for a home loan, the lender must give the buyer a special information booklet, Loan Estimate, and a Mortgage Servicing Disclosure Statement.
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RESPA requires that borrowers receive disclosures at various times. Which of the following disclosures usually is not made at the time of the loan application? a. Annual Escrow Loan Statement b. Loan Estimate c. Special Information Booklet d. Loan Servicing Statement
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c. It only applies to FHA-insured loans. The Real Estate Settlement Procedures Act (RESPA) applies to almost all home loans and lenders, not just FHA-insured loans.
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Which of the following statements about RESPA is not true? a. It applies to all federally related home loans used to purchase or refinance real property. b. It protects consumers by eliminating kickbacks and referral fees that increase settlement service costs. c. It only applies to FHA-insured loans. d. It helps consumers get fair settlement services by requiring the advance disclosure of key service costs.
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c. Sally orders a pizza to be delivered. In an express contract, the parties declare the terms of the agreement and put their intentions in words, either orally or in writing. When a contract is implied, the agreement is demonstrated by conduct rather than by words.
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Which is not an example of an express agreement? a. Al sells his car to Fred for $5,000 and both "shake hands" on the deal. b. Donna finances the purchase of a phone system for her office and signs loan papers. c. Sally orders a pizza to be delivered. d. Ted signs a 6-month lease for an apartment.
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c. Unilateral agreement The elements of a valid contract are mutual consent, consideration, competent parties, and a lawful object.
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Which of the following is not an element of a valid contract? a. Consideration b. Competent parties c. Unilateral agreement d. Mutual consent
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d. Gary's letter is a counteroffer that Paul can accept or reject In order for a contract to be formed, the offeree must accept the offer without making any changes to it. If he does make a change, then the purported "acceptance" has really become a counteroffer.
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Paul sends Gary a letter that states, "I offer to purchase your house for $290,000, closing to take place by December 31." Gary writes back, "I accept your offer, but escrow must close before November 30." Which of the following is true? a. Gary's letter is a counteroffer creating a binding contract b. Gary's letter is an acceptance creating a binding contract c. Gary's letter is a revocation that Paul can accept or reject d. Gary's letter is a counteroffer that Paul can accept or reject
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a. Alice's mailed acceptance created a binding contract even though Jim never received it, according to the "mailbox rule." The acceptance or a rejection of an offer is deemed to be complete at the moment it is deposited in the mail. The actual receipt of the communication is not required; even if the letter communicating the acceptance or rejection is lost, it is still effective (assuming that the offeree can establish that the acceptance was deposited in the mail and when that deposit took place).
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Jim is in the market for a new house and visits a listed property owned by Alice. After his tour of the property, he sends her a written offer to buy for a few thousand dollars less than her listing price. Alice looks it over and decides that it is a reasonable offer and mails her acceptance to Jim. When she hears nothing for two weeks, she calls him and he tells her, "I never received your acceptance. And I've decided to revoke my offer to buy your house." Alice, however, has a copy of her letter stating her acceptance and the certified mail receipt. The postal service has no record that the letter was delivered, however, even though Alice can prove she mailed it. Do they have a contract? a. Alice's mailed acceptance created a binding contract even though Jim never received it, according to the "mailbox rule." b. Alice's mailed acceptance did not create a binding contract because Jim never received it, according to the "mailbox rule." c. Alice's mailed acceptance did not create a binding contract because too much time has elapsed from the date of mailing. d. The parties do not have a binding contract, because Jim told Alice he was revoking his offer.
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a. valid unless set aside by one of the parties. If an agreement is voidable there may be some barrier to the formation of the contract that does not appear on the face of the agreement itself, but that will not make the agreement unlawful under all circumstances. Until one party exercises its right to disaffirm the contract, it is presumptively valid and can be performed.
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Voidable means: a. valid unless set aside by one of the parties. b. illegal. c. unconditionally enforceable by either party. d. valid but unenforceable by either party.
