California Real Estate Broker Practice Exam.
Free practice test — 214 quality-checked questions, instant feedback.

1. In a fully amortized fixed-rate mortgage, how does the composition of a level monthly payment change from the first payment to the last?

• A. The principal and interest portions remain equal throughout the loan term
• B. The entire payment applies to principal until the balance is retired, then to interest
• C. The interest portion increases each month while the principal portion decreases
• D. The interest portion decreases each month while the principal portion increases

2. What best describes the primary function of a promissory note in a real estate financing transaction?

• A. It pledges the real property as security for the debt
• B. It is the borrower's written promise to repay the debt
• C. It is the government's record of the recorded lien
• D. It transfers legal title of the property to the lender

3. What is the general purpose of a loan-to-value ratio when a lender evaluates a mortgage application?

• A. It determines the length of the amortization schedule
• B. It measures the borrower's monthly income against total monthly debts
• C. It sets the interest rate the borrower will be charged
• D. It compares the loan amount to the appraised value or price of the property

4. Which of the following correctly pairs a feature of the broker examination with its official value?

• A. Examination fee: $150
• B. Number of questions: 150
• C. Passing score: 60 percent
• D. Number of questions: 250

5. A broker candidate answers 150 of the questions correctly on the examination. Assuming every question is scored equally, does this meet the stated passing standard?

• A. Yes, but only because partial credit applies
• B. No, because a passing score requires 80%
• C. Yes, because 150 correct out of 200 is 75%, which meets the passing standard
• D. No, because 150 correct out of 200 is only 70%

6. A candidate answers 140 questions correctly on the 200-question broker examination. Relative to the stated passing standard, how many additional correct answers would have been needed to pass?

• A. 15 more
• B. 10 more
• C. 20 more
• D. 5 more

7. A borrower obtains a loan secured by a deed of trust. Which parties are associated with a deed of trust?

• A. A trustor, a trustee, and a beneficiary
• B. A vendor and a vendee only
• C. Only a mortgagor and a mortgagee
• D. A grantor and a grantee only

8. In the context of mortgage lending, what does an acceleration clause allow a lender to do?

• A. Demand immediate payment of the entire remaining balance upon a specified default
• B. Reduce the monthly payment during periods of financial hardship
• C. Extend the loan term automatically if the borrower misses a payment
• D. Increase the interest rate at fixed intervals regardless of default

9. How does the secondary mortgage market primarily differ from the primary mortgage market?

• A. The secondary market only handles government-issued grants, not loans
• B. The secondary market originates new loans directly to homebuyers
• C. The secondary market buys and sells existing loans, providing liquidity to originating lenders
• D. The secondary market sets the appraised value of financed properties

10. A broker represents a seller under a listing agreement limited to that single property sale, with no other authority to act for the seller. Which category of agency does this describe?

• A. Ostensible agent
• B. Universal agent
• C. General agent
• D. Special agent

11. A buyer breaches a signed purchase agreement for a single-family home by refusing to close. The seller wants a court to force the buyer to complete the purchase rather than simply awarding money damages. Which remedy is the seller seeking?

• A. Specific performance
• B. Novation
• C. Liquidated damages
• D. Rescission

12. A homeowner conveys a parcel by deed that names the parties, includes a legal description and granting clause, and is signed by the grantor, delivered, and accepted, but the deed includes no warranties of title whatsoever. Which type of deed was most likely used?

• A. Special warranty deed
• B. Bargain and sale deed
• C. Quitclaim deed
• D. General warranty deed

13. Which estate in land is described as the highest and most complete form of ownership, freely inheritable and freely transferable?

• A. Fee simple absolute
• B. Leasehold estate
• C. Life estate
• D. Easement appurtenant

14. A grant conveys a home 'to my brother for life, then to my daughter.' Upon the brother's death, who holds title to the home?

• A. The state, by escheat
• B. The grantor, automatically, by reversion
• C. The brother's heirs, through probate
• D. The daughter, as the named remainderman

15. A buyer records her deed in the public land records immediately after closing. What is the primary legal effect of that recording?

• A. It gives constructive notice to the world and establishes priority
• B. It cures any pre-existing defects in the chain of title
• C. It automatically removes any recorded easements
• D. It guarantees the title is marketable

16. A property owner falls behind on both a mortgage payment and a property tax bill, and the property is later sold in a foreclosure with insufficient proceeds to satisfy every lien. Which lien is generally paid first, regardless of recording date?

• A. Whichever lien has the largest balance
• B. The property tax lien
• C. The mortgage, because home loans always have top priority
• D. The mortgage, because it was recorded first

17. Two neighboring lots are configured so that the owner of Lot 1 has the right to cross Lot 2 to reach a public road, and this right was created to benefit Lot 1 specifically. If Lot 1 is sold, what happens to this right?

• A. It terminates automatically because easements cannot be transferred
• B. It continues to benefit Lot 1 because it runs with the land
• C. It converts into a personal license held only by the original owner
• D. It must be renegotiated with the new owner of Lot 2

18. A seller wants to convey a property with the strongest possible protection to the buyer, including warranties against title defects arising at any point in history, even before the seller owned the property. Which deed type provides this level of protection?

• A. Sheriff's deed
• B. General warranty deed
• C. Deed in lieu of foreclosure
• D. Quitclaim deed

19. For a deed to be effective in transferring title, which of the following combinations of requirements must all be satisfied?

• A. An appraisal and lender approval
• B. Payment in full and a title insurance policy
• C. Notarization, recording, and a survey
• D. A legal description, a granting clause, and signature, delivery, and acceptance by the grantor

20. An owner grants a neighbor the right to cross a strip of the owner's land to reach a lake, and this right is tied to and benefits the neighbor's adjoining parcel. Which parcel is the 'servient tenement' in this arrangement?

• A. Neither parcel, since easements only affect public land
• B. The neighbor's parcel, because it benefits from the right
• C. The owner's parcel, because it is burdened by the right
• D. Both parcels equally

21. A deed was signed by a grantor who was a minor at the time of the transaction. How would this deed most accurately be classified under contract-validity principles?

• A. Voidable, because the minor may disaffirm it
• B. Void, because it never legally existed
• C. Fully valid and permanent regardless of the grantor's age
• D. Unenforceable, because it was never in writing

22. A seller and a buyer are negotiating the sale of a home. Before the buyer communicates acceptance of the seller's written offer, the seller decides to withdraw it. Under contract law principles, may the seller do this?

• A. No, because the buyer's reliance on the offer makes it binding
• B. No, because a written offer becomes irrevocable once it is delivered to the buyer
• C. Yes, because an offer may be revoked any time before acceptance is communicated
• D. Yes, but only if the seller pays the buyer's expenses incurred in reliance on the offer

23. A buyer submits a written offer to purchase a property at a stated price. The seller responds by signing the offer but changing the closing date to a date the buyer never proposed. What is the legal effect of the seller's response?

