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CALIFORNIA REAL ESTATE EXAM
MULTIPLE CHOICE EXAM 500
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An appraiser's definition of "Value" would be: a. present worth of all rights to future benefits arising out of ownership. b. the ability of one commodity to command other commodities in exchange. c. relationship between the thing desired and the potential purchaser. d. all of the above. - ANSWER>>>d. all of the above. These are elements of value. Which of the following abbreviations is associated with the FHA? a. NAR b. CPM c. MIP/MMI d. MBA - ANSWER>>>c. MIP/MMI MIP - Mortgage Insurance Premium/Mutual Mortgage Insurance. An investor group recently sold a parcel of land for $217,500, which was 45% more than they paid for it. The land is described as follows: N½ of the
NW¼ of the SE¼ of Section 13 plus the W½ of the NE¼ of Section 13. What was the original price they paid per acre for the property? a. $1, b. $1, c. $1, d. $750 - ANSWER>>>a. $1, $217,500 ÷ 145% (1.45) = $150,000 original price Acreage: N½ of the NW¼ of the SE¼ = 20 acres W½ of the NE¼ = 80 acres Therefore, price per acre = $150,000 ÷ 100 = $1,500. Which of the following is NOT a lien? a. Encumbrance b. Homestead c. Zoning d. All of the above - ANSWER>>>d. All of the above A lien is a charge against property, whereby the property is made security for payment of the debt, i.e., attachment. A property sells for $121,000. The purchaser gives $10,000 down payment, agrees to place an additional $5,000 down, and ta ke over an existing VA first loan of $100,000, with the remainder to be in the form of a 2nd note and trust deed. For these cond itions, how much would the documentary tax stamps be? a. $1. b. $5. c. $133. d. $23.10 - ANSWER>>>d. $23. Do NOT pay on old existing loan being taken over. Therefore, ($121,000 - 100,000) ÷ 1,000 x ($1.10) = 21.0 x $1.10 = $23.10. If an appraiser were called upon to evaluate a public building, which had unique and distinctive architecture, he would employ which of the following methods of valuation?
a. dividing the gross rental income by the appraised value. b. multiplying the market price by the capitalization rate. c. dividing the sales price by the gross monthly rental. d. multiplying the gross monthly rental by a reasonable cap rate. - ANSWER>>>c. dividing the sales price by the gross monthly rental. Gross Rent Multiplier is a rough, quick way of converting gross rent into market value. Which of the following could be used with a purchaser without the immediate involvement of a title change? a. Grant deed b. Land contract c. Quit claim deed d. Warranty deed - ANSWER>>>b. Land contract The land contract does not pass title until some later time, whereby the buyer (vendee) has performed certain requirements (i.e., accumulate a minimum amount of equity for down payment); title in the meantime remains with the seller (vendor). It is preferable to use the replacement cost method of appraisal on new buildings, as opposed to old buildings, because: a. it is easier to estimate depreciation. b. values of land change. c. it is difficult to estimate historical values. d. local codes are changed from time to time. - ANSWER>>>a. it is easier to estimate depreciation. As the age of the improvements on a property increases, it becomes more difficult to forecast the allowable depreciation. The following are essential to the creation of an "agency" relationship, except: a. parties are competent. b. agreement to pay consideration.
c. agreement between principal and agent. d. fiduciary relationship. - ANSWER>>>b. agreement to pay consideration. "Gratuitous agent" would not necessitate consideration. SHE owns a single-family residence in which SHE lives. SHE trades HE for another residence which HE is renting to a tenant. Both parties intend to use their newly acquired properties for rental income. Which of the following is true? a. SHE can negotiate a tax-free (deferred) exchange. b. HE can negotiate a tax free (deferred) exchange. c. Both parties can negotiate tax-free exchanges. d. Neither can negotiate a tax-free exchange. - ANSWER>>>b. HE can negotiate a tax free (deferred) exchange. HE is exchanging income property for the same—like-for-like; SHE is not. Examination of the records indicate there are conflicts between the local zoning restrictions and private restrictions contained within the deed that conveyed the property. Which of the following statements is true? a. The deed restrictions would prevail. b. The zoning restrictions would prevail. c. Since they are in conflict, the earlier restriction would prevail. d. The more restrictive of the two (deed vs. zoning) requirements would prevail. - ANSWER>>>d. The more restrictive of the two (deed vs. zoning) requirements would prevail. The more restrictive of conflicting zoning restrictions would prevail. Three general partners borrowed money and agreed to be liable for the repayment, either individually or collectively. They signed the security instrument: a. jointly. b. singularly. c. jointly and collectively. d. jointly and severally. - ANSWER>>>d. jointly and severally.