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a. It is a rule that bars the introduction of most evidence regarding the oral negotiations of the parties that occurred prior to the execution of a written contract. "Parol evidence" refers to the oral discussions that precede the parties' reduction of those discussions into a written agreement.
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The parol-evidence rule refers to which of the following? a. It is a rule that bars the introduction of most evidence regarding the oral negotiations of the parties that occurred prior to the execution of a written contract. b. It is a rule of evidence that prohibits someone who was a party to a contract in which the other party has died from testifying about the meaning of the terms of the agreement. c. It is a rule that prohibits someone in prison, on probation, or parole from entering into most contracts. d. It is a rule that prohibits someone who has committed a felony from testifying about why that person entered into a contract.
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a. A court would likely find that the $1,000 payment to Marian is a valid liquidated damages provision. Because contract damages are sometimes difficult to ascertain, many contracts include a provision for liquidated damages. Liquidated damages are a sum set forth in a contract that the parties agree in advance will be their maximum exposure if one party or the other breaches the contract. Courts assume that such clauses give the parties certainty regarding their potential legal liability if either side breaches the agreement and consequently usually uphold them.
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Jeff and Marian sign a real estate purchase agreement by which Jeff agrees to buy Marian's house. The contract states that Jeff will deposit $1,000 into escrow upon execution of the agreement and that if the parties are unable to conclude the sale for any reason, Marian will retain the $1,000 as liquidated damages, less the escrow costs to that point. If the results of the termite inspection show that there is damage to the property and Jeff cancels the sale as a result, how is a court likely to treat the $1,000? a. A court would likely find that the $1,000 payment to Marian is a valid liquidated damages provision. b. A court would likely find that the $1,000 is invalid as a penalty or forfeiture. c. A court is likely to split the $1,000 between Jeff and Marian regardless of what their contract says. d. A court would likely order that the full $1,000 be returned to Jeff because he acted reasonably based on the results of the termite inspection.
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c. Novation If the assignor wants to be released entirely from any obligation or secondary liability for the contract, it may be done by novation. Novation is the substitution, by agreement, of a new obligation for an existing one, with the intent to terminate the original contract.
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What document should an assignor use to be released entirely from any obligations or secondary liability? a. Assignment b. Cancellation c. Novation d. Revocation
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b. Equitable remedies for breach of contract Common equitable remedies include unilateral rescission, specific performance, and reformation.
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What is the commonality of unilateral rescission, specific performance, and reformation? a. Assignment of a contract b. Equitable remedies for breach of contract c. Laches as it pertains to contracts d. Legal remedies for breach of contract
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b. 4 years The statute of limitations places a limit on the length of time a plaintiff has to file a lawsuit. The time limit to file an action on any written contract, which includes most real estate contracts, is 4 years.
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The statute of limitations places a limit on the length of time a plaintiff has to file a lawsuit. What is the time limit to file an action on any written contract? a. 2 years b. 4 years c. 5 years d. 10 years
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b. be in writing. According to the Statute of Frauds, to be enforceable, real estate contracts must be in writing.
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The statute of frauds requires that contracts for the sale of real estate must: a. be bilateral contracts. b. be in writing. c. be recorded. d. have a cash deposit.
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b. the unauthorized practice of law. Licensees should use care not to try to write specialized contract terms for the contract. This activity can constitute the unauthorized practice of law (a misdemeanor under Business and Professions Code §6125).
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A person holding only a salesperson's license who inserts complicated clauses that require legal expertise to form contracts might well be committing: a. a lack of due diligence. b. the unauthorized practice of law. c. a felony. d. acts that require a real estate broker's license.
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c. Uniform Electronic Transactions Act The California Uniform Electronic Transactions Act (UETA) codified California Civil Code; Division 3; Part 2, Contracts; Title 2.5, Electronic Transactions Cal. Civ. Code §§1633.1-1633.17 became effective January 1, 2000. This act provides that documents establishing contracts and agreements in a real estate transaction may be electronically written and signed.
