California Real Estate Exam Multiple Choice Questions with Answers 2024, Exams of Economics

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California Real Estate Exam Multiple

Choice Questions with Answers 2024

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. ✔ 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 ✔ 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. $ ✔ 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 ✔ 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. ✔ 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. Replacement (cost approach) b. Comparison c. Capitalization d. None of the above ✔ a. Replacement (cost approach) Since there is no income for capitalization and no means for comparing sales, replacement cost is the only approach available. The members of the National Association of Real Estate Brokers are called: a. Realtors®. b. Consolidated Brokers. c. Realtists. d. None of the above. ✔ c. Realtists. If the taxes on a newly acquired property will amount to 1.25% of the purchase price, what will the first installment (6 months) bill for a home costing $125,500 be? a. $765. b. $742. c. $784.

✔ 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. ✔ 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. ✔ 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. ✔ 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.

✔ d. jointly and severally. They are jointly (collectively) and severally (individually) responsible. When all expenses, including taxes and insurance, are paid by the lessee along with a new amount of "rent" as agreed upon to the landlord, this is referred to as a: a. gross lease. b. net lease. c. percentage lease. d. sandwich lease. ✔ b. net lease. Net lease. Lessor receives a net amount for lease payment, lessee pays for expenses; property taxes, fire insurance, and operating expenses. A lending institution hires an appraiser to evaluate a property for loan purposes. Select one of the following factors which would have the greatest influence on her appraisal. a. The type of neighborhood surrounding the property b. The size of the loan c. The credit rating of the loan applicant d. None of the foregoing ✔ a. The type of neighborhood surrounding the property The appraiser would have a basic interest in the kind of neighborhood and its resulting effect on market value. The other items in the question would be a matter of concern only to the lender. On FHA and VA loans, the lender is allowed to charge the borrower a fee (percentage of the loan) as an initial service fee. This is generally referred to as a(n): a. subordination fee. b. accommodation fee. c. acceleration fee. d. origination fee. ✔ d. origination fee. In which of the following would you use a "package mortgage"? a. When covering more than one parcel of land in a subdivision. 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.

✔ 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. ✔ 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. ✔ 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 ✔ d. January 1 On January 1 of the preceding the tax year, the lien is placed on the property. December and April dates above are dates taxes become delinquent for their respective periods, and July 1 is the beginning of the tax year. In the development of a subdivision of single-family homes, which of the following would be the least economical? a. Cul-de-sacs b. Long blocks c. Right angle (90%) intersections into major streets d. Short blocks ✔ d. Short blocks

With more streets, there's more cost and less land for homes. Capitalization is a process by which an appraiser: a. converts income into value. b. determines depreciation. c. establishes cost. d. finds gross income. ✔ a. converts income into value. When he ascertains the true net income for investment, an appraiser uses the "capitalization approach" to estimate value. Net income is determined by an appraiser using which one of the following? a. Real property taxes b. Capital additions c. Depreciation reserves d. Mortgage amortization and interest ✔ a. Real property taxes Real property taxes are considered as a fixed expense. Appraisers use them as deductions in computing net income. The other items are not in this category. Three of the following are closely related. Which one is NOT? a. Judgment b. Claim c. Real estate taxes d. Easement ✔ 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. ✔ 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?

c. home or residence. d. none of above. ✔ 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, ✔ c. $34, Which of the following represents an essential part of a valid grant deed? a. Acknowledgment and recordation b. Offer and acceptance c. Parties capable of contracting d. Parties properly described ✔ d. Parties properly described The five essential elements of a valid deed are: (1) In writing; (2) Parties properly described; (3) Adequate property description; (4) Operative words (granting); (5) Signed by Grantor. In contracting, if one of the parties enters the agreement under duress, the contract would be: a. valid. b. voidable. c. void. d. Illegal. ✔ b. voidable. Until proved either valid or void, it is voidable. Under a real property sales contract, Buyer "A" makes a $2,000 down payment to Seller "B" on a property he had been renting. The agreement is filed with the county recorder. Subsequently, "A" moves to Florida, without making any further payments, and with no notice of his intentions being made to "B." Which of the following would be true? a. Seller could resell the property and obtain a deficiency judgment against "A." b. New buyer should not be concerned about the previous sales to "A." c. "A's" activity has no effect upon the marketability of the property.

d. There would be a cloud on the title to the property. ✔ d. There would be a cloud on the title to the property. Seller "B" would need a quitclaim deed from "A," or would need to seek a "quiet title action" in court to clear the cloud on his title so he could sell the property to another. Appraisal fees: a. may vary. b. are always a fixed amount. c. are based on a percentage of the appraised value. d. are set by the loan broker. ✔ 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. ✔ 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. ✔ 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.