b. When encumbering real property and using personal property as additional collateral. c. When securing additional financing from the lender at a later date without rewriting the original loan. d. None of the above. - ANSWER>>>b. When encumbering real property and using personal property as additional collateral. A loan that is secured by the basic lot and improvement, plus fixtures attached to the home (appliances, carpeting, drapes, air conditioning, and other kinds of personal property). The primary purpose of the Federal National Mortgage Association (FNMA) is to: a. provide large sums of money for the building industry. b. finance the construction of low cost residential housing. c. lend money in the residential marketplace lower than normal interest rates for lower income families. d. Expand available home loan funds by buying and selling VA, FHA, and conventional loans in the secondary money market. - ANSWER>>>d. Expand available home loan funds by buying and selling VA, FHA, and conventional loans in the secondary money market. For a straight-line schedule of depreciation: a. earlier years receive more weight. b. later years receive more weight. c. each year receives equal weight. d. none of the above. - ANSWER>>>c. each year receives equal weight. For straight-line, the value is divided by the number of years over which depreciation is run—the same amount for each year. For "accelerated" methods, allow greater amounts of depreciation for the earlier years, and less for the later years A lender with vast funds for investment, who prefers larger loans without collection responsibilities, would most likely be a(n): a. commercial bank. b. insurance company.
c. private lender. d. savings bank. - ANSWER>>>b. insurance company. One particular appraisal method would be more detailed and accurate than others. Which would it be? a. Unit of cubic foot method b. Unit of square foot method c. Unit cost in place d. Quantity survey - ANSWER>>>d. Quantity survey The quantity survey is used by contractors in calculating the cost of construction of improvements. It is rarely used by appraisers because costly details are not necessary for most of their evaluations. To "rescind" is the same as to: a. revise. b. transfer. c. resale. d. revoke. - ANSWER>>>d. revoke. To revoke, or take away a license. (The Real Estate Commissioner has this power.) The legal purpose of police power is to: a. keep all types of commercial property out of residential neighborhoods. b. keep the land in every area as similar as possible. c. preserve or protect public health, safety, morals, or general welfare. d. none of the above. - ANSWER>>>c. preserve or protect public health, safety, morals, or general welfare. On which of the following dates do California real property taxes become a lien on the subject property? a. December 10 b. April 10 c. July 1 d. January 1 - ANSWER>>>d. January 1
a. Judgment b. Claim c. Real estate taxes d. Easement - ANSWER>>>b. Claim Claim is associated with insurance, whereby the others are types of encumbrances. Financial enhancement, as compared to comfort and safety when purchasing a home, is generally considered: a. absolute. b. primary. c. secondary. d. none of the above. - ANSWER>>>c. secondary. A true disadvantage of owning real property would be the lack of liquidity. Of the following, which would provide the greatest amount of liquidity to such an investment? a. Amortization b. Leaseback c. Leverage d. Syndication - ANSWER>>>d. Syndication A syndication participant would be able to convert property interests into cash, without having to sell the property. For a "blanket encumbrance," the typical release clause requires the debtor to pay more to the lender than each released property is worth because: a. better lots are sold first. b. compensates for unsold lots. c. lender desires to increase security on overall loan. d. all of the above. - ANSWER>>>d. all of the above. A fire station building and a small appliance sales and repair store were recently leased on long-term leases at the same lease payment. Between the two, the fire station building would probably have a stable capitalization rate, which would be:
a. higher. b. lower. c. same as. d. varying; sometimes higher, sometimes lower than the other property. - ANSWER>>>b. lower. Since the lessee of the fire station building would be the government, classified as a more stable tenant, the owner would probably be willing to accept a lower return on investment. In determining the value of a property, an appraiser would use the: a. cost approach. b. market approach. c. income approach. d. any or all of the above. - ANSWER>>>d. any or all of the above. Appraisers use all three approaches to determine value. "Domicile" most frequently means: a. semi-circled ceiling. b. relationship of parties. c. home or residence. d. none of above. - ANSWER>>>c. home or residence. An investor who owned a 16-unit apartment complex has evaluated a newly installed freeway near his property, which has caused a decrease in monthly rent in the amount of $320. When an 11% "cap rate" for the area is applied, what is the resulting loss in value he has experienced due to the freeway? a. $45, b. $40, c. $34, d. $32,468 - ANSWER>>>c. $34, Which of the following represents an essential part of a valid grant deed?
