California Real Estate Exam Study Guide: Key Concepts and Definitions, Exams of Real Estate Management

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Guide Questions with Exact Answers.

The laws from which the majority of our laws are patterned. - Correct Answer-English Common Law Are of Mexican or Spanish Origin, and were retained through theTreaty of Guadalupe Hidalgo. - Correct Answer-Community Property Law Anything Movable. Any property not considered real. - Correct Answer-Personal Property Anything Immovable or Immovable By Law. Any property not considered personal. - Correct Answer-Real Property Any document relating to a right or interest held in real property. Examples: Leases or rentals on real property. - Correct Answer-Chattel Real Intangible Items. Documents giving holder a right to an action. Examples: TrustDeeds, Mortgages, Leases, SecurityAgreements, etc. (Personal Property) - Correct Answer-Choses in Action Tangible Items. Examples: Automobiles, Money, Furniture, Jewelry, Stock in Trade of a Business or TRADE FIXTURES (Fixtures used to operate a trade or business even if firmly attached to the real property may be legally removed and taken). (Personal Property) - Correct Answer-Choses in Possession Bill of Sale - The document which evidences transfer of personal property. What is REQUIRED for it to be valid? - Correct Answer-1) Dated. 2) In Writing. 3) Identify Subject Matter. 4) Signed by the Vendor. Bill of Sale - The document which evidences transfer of personal property.

What is NOT REQUIRED for it to be valid? - Correct Answer-1) Vendor's signature acknowledged (required only if wanting to record).

2. Recording the bill of sale. Given as security while retaining ownership and the legal possession of the personal property. (e.g. - House, apartment building, etc.) - Correct Answer-Hypothecated Security Given as security while retaining ownership, but transferring legal possession to the lender. (e.g. - Pawn Shop, where items pledged as security). - Correct Answer-Pledged Security Tangible personal property can be assessed for the purpose of _______? - Correct Answer-Property Taxation Real Property is _________, ________, and ______? - Correct Answer-Land, Appurtenances, and Affixed In Real Property, Land refers to ____, _____, and _____? - Correct Answer-Surface (area on surface of earth), Material beneath the surface (extends to center of earth), and Airspace (infinite height but can now be subject to air travel reasonable height) In Real Property, what are Appurtenances? - Correct Answer-Benefits or rights legally attached to become part of the land, which the owner of the land receives as part of their ownership rights. Examples: Easements or WaterRights In Real Property, what is considered Affixed? - Correct Answer-Buildings, fences, certain types vegetation, etc. b. Trees and Shrubs attached by roots. 1) Natural growth.
3. Trees or Vines (used for Commercial growth).
4. Commercial growth not previously sold by contract.
5. Fixtures attached to property In Real Property, what is NOT considered Affixed? - Correct Answer-Commercial growth which has been previously sold by contract.

Note: Deciduous - A term quite often used on the exam. Describes any type of a plant or tree that sheds it's leaves on an annual basis". Not a type of soil, but a type of plant. What standards are Used to determine whether or not an item is a fixture? - Correct Answer-(M) Method of attachment (A) Adaptability (R) Relationship between the Disputants ( I ) Intention of the Parties (A) Agreement or Basic Rule Note: NOT ONE OF THE TESTS: The COST of the item nor DATE of purchase. Owner's Rights include.... - Correct Answer-Reservation, Exception, Lateral or Subjacent Support, and Water Rights When speaking of owner's rights, what does Reservation mean? - Correct Answer- Withholding a right or rights when conveying title. Examples...Minerals, Oil, Natural Gas, etc. When speaking of owner's rights, what does Exception mean? - Correct Answer- Withholding part of the described property when conveying title. Example..."I hereby convey all of Parcel 7, except the West half" Describe Lateral and Subjacent - Correct Answer-Lateral is side and subjacent is lower Which board controls California Water and arbitrates disputes? - Correct Answer- California State Water Resources Board What are Riparian Rights? - Correct Answer-Rights of adjacent owners to the use of water on navigable and non-navigable waterways or watercourses (rivers and streams). a. Boundary Lines - If navigable, to edge of river/stream (medium high tide mark). If non- navigable each owns to the mean center of river/stream. b. Use of Water - Reasonable use. What are Littoral Rights? - Correct Answer-Rights of adjacent owners to the beneficial use of (quiet) waters in a lake, sea or underground. (Very Seldom asked about on exam)