Appraisers always consider the highest net income as the basis for the highest value. A home sold for $150,000 on which the seller was to pay a 6% brokerage fee. Additional costs were: 2% prepayment penalty on existing loan balance of $102,800, escrow fees of $210, new loan discount fee of $534. The seller's cost of sale will be what percent of gross equity? a. 20.5% b. 25% c. 23.4% d. 228% ✔ b. 25% Commission = $150,000 x 6% = 50,000 x .06 = $9, Escrow Fees = 210 New Loan Discount Fee = 534 Prepayment Penalty = 2% x $102,800 = 2, Total Seller Costs = $11, Equity = Sale Price minus 1st loan = $150,000 - $102,800 = $47, Costs as "%" of Equity = $11,800 ÷ 47,200 x (100) = 25% To whom is the Mortgage Insurance Premium (MIP) on a VA loan paid? a. The broker b. The mortgage company c. The Veterans Administration d. To no one ✔ d. To no one FHA has the requirement for such a premium, not the VA. Which of the following would NOT be considered a "fiduciary" relationship? a. Agent to seller b. Attorney-in-fact to principal c. Attorney to client d. Trustor to beneficiary ✔ d. Trustor to beneficiary 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 ✔ 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, ✔ 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. ✔ 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.

b. government bonds. c. mortgages/loans. d. savings accounts. ✔ a. equity assets. A fine example of an "equity asset" is a single-family residence, which during an inflationary market condition, has a value that tends to follow the inflationary trends. All of the following are methods for estimating accrued depreciation, except the: a. engineering method. b. market analysis method. c. economic method. d. cost of reproduction method. ✔ c. economic method. There are five recognized methods for measuring past, or accrued, depreciation:

1. The breakdown method
2. The engineering method
3. The straight-line method
4. The market method
5. 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 ✔ 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 ✔ 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. ✔ 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. ✔ 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 ✔ 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. ✔ 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.

a. Dry rot b. Poor neighborhood c. Single car garage d. Zoning ✔ c. Single car garage In today's world, this feature would be considered "outdated," or in other words, functionally obsolete. There are three methods normally used in the evaluation of real property. However, one of these might prove more effective and accurate than the others, depending on the type of property being appraised. For example, the comparison approach would be the most desirable choice in the appraisal of: a. so-called amenity properties. b. service properties. c. industrial properties. d. apartment properties. ✔ a. so-called amenity properties. Because of the appeal of amenities and of the effect of emotional factors related to single-family residences, the best basis for the analysis of current market value is by means of comparison. Occasionally a property owner will realize a taxable gain when his property is destroyed or taken through condemnation. This is known as: a. trading up. b. depreciation. c. owner's amenities. d. involuntary conversion. ✔ d. involuntary conversion. The conversion of real property to personal property (money). A member of the Institute of Real Estate Management would carry the designation: a. NAREM. b. MAI. c. CPM. d. PMA. ✔ c. CPM.

CPM - Certified Property Manager. The others are: NAREM - National Association of Real Estate Managers; MAI - Member of Appraisal Institute; and PMA - Property Manager's Association. A corporation "seal" evidences the: a. authority of persons using the "seal." b. rights and privileges of recipient of document with "seal." c. proof of office of the presidency. d. none of above. ✔ a. authority of persons using the "seal." According to R.E.S.P.A., on applicable loans, a lender is required to furnish a copy of a Special Information Booklet (prescribed by Housing and Urban Development) together with a "Good Faith Estimate" of closing costs to every person from whom it receives (or for whom it prepares) a written application for a federally related loan, within: a. 3 business days. b. 12 business days. c. 15 business days. d. 21 business days. ✔ a. 3 business days. By delivery, or placing it in the mail within 3 days. Seller has paid the 1st half of the annual tax bill of $1,200. Buyer agrees to assume existing fire insurance policy, originally dated Oct. 1, 1986, with a three year premium of $900. Escrow to close on Mar. 1, 1988. What would be the net buyer proration for closing? a. $200 credit b. $275 debit c. $675 credit d. $475 debit ✔ b. $275 debit Taxes: $1,200 ÷ 12 = $100 per month. Seller owes buyer for 2 months = $100 x (2) = $200 credit buyer Insurance: $900 ÷ 36 = $25 per month. Buyer owes seller for 19 months unused premiums = $25 x (19) = $475 debit buyer Net = debit buyer ($475 - 200) = $275 debit buyer