c. are based on a percentage of the appraised value. d. are set by the loan broker. - ANSWER>>>a. may vary. An appraiser's fee is set by the difficulty of the work and by the level of expertise required to complete the work. Percentage fees are illegal. An unlawful detainer action may be filed by a landlord in all but one of the following. Which is it? a. Tenant holds over after termination of lease. b. Tenant fails to pay rent. c. Tenant exercises lease option agreement, but fails to make payment as required. d. Tenant breaches lease by permitting nuisance on the property. - ANSWER>>>c. Tenant exercises lease option agreement, but fails to make payment as required. By process of elimination, this is the exception. The others are three of five lawful situations for exercising this action, the others being: (4) failure to perform any lease covenant, and (5) failure to give up possession when he had previously given written notice of intention to do so. All the following statements are incorrect, except: a. a real property security can be created from a note on a home not located in any subdivision. b. real property securities are always secured by installment sales contracts. c. real property securities and real property sales contracts are interchangeable terms. d. out-of-state subdivisions offered in California for sale need not comply with Article 6 of the California Real Estate Law. - ANSWER>>>a. a real property security can be created from a note on a home not located in any subdivision. All that is necessary would be the "guarantee" against loss, or a specific minimum yield, made by the selling broker. Which of the following properties could be purchased using FHA financing, but NOT VA financing? The purchase of:
a. a business. b. a farm. c. farm equipment. d. income property/property to be rented to a tenant. - ANSWER>>>d. income property/property to be rented to a tenant. VA requires the veteran purchaser must "move into" the property being purchased as personal residence. The purchase of "units" (4 maximum) is allowed, if the veteran will be residing in one of the units. An owner acquires title to additional land on his river-front property when the river shifts its course. This is acquiring by: a. acclamation. b. accession. c. abstraction. d. alienation. - ANSWER>>>b. accession. Accession - addition to property through efforts of man or by natural forces. Accretion - Accession to property through natural forces, for example, alluvium. Alluvium - Gradual increase of the earth on ocean front or bank of stream resulting from action of water. Past expenditures for residential improvements are called: a. costs. b. investments. c. price. d. value. - ANSWER>>>a. costs. They have nothing to do with establishing value. The term "highest and best use," as the fundamental concept of value, is best defined as: a. that which produces the greatest net return on the investment over a given period of time. b. that which produces the highest gross income. c. that which complies with all laws and restrictions.
Fiduciary relationship involves "trust and confidence." This is NOT required between trustor (borrower) and beneficiary (lender). Under which of the following types of financing is a buyer required to purchase term life insurance? a. Cal-Vet b. Conventional c. FHA d. VA - ANSWER>>>a. Cal-Vet The State of California is the beneficiary. If land was selling for $10,000 per acre, what would the following parcel sell for? The SE¼ of the SE¼ of the SE¼ of Sec. 4 a nd the S½ of the SW¼ of the SW¼ of Sec. 3 and the N½ of the NE ¼ of the NE¼ of the NE¼ of Sec. 9 and the N½ of the N½ of the NW¼ of the NW¼ of Sec. 10. a. $400, b. $425, c. $450, d. $500,000 - ANSWER>>>c. $450, Sec. 4: SE¼ of SE¼ of SE¼ = 1/4 x 1/4 x 1/4 x 640 acres = 10 Sec. 3: S½ of SW¼ of SW¼ = 1/2 x 1/4 x 1/4 x 640 acres = 20 Sec. 9: N½ of NE¼ of NE¼ of NE¼ = 1/2 x 1/4 x 1/4 x 1/4 x 640 acres = 5 Sec. 10: N½ of N½ of NW¼ of NW¼ = 1/2 x 1/2 x 1/4 x 1/4 x 640 acres = 10 Total Acreage = 45 acres Price (total) = $10,000 x 45 acres = $450, The cost of an improved parcel of real property would probably be equal to its value in which of the following instances? a. Highest and best use of the parcel. b. The parcel as a new piece of property. c. When a and b are both present.