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The __________ declares that real estate contracts can be electronically written and signed. a. statute of frauds b. Statute of Electronic Documents c. Uniform Electronic Transactions Act d. Electronic Real Estate Document Act
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d. The broker could sue for his or her commission. In the listing agreement, the seller promises to pay a commission upon presentation of a ready, willing, and able buyer who meets all the terms of the listing. Once the broker has done so, the broker is entitled to his or her commission; it does not matter that the seller ultimately decides not to go through with the sale, because the broker is hired only to find a ready, willing, and able buyer.
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If a seller refused to accept a full-price offer that met all terms of an exclusive authorization and right to sell listing, which of the following legal actions would most likely result from this? a. The broker could sue for specific performance. b. The buyer could sue for specific performance. c. The buyer could sue for monetary damages. d. The broker could sue for his or her commission.
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d. Safety clause A safety clause is a provision entitling the broker to a commission even after the listing for a given property has expired if the seller consummates a sale within a stated period of time, the ultimate buyer is someone with whom the broker negotiated, and the broker disclosed this to the seller. The assumption underlying a safety clause is that the broker's efforts should be rewarded even though the listing technically had expired.
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Steve, a broker, finds a buyer for a property and convinces the person to buy the property. The listing agreement expires before the sale is completed. However, the buyer whom Steve located eventually does complete the transaction and Steve was entitled to a commission. Which of the following allowed Steve to collect the commission? a. Contra proferentem clause b. Definite termination date c. Net listing d. Safety clause
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b. It creates the potential for a conflict of interest if the offer for the property comes in at or just above the seller's minimum sales price. With a net listing, instead of the broker being entitled to a percentage of the sales price, the seller and broker agree to a minimum amount the seller wants and the broker is entitled to anything that the broker can negotiate above that price. If the buyer's offer comes in at or near the seller's minimum price, the broker may be tempted to reject it without getting the client/seller's permission, constituting a breach of the broker's fiduciary duty to the client.
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What is one of the risks of a broker using a net listing? a. The broker will have to establish that he or she was the procuring cause of the sale. b. It creates the potential for a conflict of interest if the offer for the property comes in at or just above the seller's minimum sales price. c. The owner can decide to take the property off the market before the broker finds a seller. d. The broker might not get a fee if the owner finds a buyer himself or herself.
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b. The person making the original offer is no longer bound by it. After a counteroffer, the person making the original offer is no longer bound by that offer, and may accept the counteroffer or not.
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What happens to an original offer if a counteroffer is made? a. The original offer will stand until there is mutual consent. b. The person making the original offer is no longer bound by it. c. If the original offer is in writing, it must remain in effect. d. None of the choices apply.
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b. Dispute resolution The buyer and seller must agree to mediation by a neutral mediator in the attempt to resolve disputes.
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Which function of the deposit receipt is described by a buyer and a seller agreeing to mediation by a neutral mediator? a. Acceptance of offer b. Dispute resolution c. Joint escrow instructions d. Reaffirmation of agency
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b. no contract. Fred's counteroffer terminated the buyer's original offer.
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Seller Fred listed a vacant lot with a broker at $115,400. Prospective buyer Dan submitted an offer of $115,000 that was to expire in three days. The next day, Fred made a counteroffer of $115,200. When Dan did not respond within the three-day period, Fred signed an acceptance of Dan's $115,000 original offer and instructed the broker to deliver it to Dan. Dan told the broker that he had decided not to purchase the property, but Fred insisted they had a deal. Based on these circumstances, there is: a. a valid contract. b. no contract. c. an invalid contract. d. an enforceable contract.
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b. An option contract An option comes about when one party has made an offer that the other party believes is attractive but is unsure whether to accept it or to reject it immediately. Rather than doing either one immediately, the offeree may instead suggest paying the offeror separate consideration for the right to accept or reject the offer at some time in the future.
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Oliver made Brad an attractive offer to sell property that Brad was interested in buying. Brad was uncertain whether to accept, so he paid Oliver $100 to keep his offer irrevocable for ten days. What is the arrangement between Brad and Oliver? a. An open contract b. An option contract c. A unilateral offer d. A bilateral offer
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a. Document and disclose material facts The only option for those professionals who wish to press forward and succeed in their chosen vocation is to do their utmost to protect themselves. One way that this is performed is to document the disclosure of material facts—namely, those items that would affect the value or desirability of the property.