What's a Mutual Water Company? - Correct Answer-Privately owned water company. Incorporated, with each property receiving a "Share of Stock" which evidences their ownership rights to receive water. a. Stock Certificate - Evidence of ownership rights (PERSONAL) b. Stock in the Mutual Water Company - The right(s) that are conferred (REAL) What is Percolating Water? - Correct Answer-Water having no defined channel. Law allows for the "Beneficial use of such water" (e.g. - water table). What rights do owners have regarding flood or surface waters? - Correct Answer-Not to be diverted onto the land of another, however an owner has the right to protect their property from flood. What is Appropriation? - Correct Answer-A right given a non-riparian owner to acquire water if need is proven. Granted by the California State Water Resources Board. What can cause Loss of Land in regard to Water? - Correct Answer-a. SLOW Natural Process Erosion, Accretion, Alluvium b. QUICK Disastrous Process Avulsion Describe the process of Erosion - Correct Answer-Natural wearing away of land. Title to a part or all could be lost. SLOW Natural Process Describe the process of Accretion - Correct Answer-Addition to, or build-up of land by natural causes. SLOW Natural Process What is Alluvium? - Correct Answer-Name of the soil that is deposited through accretion. SLOW Natural Process What is Avulsion - Correct Answer-The sudden ripping or tearing away of the land (e.g. - A flood). A QUICK Disastrous Process. What is the DOCTRINE OF EMINENT DOMAIN? - Correct Answer-Private property taken for beneficial public use.

Examples: Freeways, highways, dams, power stations, hospital sites, parks, etc. How does the process of Eminent Domain work? - Correct Answer-a. A negotiation is made to purchase the land.

1. Owner may sell. Owner is compensated.
2. Owner may refuse to sell. If owner refuses to sell, power of condemnation is invoked. Owner still receives "just" compensation. Note: Under either circumstance owner is generally paid for the real property but not for personal property. What is Police Power? - Correct Answer-REGULATING THE USE OF LAND The right of the state to enact laws; of cities or counties to enact ordinances for protection and the "Health, Welfare, Safety, Morals and General Well-Being" of the public. Examples: Zoning Ordinances (designating property usage) or Condemnation for health or safety purposes. Note: Compensation is not required for actions instituted under Police Power. What is Escheat? - Correct Answer-Reversion of unclaimed property to the State a. Action takes place when death occurs and the deceased party leaves NO WILL, and NO HEIRS to claim the estate. b. Not automatic - requires a 5 YEAR WAITING PERIOD. What are two types of Estates in Property? - Correct Answer-Freehold and Less-than- freehold What is a Freehold estate? - Correct Answer-Ownership evidenced by deed. Conveys existing "Bundle of Rights". Fee Estate or/and Life Estate What are 3 essential characteristics of a freehold estate? - Correct Answer-1. Freely Transferable (can be deeded) 2 Freely Inheritable (can be left by will)

3. Of an Indefinite Duration (No definite ending time)

What is a Fee Estate? - Correct Answer-Also known as a Fee, Estate In Fee or Fee Simple. The term fee refers to an "INHERITABLE ESTATE". There are two Categories of Fee Estates; Absolute and Defeasible What is a Life Estate? - Correct Answer-An estate measured by the life of the grantee of the estate or a third designated party. Upon designated party's death, Life Estate rights will pass to the party holding the ESTATE IN REVERSION or ESTATE IN REMAINDER What is an "Absolute" Fee Estate? - Correct Answer-Maximum interest attainable in real property. Contains no conditions or qualifications. What is a "Defeasible (defeatable)" Fee Estate? - Correct Answer-Contains conditions or qualifications that may cause the possible forfeiture of the title if violated. e.g."This property is conveyed with the condition that it shall be used for religious meetings only. If condition is violated the property is to revert to me or my heirs" What is a Life Estate in Reversion? - Correct Answer-REVERSION OF RIGHTS to grantor, or grantor's estate. Reverts back to original grantor. What is a Life Estate in Remainder? - Correct Answer-REMAINDER OF RIGHTS to someone other than grantor or their estate. Rights go to someone other than the original grantor. The Grantee of a Life Estate is required to __________ and Cannot ___________? - Correct Answer-a. Required to PAY THE PROPERTY TAXES AND INSURANCE; b. CANNOT COMMIT WASTE (allow the property to run-down), and may be required to pay the interest, but not the principal on any outstanding loans against the property. Upon the death of the designated party, the Life Estate with any existing interests (rentals, leases or owners) will terminate. The property will then vest in the pre-designated Reversion or Remainder Estate Holder. Less-Than-Freehold Estates are also known as ________? - Correct Answer-Leasehold Interests 4 Types of Leaseholds - Correct Answer-Estate for Years, Estate at Sufferance, Periodic Tenancy, and Estate at Will