• A. It is enforceable as a modification of the original offer without further action
• B. It is a counteroffer that rejects and extinguishes the buyer's original offer
• C. It has no legal effect because closing dates cannot be altered after an offer is signed
• D. It is a valid acceptance because the price term was unchanged

24. Which combination of elements must be present for a real estate purchase agreement to be legally valid?

• A. Mutual assent, consideration, legally competent parties, and a lawful object
• B. Consideration, an appraisal, and legally competent parties
• C. Mutual assent, a title insurance policy, and a lawful object
• D. A licensed broker's signature, consideration, and a recorded deed

25. A landlord and tenant orally agree to a five-year lease and shake hands, but nothing is ever signed. Which legal concept most directly explains why this lease cannot be enforced in court?

• A. The parol evidence rule
• B. The doctrine of specific performance
• C. The rule against commingling of funds
• D. The Statute of Frauds requirement that leases longer than one year be in writing and signed by the party to be charged

26. A 16-year-old signs a contract to purchase a parcel of vacant land. Which term best describes the status of this contract?

• A. Valid and binding on both parties regardless of age
• B. Voidable, because the minor may choose to disaffirm it
• C. Unenforceable, because land contracts require a licensed attorney
• D. Void, because minors can never be parties to a contract

27. A purchase agreement provides that the buyer's obligation to close is dependent on the buyer obtaining loan approval and the property passing a satisfactory inspection. What are these provisions called?

• A. Acceleration clauses
• B. Liquidated damages clauses
• C. Granting clauses
• D. Contingencies

28. A purchase agreement states that if the buyer defaults, the seller may retain the buyer's earnest money deposit as the agreed measure of damages, rather than suing for actual losses. What type of clause is this?

• A. A due-on-sale clause
• B. A contingency clause
• C. An acceleration clause
• D. A liquidated damages clause

29. A seller receives two competing written offers on the same day. The seller signs one offer without any changes and has it delivered back to that buyer's agent before doing anything else. Under contract formation principles, what has occurred?

• A. A void contract, because competing offers cannot both be considered
• B. A valid acceptance, because the seller's signature was an unqualified acceptance of that offer's terms
• C. A counteroffer, because two offers existed simultaneously
• D. Nothing, because acceptance requires the buyer to sign a second time

30. A buyer and seller execute a written agreement for the sale of a home, but the agreement omits the purchase price entirely. Applying the essential elements of a valid contract, what is the legal status of this document?

• A. It is voidable at the buyer's option only
• B. It is fully valid because mutual assent alone is sufficient
• C. It is unenforceable, but only until the parties agree to a price
• D. It is void, because it lacks the required element of consideration

31. A borrower's loan documents include a promissory note and a deed of trust. What is the primary legal function of the promissory note in this transaction?

• A. It pledges the property as security for the debt
• B. It grants the lender legal title to the property
• C. It authorizes the lender to declare the full balance due upon default
• D. It evidences the debt and the borrower's promise to repay

32. A buyer submits a written offer to purchase a home. Before the seller communicates acceptance, the buyer changes their mind. Under contract law principles, may the buyer withdraw the offer?

• A. Only with the listing broker's written permission
• B. No, once submitted in writing an offer cannot be withdrawn
• C. Only if the seller has not yet reviewed the offer
• D. Yes, an offer may be revoked any time before acceptance is communicated

33. In a lien-theory state, which party holds legal title to real property during the term of a mortgage loan?

• A. Title is held jointly by borrower and lender as tenants in common
• B. The borrower, with the lender holding only a lien
• C. A neutral trustee appointed by the court
• D. The lender, until the debt is fully repaid

34. A borrower defaults on mortgage payments, and the lender invokes a clause that makes the entire remaining loan balance immediately due. What is this clause called?

• A. Subordination clause
• B. Alienation clause
• C. Defeasance clause
• D. Acceleration clause

35. A lender offers a borrower a lower interest rate in exchange for paying 2 discount points on a $200,000 loan. How much will the borrower pay in points at closing?

• A. $4,000
• B. $2,000
• C. $20,000
• D. $400

36. A veteran who qualifies for VA financing wants to minimize upfront cash needed to purchase a home. Which feature of VA-guaranteed loans most directly supports this goal?

• A. They are insured by the Federal Housing Administration
• B. They automatically waive the need for a promissory note
• C. They are not government-backed, reducing lender fees
• D. They can permit no down payment for eligible veterans

37. A buyer is obtaining a conventional loan with a 10 percent down payment. Based on standard industry practice for conventional financing, what will the lender most likely require?

• A. Private mortgage insurance
• B. A VA funding fee
• C. FHA mortgage insurance
• D. No mortgage insurance, since the loan is conventional

38. A mortgage broker refers borrowers to a title company in exchange for an unearned fee for each referral. Which federal law most directly prohibits this practice?

• A. The Truth in Lending Act
• B. The Civil Rights Act of 1866
• C. The Fair Housing Act
• D. The Real Estate Settlement Procedures Act

39. Under RESPA, which two disclosure documents are lenders required to provide to borrowers on federally related mortgage loans?

• A. The appraisal report and the title commitment
• B. The promissory note and the deed of trust
• C. The APR disclosure and the rescission notice
• D. The Loan Estimate and the Closing Disclosure

40. A lender fails to disclose the annual percentage rate on a borrower's loan for a principal residence. Which federal law and implementing regulation governs this disclosure requirement?

• A. The Statute of Frauds, implemented by state regulation
• B. The Truth in Lending Act, implemented by Regulation Z
• C. RESPA, implemented by Regulation X
• D. The Fair Housing Act, implemented by Regulation B

41. A homeowner refinances the mortgage on their principal residence with a new lender. Under TILA/Regulation Z, what right does the borrower have after signing the new loan documents?

• A. No right of rescission on refinances
• B. An unlimited right to cancel the refinance at any time
• C. A thirty-day right of rescission
• D. A three-day right of rescission

42. Months after a sale closes, a former buyer-client asks the agent to disclose information that would weaken the seller's position in a separate, unrelated negotiation. What does the fiduciary duty of confidentiality require?

• A. The agent must disclose only to a court
• B. The agent must disclose because the agency relationship has already terminated
• C. The agent may disclose only with a fee
• D. The agent must withhold the information, because confidentiality survives termination of the agency

43. A licensee is representing both the buyer and the seller in the same transaction. Under agency law principles, what must occur for this arrangement to be permissible?

• A. Nothing; dual representation is automatically allowed once a contract is signed
• B. Both parties must give informed written consent
• C. The broker's manager must approve verbally
• D. Only the seller's consent is required

44. An agent representing the seller is dealing with an unrepresented buyer who is a customer, not a client. Which statement correctly describes the agent's obligations to that buyer?

• A. The agent owes the buyer no duties whatsoever
• B. The agent owes the buyer the same full fiduciary duties owed to the seller
• C. The agent owes honesty, fair dealing, and disclosure of known material latent defects, but not fiduciary duties
• D. The agent owes only the duty of loyalty to the buyer

45. A seller receives a buyer's purchase offer and signs the acceptance but crosses out the closing date and writes in a new one before returning it. What is the legal effect of this change?