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How should real estate licensees protect themselves when handling real estate transactions? a. Document and disclose material facts b. Only conduct business as an LLC c. Not engage in any real estate transactions whatsoever d. Waive any responsibility for seller's or buyer's decisions
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c. Don is not required to do anything other than indicate on the TDS that there is a musty odor in one bathroom. All listing brokers of a residential property and any cooperating brokers must conduct a reasonably competent and diligent visual inspection of the property and disclose to a prospective buyer all material facts that may affect value, desirability, and intended use of the property. Don must disclose the musty odor, but is not required to have the property inspected for mold. Because the buyer is notified of a musty smell, the buyer may request a mold inspection.
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Don is a licensee who is helping Donna sell her home. He visually inspects her property and notices a musty odor (but no mold) in one bathroom. Donna cleans and uses an air freshener. Of the following statements, which is correct regarding Don's responsibility? a. Don is required to order a mold inspection and obtain a certificate. b. Don is required to have Donna bleach every surface of the bathroom. c. Don is not required to do anything other than indicate on the TDS that there is a musty odor in one bathroom. d. Don is not required to do anything, pursuant to caveat emptor.
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a. Broker A broker must notify the buyer and the seller, in writing, of the selling price of real property within one month after completion of the sale. If a neutral escrow closes the transaction, a closing statement from the escrow holder will constitute compliance on the part of the broker.
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Who has the primary responsibility to notify the buyer and the seller, in writing, of the selling price of real property after completion of the sale? a. Broker b. Escrow holder c. Lender d. Salesperson
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c. Megan's Law The Real Estate Transfer Disclosure Statement includes a number of specific items that must be included. The items listed on the TDS relate to the physical condition of the property that the buyer is considering purchasing, not such facts as the circumstances on neighboring properties.
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Which of the following is/are NOT included on the TDS? a. Automatic garage door openers b. Smoke detectors c. Megan's Law d. Solar panels
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a. drought. The natural hazards disclosure requires that a seller disclose six specific natural hazards that fall into three distinct areas: flooding; fire; and seismic risks. Drought is not disclosed on the HHD.
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The following items are all included on the Natural Hazards Disclosure, except: a. drought. b. floods. c. seismic hazards, such as liquefaction. d. wild land fire area.
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d. Special flood zone area
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Flood hazard boundary maps identify the general flood hazards within a community. On the flood hazard boundary map, what is the name for the area that falls with a 100-year flood boundary? a. Areas of minimum risk b. Areas of moderate flood hazards c. Dangerous flooding area d. Special flood zone area
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a. drought. The natural hazards disclosure requires that a seller disclose six specific natural hazards that fall into three distinct areas: flooding; fire; and seismic risks. Drought is not disclosed on the HHD.
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The following items are all included on the Natural Hazards Disclosure, except: a. drought. b. floods. c. seismic hazards, such as liquefaction. d. wild land fire area.
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d. Special flood zone area Flood hazard boundary maps identify the general flood hazards within a community and show areas within a 100-year flood boundary, termed special flood zone areas. Also identified are areas between 100 and 500-year levels termed areas of moderate flood hazards and the remaining areas above the 500-year level termed areas of minimal risk.
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Flood hazard boundary maps identify the general flood hazards within a community. On the flood hazard boundary map, what is the name for the area that falls with a 100-year flood boundary? a. Areas of minimum risk b. Areas of moderate flood hazards c. Dangerous flooding area d. Special flood zone area
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d. Very high fire hazard severity zone Properties in the Very High Fire Hazard Zone are subject to property maintenance requirements, such as clearing brush and maintaining firebreaks. Generally, CDF requires a 30-foot clearance area around dwellings per the Public Resources Code.