In a Leasehold, what is an Estate for Years? - Correct Answer-Any specified period of time. Definite termination date. In a Leasehold, what is an Estate at Sufferance? - Correct Answer-Tenant holds over after Estate for Years has terminated. In a Leasehold, what is Periodic Tenancy? - Correct Answer-Day to Day, Week to Week, Month to Month. In a Leasehold, what is an Estate at Will? - Correct Answer-An agreement to allow a tenant use of a premises at the will of either or both parties - Generally verbal. California Law requires prior notice to terminate. Most Common method utilized by Brokers and Salespersons to appraise real property? - Correct Answer-Comparison of Market Data Approach. Used for raw land and single family dwellings What Appraisal approach is based the principle of substitution? - Correct Answer- Comparison of Market Data Approach. What Appraisal approach is based on the principle of replacement or reproduction? - Correct Answer-Cost Approach What is the Reproduction Cost? - Correct Answer-Cost to create exact replica. Seldom used. It costs more. What is the Replacement cost? - Correct Answer-Cost to reconstruct a property with equal quality materials. Cheaper and most often used. Most Common method utilized by Brokers and Salespersons to appraise service type properties? - Correct Answer-Cost Approach because of uniqueness. 4 Steps in performing the Cost Approach? - Correct Answer-1. Determine Current Value of Land

2. Determine Cost of Replacing Improvements at todays current prices.
3. Determine Depreciated Value of Improvement using Straight-line Method
4. Add Current Land Value to Depreciated Improvement Value

Most accurate way to determine cost of replacing improvement in today's market? - Correct Answer-Quantity Survey. Counts every single nail, board, etc. Most accurate but also most expensive to use. Appraisal approach based on the principle of Anticipation? - Correct Answer-Income Approach. The Value is based on the PRESENT WORTH OF FUTURE BENEFITS of the property being purchased. Income Properties. 6 Steps of Income Approach Appraisal? - Correct Answer-1. Gross Scheduled Income- Total possible rents

2. Adjusted (effective) Gross Income- deduct loss rent
3. Allowable Expenses determined and deducted- such as taxes, insurances, maintenance, carpets, drapes. etc
4. Net Income- Get by subtracting allowable expenses from gross income.
5. Capitalization Rate (Cap-Rate)- return on investment
6. Determine Value of Property How is a property manager paid? - Correct Answer-Gets a percentage of gross income. What's the known factor in the "Land Residual" Technique? - Correct Answer-Cost of Improvements (buildings) 3 Different methods of determining Capitalization Rate? - Correct Answer-1. Band of Investment Theory
7. Summation
8. Comparison How many units have to be in a complex for a manager to be required to live there? - Correct Answer- 16 Units in One Complex What is the replacement of excavated earth into a hole or against a structure called? - Correct Answer-Backfill What do you call the Wall that supports the main load of floors and ceilings? It must be taken into consideration when remodeling. - Correct Answer-Bearing Wall

What is A location, used by a surveyor, indicated on a durable marker? - Correct Answer- Bench Mark or monument What unit of measurement is used for lumber? - Correct Answer-Board foot How many cubic inches are in ONE board foot? - Correct Answer- 144 cubic inches What is a BTU? - Correct Answer-It stands for British Thermal Unit. It is a measurement of energy to push out heat and/or air. What do you call the metal pipe that wiring is run through that is used by Electricians? - Correct Answer-Conduit What is EER? - Correct Answer-Energy Efficiency Rating. The higher the rating the better the efficiency. What do you call the blueprint page showing the outside heights and measurements of a building? - Correct Answer-Elevation Sheet What do you call the blueprint which diagrams the dimensions of the room? - Correct Answer-Floor Plan What blueprint shows all the components of the foundation? - Correct Answer-Foundation Plan What do you call a 2 sided roof? - Correct Answer-Gable Roof What do you call a 4 sided roof? - Correct Answer-Hip Roof HVAC stands for? - Correct Answer-Heating, Ventilation, & Air Conditioning What supports the floor and ceiling loads?It is a series of parallel horizontal beams to which the subfloor and/or ceiling panels are nailed to. - Correct Answer-Joist What do you call a multi-sided stand or container or information booth in a shopping mall?