• A. It automatically binds the buyer to the new closing date
• B. It is a valid acceptance because the seller signed the document
• C. It has no legal effect until escrow closes
• D. It operates as a counteroffer that rejects and extinguishes the original offer

46. Two parties orally agree to the sale of a parcel of land, and neither ever signs a written document. If the seller later refuses to convey the property, what is the legal status of the oral agreement?

• A. Void, because no agreement was ever legally formed
• B. Unenforceable, because the Statute of Frauds requires real estate sale contracts to be in writing
• C. Enforceable, because real estate custom permits oral sale agreements
• D. Voidable at the buyer's option only

47. A purchase agreement includes a clause requiring the buyer to obtain loan approval before being obligated to close. What is this clause called, and what is its function?

• A. A granting clause, which conveys title
• B. An acceleration clause, which speeds up the closing date
• C. A liquidated damages clause, which sets a default remedy
• D. A contingency, which is a condition that must be satisfied before a party is obligated to perform

48. A buyer breaches a contract to purchase a uniquely situated parcel of land. Rather than seeking money damages, the seller asks a court to force the buyer to complete the purchase as agreed. What remedy is the seller pursuing?

• A. Rescission
• B. Specific performance
• C. Novation
• D. Liquidated damages

49. A minor signs a contract to purchase a small parcel of real estate. Which term best describes the legal status of this contract?

• A. Fully enforceable against both parties
• B. Void, because it never existed legally
• C. Voidable, because the minor may disaffirm it
• D. Unenforceable in every case involving a minor

50. The California Real Estate Commissioner investigates a broker and wishes to halt an ongoing practice before a formal hearing concludes. What order may the Commissioner issue?

• A. A desist and refrain order, which stops the conduct pending proceedings
• B. A criminal sentence imposed directly by the Commissioner
• C. An order that is final and not subject to any review
• D. No order; the Commissioner may only act after a completed hearing

51. A California salesperson wishes to qualify for a broker license. Beyond coursework, what experience requirement generally applies?

• A. Two years of full-time licensed salesperson experience within the prior five years, or a qualifying equivalent such as a degree with a real estate major
• B. No experience requirement, only additional coursework
• C. Ten years of licensed experience
• D. Experience in any sales occupation

52. A California licensee is selecting continuing education courses. Which subjects does California designate as mandatory within the required hours?

• A. Ethics, agency, trust fund handling, fair housing, risk management, and for many licensees a management and supervision course
• B. Any subjects the licensee chooses, with no designated content
• C. Only ethics and fair housing
• D. Only appraisal and construction subjects

53. A California broker keeps a small amount of the broker's own money in the trust account to absorb bank service charges. Under what condition is this permitted?

• A. No broker funds may be kept in a trust account for any purpose
• B. Service charges must be paid from beneficiary funds
• C. Any amount of broker funds may be kept in a trust account
• D. A limited amount of broker funds, capped by regulation, may be kept solely to cover service charges; any greater amount is commingling

54. A California broker maintains a trust account and is subject to Department audit. What record must the broker keep for each beneficiary?

• A. A single aggregate ledger for all trust funds
• B. No records beyond deposit slips
• C. A separate record for each beneficiary or transaction, reconciled with the control record at least monthly
• D. Bank statements only

55. A California seller of residential one-to-four unit property must deliver a Transfer Disclosure Statement. Can this requirement be waived?

• A. Yes, if the property is sold as is
• B. Yes, if the buyer conducts an independent inspection
• C. No, the statutory disclosure requirement for covered transactions may not be waived
• D. Yes, if both parties agree in writing

56. Under California case law, what duty does a listing licensee owe regarding the physical condition of residential property?

• A. A duty to warrant the condition of the improvements
• B. A duty to conduct a reasonably competent and diligent visual inspection of accessible areas and disclose material facts revealed
• C. A duty to obtain a professional engineering report
• D. No duty, since disclosure is solely the seller's responsibility

57. California requires a Natural Hazard Disclosure for covered residential transactions. What does it address?

• A. The seller's mortgage payoff amount
• B. The property's assessed value history
• C. Whether the property lies within designated hazard zones such as flood, fire and seismic areas
• D. The condition of the roof and mechanical systems

58. A California buyer is purchasing in a community facilities district financed by special taxes. What disclosure requirement applies?

• A. Only the amount of the current year's tax must be stated verbally
• B. A Mello-Roos notice of special tax must be provided, disclosing the special tax lien and its terms
• C. No disclosure is required because the tax appears on the tax bill
• D. Disclosure is required only for commercial property

59. A California broker supervises salespersons in several offices. What supervisory obligation does the Real Estate Law impose?

• A. Reasonable supervision including written policies, procedures and systems to review transactions, advertising, trust funds and licensee compliance
• B. No supervisory duty where salespersons are independent contractors
• C. Personal handling of every transaction
• D. Supervision only of salespersons in the broker's primary office

60. A California broker wishes to collect an advance fee for marketing services before performing them. What does the Real Estate Law require?

• A. Advance fees are prohibited in all circumstances
• B. Only verbal disclosure of the fee is required
• C. Advance fees may be collected and treated as earned income immediately
• D. The advance fee agreement must be submitted to the Department in advance, and the funds are trust funds subject to accounting to the principal

61. A licensee negotiates residential mortgage loans in addition to brokerage. What additional credential is generally required?

• A. A separate contractor license
• B. No additional credential, since a broker license covers loan origination
• C. An appraiser certification
• D. A mortgage loan originator endorsement obtained through the national licensing system

62. A California commercial property is leased with the tenant paying a percentage of gross sales above a breakpoint in addition to base rent. What must the lease define carefully?

• A. Only the base rent amount
• B. Nothing beyond the percentage rate
• C. What constitutes gross sales, including exclusions such as returns and inter-store transfers, and the audit rights supporting it
• D. Only the lease term

63. A broker manages an apartment building and is asked by the owner to deposit rents into the owner's personal account rather than a trust account. What should the broker do?

• A. Refuse the management engagement entirely
• B. Deposit the rents into the broker's general account for convenience
• C. Comply, since the owner may direct the handling of their own funds
• D. Follow the license law's trust fund requirements, which govern regardless of the owner's preference, unless the funds go directly to the principal as permitted

64. A California residential landlord wishes to increase rent on a month-to-month tenancy. What general principle governs the notice required?

• A. Rent may never be increased during a month-to-month tenancy
• B. No notice is required for month-to-month tenancies
• C. The same short notice applies regardless of the increase amount
• D. Statutory notice periods apply and lengthen for larger increases, and local rent regulations may impose further limits

65. An investor evaluates an apartment building's operating expense ratio. How is it computed and what does it indicate?

• A. Net operating income divided by operating expenses
• B. Debt service divided by effective gross income
• C. Operating expenses divided by the purchase price
• D. Operating expenses divided by effective gross income, indicating what share of collected income operations consume

66. An investor computes cash on cash return for a leveraged property. What does this measure?

• A. Gross rent divided by cash invested
• B. Net operating income divided by the purchase price
• C. Total return including appreciation and tax benefits
• D. Annual pre-tax cash flow after debt service divided by the cash invested

67. A property is purchased with substantial leverage and the return on equity exceeds the return the property would produce unleveraged. What is this effect called?