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Which of the six statutorily specified areas described in the Natural Hazard Disclosure Statement requires property owners to clear brush (30-foot clearance area) around dwellings? a. Earthquake fault zone b. Seismic hazard zone c. Special flood hazard zone d. Very high fire hazard severity zone
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b. Yes, because the police activity and violence are facts that could reasonably be material to a potential buyer. Gayle's house is not contaminated by an illegal controlled substance so she does not have to disclose the neighbor's meth lab. However, the criminal activity in the neighborhood and police responses to it are the kinds of factual information that would probably affect a buyer's decision whether to purchase a given parcel of property. On the TDS, this would be disclosed on Part C, #11-Neighborhood noise, problems, or other nuisances.
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Gayle is a senior citizen who has lived in her neighborhood for over 40 years. Unfortunately, the neighborhood has deteriorated over the years. Gayle's next-door neighbor uses his house to manufacture and sell methamphetamine drugs, which has resulted in several arrests. However, Gayle's house has never been used to sell or manufacture any controlled substances. There have been several incidents involving drug users, for which Gayle has had to call the authorities to deal with undesirable people causing a disturbance. When selling her home, does Gayle have any obligations to disclose what she knows about her neighbor? a. Yes, because methamphetamine is a very dangerous substance and while it is not in Gayle's house, the proximity may be a danger to someone looking to purchase the house. b. Yes, because the police activity and violence are facts that could reasonably be material to a potential buyer. c. No, because the drugs were not in Gayle's home and the police activity is only sporadic. d. None of the choices apply
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c. water heaters State law requires that all new and replacement water heaters sold in California on or after July 1, 1991 must be braced, anchored, or strapped to resist falling or horizontal displacement due to earthquake motion.
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State law requires that all new and replacement __________ sold in California on or after July 1, 1991 must be braced, anchored, or strapped to resist falling or horizontal displacement due to earthquake motion. a. military ordnance b. smoke detectors c. water heaters d. window bars
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c. Yes, under FIRPTA, a portion of the sale will be diverted to the state and federal tax agencies. Under FIRPTA (Foreign Investment in Real Property Tax Act), when the seller of real property is a foreign person, the IRS requires the buyer to withhold ten percent of the sales price, which is forwarded to the IRS, and three and one-third percent is forwarded to the Franchise Tax Board of California.
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Alain is a French citizen who resides in California. He owns a home that he wishes to sell to his son, Francois, who was born here and is a U.S. citizen. He intends to sell the home to his son at fair market value, which is currently $785,000. Do Alain and Francois have any special considerations because of their respective citizenships? a. No, because of the amount of the sales price, the transfer is exempt from FIRPTA. b. No, the transfer is between family members, so no special considerations need apply. c. Yes, under FIRPTA, a portion of the sale will be diverted to the state and federal tax agencies. d. Yes, under RESPA, a portion of the sale will be diverted to the state and federal tax agencies.
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d. tenancy for years. for example, a periodic rental agreement that requires one rent payment each month is a month-to-month rental agreement, and the tenancy is a month-to-month (periodic) tenancy. A periodic tenancy automatically renews at the end of each period unless one party gives notice of termination to the other.
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A tenancy for one month that automatically renews unless notice is given, would NOT be a: a. month-to-month rental agreement. b. periodic rental agreement. c. periodic tenancy. d. tenancy for years.
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d. must be returned within 21 days, with any deductions accounted for The owner must account to the tenant for disposition of the deposit within 21 days of the tenant's departure and must account for any funds retained.
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After giving proper notice, a tenant vacated the apartment. There was no unpaid rent or damage other than normal wear and tear. The security deposit: a. can be retained as a cleaning deposit if the lease stated it was nonrefundable. b. must be returned in full within 30 days. c. can be applied to cover the cost of carpet cleaning and repainting. d. must be returned within 21 days, with any deductions accounted for
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b. ownership of water-filled furniture. An owner cannot refuse to rent to an otherwise qualified tenant because the tenant owns water-filled furniture, such as a waterbed. However, the owner can require such a tenant to carry special property damage insurance for leakage.