• Correct Answer-Kiosk

What do you call the placement of the improvement on the land? - Correct Answer- Orientation What test to you perform test the soil for liquid/fluid absorption.? - Correct Answer- Percolation Test Four sided roof with a point on the top? - Correct Answer-Pyramid Roof What do you call the highest wood member of a roof? - Correct Answer-Ridge Board The lowest wooden member which rests on the foundation fastened by anchor bolts? - Correct Answer-Sill Type of pip used for sewage disposal? - Correct Answer-Soil Pipe Name the wooden 2 x 4 piece of lumber on which wall studs rest - Correct Answer-Sole Plate What do you call a structure which is completed and ready to be occupied? - Correct Answer-Turnkey Project What do you call a 2 story apartment without an elevator? - Correct Answer-A Walk-up In Lending, which interest rate shows the true cost when borrowing money? - Correct Answer-Effective Interest Rate What's the difference between a government participation loan and a conventional loan? - Correct Answer-A government loan is federally backed and insured and a conventional loan isn't. Which loan has a higher downpayment, shorter terms, higher interest rates, and higher monthly payments? Conventional or Government? - Correct Answer-Conventional Are Mortgage Companies Institutional or Non-Institutional Lenders? - Correct Answer- Non-Institutional Lenders

What did the Title I give FHA the authority to do? - Correct Answer-Gives FHA the authority to insure loans made to homeowners by private or institutional lenders for repairs of presently owned homes or purchase of mobile homes. What did the Title II give FHA the authority to do? - Correct Answer-Gives FHA authority to insure loans made through approved lenders on purchase of 1 - 4 unit properties. What did the Title III give FHA the authority to do? - Correct Answer-This Title created a Secondary Money Market. When was the USDVA, which gives VA or GI Loans, created? - Correct Answer- 1941 What does a VA loan require instead of an appraisal? - Correct Answer-It requires a CRV or Certificate of Reasonable Value. Does a VA loan GUARANTEE or INSURE the loan to the lender? - Correct Answer-A VA loan guarantees the loan at usually 25%. Does an FHA loan GUARANTEE or INSURE the loan to the lender? - Correct Answer- FHA insures the loan. When was the Cal-Vet program established? - Correct Answer- 1921 Who do you borrow money from when getting a Cal-Vet loan? - Correct Answer-The state of California Who charges the lowest loan fees when acquiring a loan? - Correct Answer-The Cal-Vet program Is the interest rate on a Cal-Vet loan fixed or variable? - Correct Answer-Fixed Who can assume a Cal-Vet loan? - Correct Answer-Another California Veteran only Does someone getting a Cal-Vet loan get the deed? - Correct Answer-No. California retains the legal title which is a Contract of Sale. What does RESPA stand for? - Correct Answer-Real Estate Settlement Procedure Act

What does RESPA do? - Correct Answer-RESPA sets for special disclosure requirements for non-exempt lenders. Must Provide booklet for explanation describing closing costs and good faith estimate. Also provide uniform settlement statement. All for free. When must a RESPA Uniform Settlement Statement be delivered to the borrower and seller? - Correct Answer-Must be provided at or before settlement unless waived. If waived it must be delivered as soon as practice after close of escrow. When does the property tax year end? - Correct Answer-6/ What is the purpose of the Bureau of Real Estate? - Correct Answer-To enforce California Real Estate Laws What does the Recovery Fund do? - Correct Answer-Pays uncollected judgements against agents up to a limited amount. $20,000 per individual claim and $100,000 per agent. Who is appointed to head of the Bureau of Real Estate? - Correct Answer-The Real Estate Commissioner is appointed by the Governor. He is a salaried employee. What 4 things are required for a Salesperson's license? - Correct Answer-1. 18 years of age