• A. Positive leverage, occurring when the cost of borrowed funds is below the property's unleveraged return
• B. Negative leverage
• C. Neutral leverage
• D. Leverage has no effect on return on equity

68. A borrower pledges real property as security for a debt while retaining possession and use of the property. What is this practice called?

• A. Subrogation
• B. Alienation
• C. Novation
• D. Hypothecation

69. An investor owns a property with a market value of $650,000 that is encumbered by loans totaling $410,000. What is the investor's equity in the property?

• A. $650,000
• B. $240,000
• C. $1,060,000
• D. $410,000

70. A borrower wants to pay off a home loan several years early but discovers the lender will charge a fee for doing so. Which loan provision authorizes this charge?

• A. An acceleration clause
• B. An escalation clause
• C. A defeasance clause
• D. A prepayment penalty clause

71. A borrower signs a note that calls for monthly payments of interest only, with the entire principal balance due in a single lump sum at the end of the term. What type of loan is this?

• A. A fully amortized loan
• B. A partially amortized loan with a balloon
• C. A graduated payment loan
• D. A straight (term) loan

72. A borrower's monthly payment on a loan is less than the interest that accrues each month, and the unpaid interest is added to the loan balance. What is this condition called?

• A. Deferred subordination
• B. Equity buildup
• C. Negative amortization
• D. Accelerated amortization

73. An adjustable-rate mortgage is due for a periodic rate adjustment. How is the borrower's new interest rate generally determined?

• A. By recalculating the borrower's original qualifying ratios
• B. By negotiating a new rate with the borrower at each adjustment date
• C. By adding the lender's fixed margin to the current value of a published index
• D. By applying the average rate the lender charges its newest customers

74. A borrower with an adjustable-rate mortgage is worried about how high the payments could climb if market rates spike. Which loan feature most directly addresses this concern?

• A. The loan-to-value ratio
• B. The subordination clause
• C. The prepayment privilege
• D. Periodic and lifetime interest-rate caps

75. A landowner sells a parcel and carries back financing, agreeing in the loan documents that her lien will voluntarily take a lower priority position so the buyer can later obtain a construction loan that will be recorded first in priority. What is this provision called?

• A. A release clause
• B. A subordination clause
• C. A defeasance clause
• D. An alienation clause

76. A homeowner sells her house to a buyer who plans to take over the existing loan, but the lender declares the entire balance due upon learning of the transfer, even though every payment is current. Which clause permits the lender to do this?

• A. A due-on-sale (alienation) clause
• B. A prepayment penalty clause
• C. A subordination clause
• D. An acceleration-on-default clause

77. A buyer acquires a property 'subject to' the seller's existing loan rather than formally assuming it, and the loan later goes into default. Who remains primarily liable to the lender on the note?

• A. The buyer, because possession transfers liability
• B. The seller, who signed the original note
• C. Neither party once title has transferred
• D. Both parties equally as co-makers

78. A seller carries back financing for the full purchase price using an instrument whose face amount includes the balance of an existing first loan that remains in place, and the buyer makes one payment to the seller, who continues paying the first lender. What financing device is this?

• A. A wraparound (all-inclusive) trust deed
• B. A blanket encumbrance
• C. An open-end mortgage
• D. A package loan

79. A retiring couple sells their free-and-clear rental home and, instead of receiving all cash, accepts a note from the buyer secured by a deed of trust on the property they just sold. What kind of financing is this?

• A. A bridge loan
• B. A purchase-money carryback loan
• C. A hard money loan
• D. An open-end loan

80. A private individual lends money directly to a borrower at an interest rate that exceeds the maximum allowed by law for that type of lender. Which legal concept has been violated?

• A. Usury
• B. Subordination
• C. Redlining
• D. Rescission

81. A first-time buyer compares a government-backed loan program in which the government protects the lender against loss on the entire loan through insurance funded by borrower premiums, with another program in which the government promises to reimburse the lender for only a portion of any loss. Which comparison is correct?

• A. Both FHA and VA insure the full loan amount
• B. FHA guarantees a portion; VA insures the whole loan
• C. Both programs lend government funds directly in most cases
• D. FHA insures the loan; VA guarantees a portion of it

82. An eligible California veteran buys a farm through the Cal-Vet program. Which statement correctly describes how title is held during the financing period?

• A. The veteran takes legal title immediately and gives the state a deed of trust
• B. The state buys the property and sells it to the veteran under a land contract, retaining legal title until payoff
• C. A private lender holds title in trust for the veteran
• D. Title is held by the federal Department of Veterans Affairs

83. A savings bank sells a package of its existing home loans to a large government-sponsored enterprise and uses the proceeds to fund new mortgages. What function does this illustrate?

• A. Primary market origination
• B. Disintermediation of deposits
• C. The secondary market providing liquidity to lenders
• D. Loan warehousing by the borrower

84. A California lender forecloses on a defaulted home loan by having the trustee sell the property under the power of sale in the deed of trust. Which consequence follows from choosing this method instead of a court foreclosure?

• A. Junior liens survive the sale unaffected
• B. The borrower keeps a lengthy post-sale right of redemption
• C. The sale requires confirmation by a judge
• D. The lender gives up any right to a deficiency judgment against the borrower

85. A borrower falls several payments behind and receives notice that foreclosure proceedings have begun, but she now has the funds to catch up. What does the right of reinstatement allow her to do?

• A. Force the lender to rewrite the loan at a lower rate
• B. Transfer the loan to a new buyer without lender approval
• C. Cure the default by paying the delinquent amounts plus allowable costs and stop the foreclosure
• D. Cancel the loan entirely and demand return of all interest paid

86. A lender holding a second deed of trust learns the borrower has stopped paying the first loan, and a foreclosure sale on that first loan is approaching. Why might the junior lender step in and advance the delinquent payments on the senior loan?

• A. Because the borrower's obligation to the junior lender ends if the senior loan forecloses
• B. Because junior lenders are legally required to keep senior loans current
• C. Because curing the senior default automatically promotes the junior loan to first position
• D. Because a completed senior foreclosure sale would eliminate the junior lien from the property's title

87. A developer finances the purchase of ten lots with a single loan secured by all ten parcels and plans to sell the lots individually as homes are completed. Which loan feature lets each sold lot be freed from the lien?

• A. A defeasance clause
• B. A partial release clause in a blanket loan
• C. A subordination clause
• D. An acceleration clause

88. A homeowner's loan allows her to borrow additional funds from the same lender in the future, up to a stated maximum, using the same trust deed as security. What kind of loan is this?

• A. A shared appreciation loan
• B. An open-end loan
• C. A term loan
• D. A wraparound loan

89. A buyer of a furnished vacation condominium obtains a single loan that finances both the real property and the appliances and furniture included in the sale. What is this loan called?

• A. An open-end loan
• B. A package loan
• C. A construction loan
• D. A blanket loan

90. A homeowner has found her next house but has not yet closed the sale of her current one, so she takes a short-term loan against the equity in the current home to fund the new purchase until it sells. What is this financing called?