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A property owner cannot refuse to rent to an otherwise eligible tenant due to: a. insufficient income to pay the rent. b. ownership of water-filled furniture. c. past tenancies that resulted in evictions through court process. d. poor credit history.
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d. violates a specific provision of the rental agreement. A tenant has the right to organize or participate in a tenants' association or complain to the owner or a public agency about habitability problems. A landlord may not retaliate against a tenant by raising the rent or sending an eviction notice.
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A property owner can evict a tenant if the tenant: a. complains to a public agency about property defects. b. deducts part of the rent to pay for a needed repair within 30 days after the owner fails to make the repair when notified by the tenant. c. organizes a tenant association. d. violates a specific provision of the rental agreement.
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c. sandwich A sandwich lease is so named because the original lessee is technically sandwiched between the new lessee and the lessor in the collection and payment of rent.
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A(n) __________ lease involves the original lessor and a new tenant called a sublessee. a. assigned b. periodic c. sandwich d. tenancy
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a. Notice of Belief of Abandonment If the evidence is strong that the property has been abandoned, the property manager should follow state laws and issue a Notice of Belief of Abandonment.
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If it appears that a tenant has deserted his or her leased property, the manager should follow state laws and issue a: a. Notice of Belief of Abandonment. b. Notice of Eviction. c. Notice to Pay Rent or Quit. d. Notice of Termination.
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a. Seven days Advance notice of the termination of tenancy is required by both tenant and landlord. The tenant's notice must be given at least the minimum number of days for which rent normally accrues, though no more than 30 days is required.
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James plans to move to Florida and is currently renting an apartment on a weekly basis. When James gives the landlord a notice of termination of tenancy, what is the minimum time for the advance notice? a. Seven days b. Three days c. Thirty days d. Two weeks
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c. Personally give the notice to the tenant. If the notice is being served by a landlord on a tenant, the notice should be served personally if possible.
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Of the following methods used to serve a notice of termination on a tenant, which is preferable? a. Give the notice to a person on the premises of suitable age. b. Mail the notice to the tenant. c. Personally give the notice to the tenant. d. Post the notice on the property in a conspicuous place.
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d. Serve the tenant with a Three-Day Notice to Pay Rent or Quit. The eviction process follows three main steps: (1) serving an eviction notice (3-day notice) to terminate the rental agreement, (2) obtaining a judgment against the tenant in an unlawful detainer action, and (3) evicting the tenant by the sheriff under a writ of possession
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A tenant defaulted on the rental agreement by not paying the rent when due and owner Pat must go through the eviction process to reclaim her property. What is the first thing Pat should do? a. File a complaint in court. b. Serve the tenant with a Notice of Belief of Abandonment. c. Serve the tenant with a Thirty-Day Notice to Pay Rent or Quit. d. Serve the tenant with a Three-Day Notice to Pay Rent or Quit.
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b. unlawful because a lessor who manages a mobilehome park cannot give a tenant a notice of termination unless the tenant has violated a park rule, is behind on the rent, or has violated a term of the rental agreement. the Mobilehome Residency Law provides that a mobilehome tenancy can be terminated only for violation of reasonable park rules of the park; failure to pay rent; or violation of certain state laws. If the eviction relates to violation of a park rule, the tenant also must first be informed of the violation in writing and given an opportunity to correct the violation.
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Linda is a resident of a mobilehome park. She is outspoken on various issues that have arisen with the park management over the years, such as how much landscaping should be done and noise from other units in the park. Linda is not behind in rent and she has not violated any of the park's rules or the rental agreement, but the park manager, tired of Linda's personality, has served her with a 60-day notice to terminate her tenancy. The park manager's action is: a. lawful because a lessor does not have to give a reason for serving a 60-day notice of termination. b. unlawful because a lessor who manages a mobilehome park cannot give a tenant a notice of termination unless the tenant has violated a park rule, is behind on the rent, or has violated a term of the rental agreement. c. unlawful under the Ellis Act. d. lawful because the park manager has a right to quiet enjoyment of the park, and Linda is interfering with that