2. Truthful and Honest
3. Must pay required fee
4. License issued for a 4 year term What is an Exclusive Agency Listing? - Correct Answer-It says they are only hiring that one agent to sell their property but the owner can still sell it as well and then the agent won't be paid. What is an Exclusive Right To Sell Listing? - Correct Answer-A listing where the hired agent gets paid regardless of who sells the house. Must have definite termination date on contract. Does a Real Estate Appraiser need a license? - Correct Answer-No license required

What is a NOD? - Correct Answer-Notice of Default How soon can a property be sold at Trustee Sale? - Correct Answer- 21 Days Who's name has to be on the document if signed by an Attorney-in-Fact? - Correct Answer-Both names but only Attorney-in-Fact's signature. Are the Commissioner's Regulations considered law? - Correct Answer-No. They are not law but have the same force and effect of law. Can a broker perform an Escrow? - Correct Answer-Yes, if the broker already represents the buyer or seller and both parties agree. Can get an extra fee for this. What do you call an agent representing both buyer and seller where full disclosure HAS NOT been made by the agent? - Correct Answer-Divided Agency What do you call an agent representing both buyer and seller where full disclosure HAS been made by the agent? - Correct Answer-Dual Agency What do you call a profit derived from agency not fully disclosed to agent's principal? - Correct Answer-Secret Profit What do you call the improper handling of a client's trust funds within 3 days? - Correct Answer-Commingling What is an agent guilty of if they personally use a clients trust funds? - Correct Answer- Conversion What is Redlining? - Correct Answer-Areas they don't want to loan to based a certain negative ideas. What is steering? - Correct Answer-Directing someone to or away from certain areas based on discriminatory practices. What is Blockbusting? - Correct Answer-Tell people certain negative information to get them to leave a neighborhood.

Is there a limit to the interest rate that can be charged on a loan? - Correct Answer-No limitation How long is a loan listing? - Correct Answer-It is limited to 45 days if agent has a signed Exclusive Listing. Loan listings are rare. They don't require a sale for agent to be paid, only to find buyer. What is an Agent's Fudiciary Duty to the principal? - Correct Answer-1. obligation to act in highest good faith

2. Not to take unfair advantage
3. to disclose all pertinent information While making a valid contract, the offer must have have what 5 things? - Correct Answer-
4. Name of Parties
5. Identify subject matter (describe property)
6. Full details of financing (price & terms)
7. Time of Performance
8. Communication of the offer to offeree What's the easiest remedy for a breach of contract? - Correct Answer-Unilateral Recission- Innocent or uninjured party simply withdraws from agreement after other party has breached. What is a listing agreement? - Correct Answer-Employment Contract- Employing agent to perform service. It's a personal service contract. What two parties are in a listing agreement? - Correct Answer-The principal (one who appoints or hires the agent) and the agent (the one who receives authority to represent the principal). What does aDue Diligence Clause do in an Exclusive Listing? - Correct Answer-Makes it a BiLateral agreement because the agent agrees to use diligence to find a buyer. What is a Purchase Contract also known as? - Correct Answer-Deposit Receipt

If someone says they will buy your property subject to qualifying for financing, this is called a _______? - Correct Answer-Contingency. The contract is void if the contingency doesn't occur. In what document would you find the term "time is of the essence" clause printed? - Correct Answer-In a Purchase Contract How many square feet are in an acre? - Correct Answer-43,560 square feet are in an acre What is the definition of Appraisal? - Correct Answer-An estimate or opinion of value of an item on a specific date. What is the Appraisal Value based on how much you want something? Also known as the subjective value - Correct Answer-Utility Value What is the Appraisal Value based on how much the property can be sold or exchanged under current conditions? Also known as the objective value - Correct Answer-Market Value What are the 4 Elements that influence value in an appraisal? - Correct Answer-DUST

1. Utility- the highest and best use (MOST IMPORTANT)
2. Scarcity- shortage of available supply
3. Demand- the desire to possess (backed by purchasing power)
4. Transferability- Capability of title to be conveyed (are there encumbrances?) LEAST IMPORTANT Township lines and range lines are always how far apart? - Correct Answer- 6 miles How big is a Township? - Correct Answer- 36 square miles broken up into 36 sections. How big is a Section? - Correct Answer- 640 Acres and 1 square mile How big is an Acre? - Correct Answer-43,560 sq. feet How long is a Mile? - Correct Answer-5,280 ft

How long is 1 yard? - Correct Answer- 3 ft long