• A. A purchase-money carryback
• B. An open-end loan
• C. A wraparound loan
• D. A bridge (swing) loan

91. A partially amortized loan calls for level monthly payments for its full term, but the payments are not large enough to retire the debt, leaving a substantial final payment. What is that final payment called?

• A. A reconveyance payment
• B. An impound payment
• C. A graduated payment
• D. A balloon payment

92. A borrower owes $300,000 on an interest-only loan at an annual simple interest rate of 6 percent. How much interest accrues each month?

• A. $1,500
• B. $18,000
• C. $3,000
• D. $1,800

93. A lender quotes a borrower a lower note rate in exchange for the borrower paying discount points at closing. From the lender's perspective, what do the points accomplish?

• A. They increase the lender's effective yield above the note rate
• B. They substitute for the borrower's down payment
• C. They reduce the lender's total return on the loan
• D. They insure the lender against borrower default

94. After closing, a borrower makes monthly payments to a company that collects the money, maintains the impound account, and forwards principal and interest to the loan's investor. What function is this company performing?

• A. Loan warehousing
• B. Loan origination
• C. Loan underwriting
• D. Loan servicing

95. One mortgage company funds loans with its own credit lines and often continues to service them after selling the loans to investors, while another firm merely brings borrowers and lenders together for a fee and never funds loans itself. How are these two businesses classified?

• A. Both are institutional lenders
• B. The first is a loan servicer only; the second is an underwriter
• C. The first is a mortgage banker; the second is a mortgage broker
• D. The first is a mortgage broker; the second is a mortgage banker

96. A deed of trust contains a provision authorizing the trustee to sell the secured property without court involvement if the borrower defaults. What is this provision called?

• A. A power of sale clause
• B. A forfeiture clause
• C. A habendum clause
• D. A granting clause

97. A lender requires a borrower to pay one-twelfth of the estimated annual property taxes and hazard insurance premium with each monthly loan payment. What is the purpose of this arrangement?

• A. To amortize the principal more quickly
• B. To prepay the final balloon payment
• C. To accumulate an impound reserve ensuring taxes and insurance are paid when due
• D. To increase the lender's yield on the note

98. Two lenders quote the same note rate, but one charges substantially higher origination fees and points. Which measure best allows the borrower to compare the true cost of the two loans?

• A. The loan-to-value ratio of each offer
• B. The nominal interest rate stated in each note
• C. The annual percentage rate (APR)
• D. The monthly principal and interest payment alone

99. A homeowner defaults on the loan she used to purchase her owner-occupied residence, and the foreclosure sale brings less than the balance owed. May the purchase-money lender sue her for the shortfall in California?

• A. Yes, whenever the shortfall exceeds the costs of sale
• B. No, but only if the borrower files for bankruptcy first
• C. No, because deficiency judgments are generally barred on purchase-money loans secured by the buyer's residence
• D. Yes, but only if the loan was also insured

100. During a period of tight money, market interest rates climb sharply and fewer buyers can qualify for institutional loans. Which effect is a real estate market most likely to experience?

• A. Automatic reductions in existing fixed loan rates
• B. An immediate surge in new construction lending
• C. A rise in the percentage of all-cash institutional purchases by first-time buyers
• D. Increased use of seller financing and assumptions of existing loans

101. A builder obtains a loan to construct a custom home, and the lender disburses the funds in stages as specific phases of the work are completed and inspected. What are these staged disbursements called?

• A. Progress payments (draws)
• B. Impound releases
• C. Reconveyances
• D. Points

102. A borrower makes the final payment on a loan secured by a deed of trust. What instrument clears the lien from the property's record title?

• A. A quitclaim deed from the beneficiary to the trustee
• B. A deed of reconveyance executed by the trustee
• C. A satisfaction of mortgage executed by the trustor
• D. A certificate of sale issued by the county recorder

103. Three siblings hold title to a cabin as joint tenants. One sibling secretly conveys her interest to a friend by grant deed. How is title held after the conveyance?

• A. The friend is a tenant in common with the two remaining siblings, who are still joint tenants as to each other
• B. The conveyance is void because joint tenants cannot transfer separately
• C. The friend holds the entire property in severalty
• D. All four parties are now joint tenants

104. Two investors buy an office building together, one contributing most of the price and taking a three-quarters interest, the other taking one quarter. Each wants his share to pass to his own heirs at death. Which form of co-ownership fits their intentions?

• A. Community property
• B. Tenancy in common
• C. Joint tenancy
• D. Ownership in severalty

105. A married couple in California owns their family home as community property. The husband, acting alone, signs a deed conveying the home to an investor. What is the legal significance of the missing spouse's signature?

• A. The deed is effective if the investor paid fair value
• B. The wife's signature is unnecessary because either spouse manages community assets
• C. The deed is fully effective as to the husband's half interest only
• D. Both spouses must join in conveying community real property, so the transfer is subject to being set aside

106. A California married couple takes title to a rental duplex as community property with right of survivorship. When the first spouse dies, what happens to that spouse's interest?

• A. It must be sold and the proceeds divided among the heirs
• B. It escheats to the state absent a will
• C. It vests in the surviving spouse without probate administration
• D. It passes under the deceased spouse's will to any named beneficiary

107. A single investor takes title to a warehouse in her name alone, with no co-owners of any kind. What is this form of ownership called?

• A. Tenancy in common
• B. Joint tenancy
• C. Ownership in severalty
• D. Tenancy in partnership

108. A buyer purchases a unit in a residential common interest development, receiving fee title to the airspace of her unit plus an undivided interest in the land and structural common areas shared with other owners. What has she purchased?

• A. A condominium
• B. A stock cooperative share
• C. A leasehold estate for years
• D. A license coupled with an interest

109. A resident of an apartment building owns shares in the corporation that holds title to the entire property and occupies his unit under a proprietary lease tied to those shares. Which ownership form does this describe?

• A. A condominium
• B. A stock cooperative
• C. A community apartment project
• D. A planned unit development

110. A utility company holds the right to run and maintain power lines across a rancher's land. The right benefits the company itself and is not attached to any parcel of land the company owns. What kind of interest is this?

• A. A license revocable at will
• B. A riparian right
• C. An easement in gross
• D. An appurtenant easement

111. For many years a neighbor has driven across the corner of a landowner's parcel to reach his own property, doing so openly, without permission, and continuously for the statutory period, but he has never paid taxes on the strip and has never fenced it or excluded anyone. What interest may the neighbor claim?

• A. A license
• B. Title by adverse possession
• C. A prescriptive easement
• D. An easement by express grant

112. A homeowner tells a friend he may park his boat on her side yard until she asks him to remove it. No writing is signed and no interest is recorded. What does the friend hold?

• A. A leasehold estate
• B. A prescriptive right
• C. An appurtenant easement
• D. A license, revocable at the owner's will

113. A survey reveals that a homeowner's garage extends two feet over the boundary line onto the neighboring lot. What is this condition called?