d. None of the foregoing. - ANSWER>>>c. When a and b are both present. A new piece of property would offer the best possibility of equality for cost and value. Determination of the highest and best use of a parcel would probably justify the cost of additional improvements, with the expectation of creating a profit. An "agreement in a deed" would best match up with: a. option. b. prescription. c. covenant. d. subrogation. - ANSWER>>>c. covenant. Which of the following would constitute a proper delivery of a deed? a. Escrow mailing the deed to the Grantee after signed by seller, and after all other requirements of the escrow had been met, but also after the seller had died. b. After signing, seller gave to broker with instructions to give it to buyer. c. Escrow delivers deed to buyer without completed (signed) instructions. d. After signing the deed, Grantee personally delivers to Grantor. - ANSWER>>>a. Escrow mailing the deed to the Grantee after signed by seller, and after all other requirements of the escrow had been met, but also after the seller had died. Death does not automatically terminate contract. If it can be proved that the seller intended to deliver to the buyer upon completion of requirements of escrow, it would be a valid delivery. For an appraisal being conducted on a residence built in 1910, which of the following would an appraiser use? a. Original cost of construction b. Original cost of materials multiplied by the change in the cost of living index since 1910 c. Today's cost of reproduction less depreciation d. None of the above - ANSWER>>>c. Today's cost of reproduction less depreciation
- The capitalized income method The economic method is not included in this category. A homestead offers NO protection against which of the following filed prior to the filing of the homestead? a. Real property taxes b. Mechanic's liens c. Prior recorded liens d. All of the above - ANSWER>>>d. All of the above An owner has been found guilty of discrimination under the Health and Safety Code. What action can the aggrieved party take? a. May purchase the property in question, if still available b. May purchase another like property, if the original property is not available c. May be awarded $500 in damages if neither a nor b available d. All of the above - ANSWER>>>d. All of the above In appraising a residential property, the appraiser must consider the forces currently influencing the neighborhood. Boundaries of such a neighborhood are best established by: a. geographical situation. b. social composition. c. street pattern. d. traffic flow. - ANSWER>>>b. social composition. Theory: most people with mutual interest and desires usually group together in a given area (forming a neighborhood), creating market influences. All of the following instruments are used to convey an interest in real property, except: a. agreement of sale. b. bill of sale. c. deed. d. lease. - ANSWER>>>b. bill of sale.
A bill of sale is used to convey title to personal property, NOT real property. The recording of which of the following creates a lien? a. Attachment b. Easement c. Notice of nonresponsibility d. Restriction - ANSWER>>>a. Attachment Attachment is an "involuntary lien." All of the following are methods for appraising unimproved real property, except the: a. development method. b. abstractive method. c. market data method. d. reproduction method. - ANSWER>>>d. reproduction method. There is NO structure to reproduce on unimproved property. Therefore, the reproduction method is not applicable. Real estate brokers and salespeople are authorized to engage in listing and selling certain manufactured homes which have been registered with the Department of Housing and Community Development for a minimum of: a. 18 months. b. 6 months. c. 1 year. d. 2 years. - ANSWER>>>c. 1 year. No minimum time limit if manufactured home has been converted into real property. An apartment owner desires to carpet his units. The area to be covered is 60% of the total 15,000 sq. ft. living space in the building. If the total cost of the carpet (including installation) is $14 per sq. yd., what will be the owner's total expenditure?