• A. A party wall
• B. An encroachment
• C. A variance
• D. An easement by necessity

114. A farm borders a natural stream, and its owner claims the right to make reasonable use of the stream's water in connection with the land. What are these rights called?

• A. Riparian rights
• B. Littoral rights
• C. Percolating rights
• D. Appropriative rights

115. A tenant farmer's lease ends after he has planted but before he has harvested the season's lettuce crop. Who is entitled to the crop, and why?

• A. The landowner, because the lease terminated first
• B. The tenant, because annual cultivated crops are emblements treated as the tenant's personal property
• C. Whichever party recorded a claim first
• D. The landowner, because crops are part of the real property

116. In a dispute over whether a custom-built bookcase unit is part of the real property being sold, a court weighs how it is attached, how well it is adapted to the room, and what the installing owner appeared to intend. Which factor is generally given the greatest weight?

• A. The size and weight of the item
• B. The intention of the party who installed the item
• C. Whether the item was insured as personal property
• D. The cost of the item when purchased

117. A restaurant tenant installed ovens, counters, and a walk-in cooler for its business. As the lease expires, the landlord claims these items became part of the building. What is the general rule?

• A. All attached items automatically belong to the landlord
• B. The tenant must buy the items back from the landlord
• C. Trade fixtures may be removed by the tenant before the lease ends, provided removal damage is repaired
• D. The items belong to whoever holds the security deposit

118. A rancher purchases the northwest quarter of a section of land described under the government (rectangular) survey system. How many acres did the rancher acquire?

• A. 640 acres
• B. 40 acres
• C. 160 acres
• D. 320 acres

119. A legal description begins at a fixed monument, then recites a series of compass courses and distances that trace the parcel's boundary back to the starting point. Which method of land description is this?

• A. An assessor's parcel reference
• B. The government rectangular survey
• C. The recorded lot, block, and tract method
• D. Metes and bounds

120. A squatter occupies a vacant California parcel openly and exclusively, hostile to the owner's title, continuously for the statutory period. What additional requirement must the squatter satisfy to acquire title by adverse possession in California?

• A. Payment of the property taxes assessed on the parcel during the qualifying period
• B. Obtaining a survey of the occupied land
• C. Fencing the entire parcel on all sides
• D. Recording a declaration of intent with the county

121. Over many years a river gradually deposits soil along a landowner's bank, slowly enlarging the parcel. Then, in a single storm, the river tears away a large chunk of a downstream neighbor's land. How does the law treat these two events?

• A. Both events transfer title immediately to the adjoining owners
• B. The gradual deposit (accretion) belongs to the bank's owner; the sudden tearing away (avulsion) does not change ownership of the displaced land
• C. The gradual gain belongs to the state; the sudden loss transfers to the river
• D. Both events leave title exactly where it was

122. A tenant signs a lease for a store space that runs for a fixed period ending on a specified date, with no renewal provision. What is true about how this tenancy ends?

• A. The landlord must serve a notice to quit before the end date
• B. It continues until either party gives notice equal to the rental period
• C. It converts automatically into a life estate
• D. It expires automatically on the specified date without notice from either party

123. A tenant's lease expired last month, but she remains in the apartment without the landlord's consent and without paying rent. What is her status?

• A. A tenant at will
• B. A tenant at sufferance
• C. A periodic tenant
• D. A holder of an estate for years

124. A subdivision's recorded restrictions require minimum side setbacks that are stricter than the city's zoning ordinance for the same lots. A homeowner wants to build to the zoning line. Which standard controls?

• A. The homeowner may choose whichever standard she prefers
• B. The more restrictive private deed restriction controls
• C. Neither applies until a court reconciles them
• D. The zoning ordinance always overrides private restrictions

125. A small market has operated at a corner location for decades. The city then rezones the neighborhood to residential use only. May the market continue to operate?

• A. Only if it obtains a new variance each year
• B. Yes, generally, as a legal nonconforming use that predates the ordinance
• C. No, it must close as soon as the rezoning takes effect
• D. Only if the owner petitions to have the parcel spot-zoned commercial

126. An owner of an oddly shaped lot cannot meet the standard setback requirements and asks the city for permission to build closer to the line than zoning allows, citing the unusual physical hardship of the parcel. What is the owner seeking?

• A. A variance
• B. A nonconforming use designation
• C. A zoning amendment
• D. A conditional use permit

127. A city prohibits certain uses in a neighborhood through zoning, paying owners nothing, and separately takes a strip of land from one owner to widen a road, paying that owner for it. Which principle explains the difference in compensation?

• A. Both actions require compensation, so the city erred on the zoning
• B. Zoning is an escheat; the road taking is a dedication
• C. Compensation depends solely on the parcel's assessed value
• D. Zoning is an exercise of police power, which requires no compensation, while the road taking is eminent domain, which requires just compensation

128. A homeowner in a subdivision begins operating a loud commercial workshop from his garage in violation of the recorded CC&Rs. What remedy do neighboring owners most commonly pursue to stop the violation?

• A. Rezoning of the violator's lot by petition
• B. A mechanic's lien against the garage
• C. Forfeiture of the violator's title to the homeowners association
• D. An injunction ordering the owner to stop the prohibited use

129. A California homeowner records a homestead declaration on her residence. Which protection does the homestead provide?

• A. It bars all future liens from attaching to the home
• B. It prevents foreclosure of her purchase-money deed of trust
• C. It shields a portion of her equity from forced sale by certain judgment creditors
• D. It exempts the home from property taxation

130. During a lawsuit over ownership of a parcel, the plaintiff records a notice of the pending action in the county where the land lies. What is the practical effect of this recording?

• A. It creates a money lien for the plaintiff's legal fees
• B. It freezes the property so no deed can be recorded
• C. It transfers title to the plaintiff pending trial
• D. Anyone acquiring an interest in the property takes it subject to the outcome of the litigation

131. A contractor who was never paid records a mechanic's lien against a remodeled home. In a later priority dispute with a lender whose deed of trust was recorded while the remodel was underway, from what point is the mechanic's lien priority generally measured?

• A. The date work on the overall project commenced
• B. The date the contract was signed, even if no work followed
• C. The date the lawsuit to foreclose the lien is filed
• D. The date the lien claim was recorded

132. A California broker receives an earnest money deposit check from a buyer along with an accepted offer. Which of the following is a proper way for the broker to handle the check?

• A. Deposit it into the brokerage's general operating account for safekeeping
• B. Hold it in the office safe indefinitely until closing
• C. Promptly deposit it into the broker's trust account, place it into a neutral escrow, or deliver it to the principal as the parties direct
• D. Endorse it over to the listing salesperson pending escrow

133. A broker's bookkeeper maintains the trust account records for a busy property management operation. How should the broker verify that the trust account records remain accurate?

• A. By reviewing records only when the Department schedules an audit
• B. By closing and reopening the account annually
• C. By relying on the bank to flag any errors
• D. By regularly reconciling the account balance against the bank statement and the separate beneficiary records

134. An apartment complex that is not senior housing refuses to rent to an otherwise qualified applicant because she has two young children. Which protected category under fair housing law does this refusal implicate?

• A. Ancestry
• B. Marital status
• C. Familial status
• D. Source of income

135. An investor hires a broker to manage a twelve-unit apartment building, including leasing, rent collection, and maintenance coordination. What should the parties execute before management begins?

• A. A grant deed transferring the building to the broker
• B. A listing agreement to sell the property
• C. A written property management agreement defining the broker's authority, duties, and compensation
• D. A verbal understanding confirmed by a handshake

136. A broker managing rental homes collects security deposits from new tenants on behalf of the owners. How must the broker treat these deposits while holding them?

• A. As funds that may cover office payroll if repaid later
• B. As the broker's earned income once the tenant moves in
• C. As the owner's petty cash, available for any purpose
• D. As trust funds held for the benefit of others, kept separate from the broker's own money

137. During an office audit, a broker is found to have left a substantial earned management fee sitting in the trust account for many months after it was earned, mixed with client funds. Why is this a problem?

• A. Because earned fees must always be paid directly to the salespersons
• B. Because the fee should have been converted to a client refund
• C. Because trust accounts may never receive fee income even temporarily
• D. Because leaving earned fees in the trust account beyond a reasonable time constitutes commingling of broker funds with trust funds

138. A broker who manages several properties keeps one ledger showing only the total balance of the trust account, with no breakdown by client. An owner demands an accounting of her funds. What deficiency does this record-keeping reveal?

• A. The broker failed to maintain a separate record for each beneficiary showing that person's receipts, disbursements, and running balance
• B. Nothing, because a single total balance is all that is required
• C. The account should have been split into multiple banks
• D. The broker needed the tenants' consent to keep ledgers

139. A salesperson meets prospective sellers of a single-family home and prepares to take a listing. At what point must the statutory agency disclosure form be provided to the sellers?

• A. Within a reasonable time after the listing is signed
• B. Only if the buyers request dual representation
• C. Before the sellers sign the listing agreement
• D. At the close of escrow

140. A broker lawfully acting as a disclosed dual agent learns that the seller is privately willing to accept less than the listed price. What may the broker tell the buyer?

• A. The exact price the seller will take, because dual agents owe candor to both sides
• B. Whatever the buyer asks, because dual agency waives confidentiality
• C. Nothing about the seller's willingness to accept a lower price, absent the seller's express written consent
• D. A hint that offers below list will succeed, as long as no number is stated

141. A buyer of a California home wants to research whether registered sex offenders live near the property. What are the licensee's obligations on this subject?

• A. Order a background check on all adjacent occupants
• B. Ensure the transaction documents include the statutorily required notice about the public sex-offender database
• C. Personally investigate the neighborhood and report findings
• D. Refuse to discuss the topic entirely

142. Escrow is about to close on a California home sale. The seller asks why the transaction paperwork addresses smoke alarms and the strapping of the water heater. What is the reason?

• A. State law requires sellers to certify compliance with smoke alarm and water heater bracing requirements
• B. Only new construction must have these features
• C. The items are optional upgrades that increase appraised value
• D. The lender's title policy insures against their absence

143. While completing the agent's section of the Transfer Disclosure Statement, a listing agent notes that she inspected the home's interior, yard, and accessible areas but did not enter the crawl space or move stored belongings. Has the agent met her inspection duty?

• A. Yes, because the duty is waived whenever a buyer hires a home inspector
• B. No, because only a licensed contractor may perform the inspection
• C. No, because the duty extends to every part of the structure including concealed spaces
• D. Yes, because the duty is a reasonably competent and diligent visual inspection of the property's accessible areas

144. A buyer is purchasing a home from a seller who is a foreign person under federal tax law. What obligation may fall on the buyer or escrow at closing?

• A. Denying the sale until the seller becomes a resident
• B. Filing the seller's federal tax return
• C. Withholding a portion of the sales proceeds and remitting it toward the seller's potential tax liability
• D. Paying the seller's income taxes for the year of sale

145. A buyer purchases an older home built before the federal cutoff year for lead-based paint regulation. What must the seller and agents ensure the buyer receives?

• A. A structural pest control clearance
• B. A waiver releasing the seller from all paint-related claims
• C. The federally required lead hazard disclosure and informational pamphlet before the buyer is obligated
• D. A certificate that all paint has been tested and removed

146. A brokerage refuses to provide its services to a prospective client because of the client's religion. Which California law most directly prohibits this discrimination by a business establishment?

• A. The Statute of Frauds
• B. The Subdivision Map Act
• C. The Unruh Civil Rights Act
• D. The Bulk Sales Act

147. A lender routinely denies home loans on properties located in a particular neighborhood because of the area's racial composition, regardless of the applicants' qualifications. What is this practice called?

• A. Puffing
• B. Blockbusting
• C. Steering
• D. Redlining

148. An agent working with a minority family repeatedly shows them homes only in neighborhoods where similar families already live, despite their stated interest in other areas within budget. What violation does this conduct illustrate?

• A. Redlining
• B. Blind advertising
• C. Steering
• D. Blockbusting

149. A licensee canvasses a neighborhood telling homeowners they should sell quickly because families of a different ethnicity are moving in and values will supposedly fall. What is this illegal practice called?

• A. Blockbusting (panic selling)
• B. Steering
• C. Dual agency
• D. Redlining

150. A developer subdivides land into many parcels for sale to the public. Before offering the parcels, what must the developer generally obtain and provide to each prospective purchaser under California's Subdivided Lands Law?

• A. A building permit for every future home
• B. Title insurance naming the Commissioner as insured
• C. An appraisal of each lot by a licensed appraiser
• D. The Real Estate Commissioner's public report, with a copy given to the purchaser

151. A salesperson tells prospective lot buyers that the subdivision's public report proves the state has endorsed the project as a sound investment. What is wrong with this statement?

• A. The public report is a disclosure document, not a state recommendation or endorsement of the subdivision
• B. Nothing, because issuance implies state approval of quality
• C. The report is confidential and may not be discussed
• D. Only the county, not the state, issues public reports

152. A broker wants to operate her brokerage under a catchy trade name rather than her own legal name. What must she do before conducting licensed activity under that name?

• A. Simply begin using the name in advertising
• B. Have each client approve the name in writing
• C. Register the name only with the federal trademark office
• D. Obtain a license bearing the fictitious business name from the Department of Real Estate

153. At closing, a county charges a tax on the recorded transfer of real property, computed with reference to the consideration paid, excluding the value of liens the buyer assumes. What is this charge called?

• A. A supplemental assessment
• B. The documentary transfer tax
• C. A Mello-Roos special tax
• D. An ad valorem property tax

154. A California home sells after being owned by the same family for decades. Shortly after closing, the new owner's property tax bill is far higher than the seller's had been. What most likely explains the increase?

• A. The buyer failed to record the deed
• B. The county always doubles taxes for new owners
• C. The sale triggered reassessment of the property to its current market value
• D. Transfer taxes are added to the annual bill permanently

155. A tenant vacates a California rental home and leaves it in good condition. The landlord wishes to keep the entire security deposit 'just in case.' What does California law require instead?

• A. The landlord may keep the deposit if the lease was month to month
• B. The tenant must sue before any refund is owed
• C. The landlord must return the deposit less lawful deductions, with an itemized statement, within the statutory period
• D. The deposit automatically converts to the landlord's income at move-out

156. A seller conveys the same parcel twice: first to a buyer who never records and never takes possession, then to a second buyer who pays value with no knowledge of the first sale and promptly records. Who prevails under California's recording system?

• A. Neither buyer, so title returns to the seller
• B. The second buyer, as a good-faith purchaser for value who recorded first
• C. The first buyer, because her deed was delivered first
• D. The first buyer, because recording is optional in California

157. Shortly after closing, a California buyer receives an extra property tax bill covering the difference between the seller's old assessed value and the property's new assessed value from the purchase date forward. What is this bill?

• A. An optional assessment the buyer may ignore
• B. A supplemental tax bill reflecting reassessment upon change of ownership
• C. A penalty for late recording of the deed
• D. The seller's delinquent taxes transferred to the buyer

158. A home heated by a gas furnace is being sold in California. Which safety device disclosure applies specifically because the home contains a fossil-fuel-burning appliance?

• A. A statement regarding carbon monoxide detector installation
• B. An elevator safety certificate
• C. A radon mitigation certificate
• D. A swimming pool barrier report

159. A lender acquires a home at its own foreclosure sale and then resells it to a consumer. The buyer's agent notes that some standard seller paperwork differs in this transaction. Which statement about the Transfer Disclosure Statement is accurate here?

• A. The buyer's agent must prepare the TDS personally
• B. The TDS is required in every residential sale without exception
• C. Certain transfers, such as sales by foreclosure and other statutorily listed transactions, are exempt from the TDS requirement
• D. The TDS must be completed by the defaulting former owner

160. An appraiser defines the figure she is seeking as the most probable price a property should bring in a competitive, open market, with buyer and seller each acting prudently, knowledgeably, and free of undue pressure. What is she defining?

• A. Assessed value
• B. Market value
• C. Listing price
• D. Replacement cost

161. A buyer refuses to pay more for a house than the cost of acquiring an equally desirable substitute home nearby. Which principle of value does this behavior illustrate, and which appraisal approach rests on it?

• A. The principle of regression, which underlies the cost approach
• B. The principle of substitution, which underlies the sales comparison approach
• C. The principle of anticipation, which underlies the gross rent multiplier
• D. The principle of contribution, which underlies the income approach

162. An apartment building produces an annual net operating income of $60,000 and just sold for $800,000. What capitalization rate does this sale indicate?

• A. 13.3 percent
• B. 7.5 percent
• C. 6.0 percent
• D. 8.0 percent

163. A rental house just sold for $480,000 and rents for $3,000 per month. What monthly gross rent multiplier does this sale indicate for use in valuing similar rentals?

• A. 16
• B. 160
• C. 1,600
• D. 6.25

164. An appraiser valuing a nearly new custom home estimates the land value from comparable land sales, estimates the current cost to build an equivalent structure, and subtracts observed depreciation. Which approach is she applying?

• A. The sales comparison approach
• B. The income capitalization approach
• C. The cost approach
• D. The gross rent multiplier technique

165. A well-maintained home loses value because a noisy freeway interchange is built next to the neighborhood. How would an appraiser classify this loss?

• A. Functional obsolescence within the structure
• B. External (economic) obsolescence, which is generally incurable
• C. Deferred maintenance
• D. Curable physical deterioration

166. An appraiser is analyzing a vacant lot and considers several possible uses before selecting the one that is legally permissible, physically possible, financially feasible, and produces the greatest value. What has the appraiser determined?

• A. The interim use
• B. The property's highest and best use
• C. The assemblage potential
• D. The property's plottage increment

167. A property owner grants a prospective buyer the exclusive right to purchase her ranch at a set price within a stated period, in exchange for a nonrefundable payment. The buyer is not obligated to purchase. What has been created?

• A. A right of first refusal
• B. An open listing
• C. A bilateral purchase agreement
• D. An option contract, binding the owner but not the option holder

168. A commercial tenant's lease provides that if the landlord ever decides to sell the building, the tenant may purchase it by matching the terms of any bona fide offer the landlord receives. What does the tenant hold?

• A. An equitable title to the building
• B. An option at a fixed price
• C. An estate in remainder
• D. A right of first refusal

169. A buyer under contract cannot complete the purchase, so with the seller's full agreement a new buyer is substituted into a new contract and the original buyer is released from all liability. What has occurred?

• A. A novation
• B. An attachment
• C. An assignment with continuing liability
• D. A rescission for fraud

170. A buyer assigns his rights under a purchase contract to an investor, and the seller is notified but never agrees to release the original buyer. If the investor fails to perform, what is the original buyer's position?

• A. He remains secondarily liable to the seller for performance of the contract
• B. He is automatically released because assignment ends his role
• C. He becomes the seller's agent by operation of law
• D. He may sue the seller for allowing the assignment

171. A purchase agreement has been signed by both parties, but escrow has not yet closed and neither side has fully performed its promises. How is this contract classified at this stage?

• A. Executed
• B. Void
• C. Executory
• D. Unenforceable

172. A seller knowingly conceals significant foundation damage and makes false statements about it, inducing a buyer to sign a purchase contract. After discovering the truth, what is the buyer's position with respect to the contract?

• A. The contract is voidable at the buyer's election, who may rescind or affirm and seek damages
• B. Only the seller may cancel the agreement
• C. The buyer must complete the purchase but may complain to the Department
• D. The contract is automatically void and needs no action

173. A buyer and seller sign a contract for a parcel both genuinely believe includes a producing well, but the well lies entirely on the neighbor's land and was fundamental to the bargain. What is the likely legal consequence?

• A. The seller automatically owes triple damages
• B. The contract stands because mistakes never affect enforceability
• C. The buyer must sue the neighbor for the well
• D. The contract may be rescinded for mutual mistake regarding a material fact

174. A purchase agreement states that time is of the essence. The buyer misses the agreed closing date by several days, and the seller declares a breach. What effect does the clause have?

• A. It extends every deadline by a reasonable grace period
• B. It applies only to the seller's obligations
• C. It makes timely performance a material term, so missing a deadline can itself constitute a breach
• D. It merely encourages promptness with no legal force

175. An elderly homeowner who depends entirely on her caregiver signs a contract selling her home to that caregiver at a fraction of its worth, after persistent private pressure. What contract defense is most clearly raised by these facts?

• A. The statute of frauds
• B. Impossibility of performance
• C. Failure of the parol evidence rule
• D. Undue influence, making the contract voidable by the homeowner

176. A buyer purchases a small farm under a land contract (contract of sale), making installment payments directly to the seller over many years. Until the final payment is made, how is title divided between the parties?

• A. Title remains entirely with the seller, and the buyer has no interest at all
• B. The buyer holds legal title; the seller holds a lien
• C. The seller (vendor) retains legal title while the buyer (vendee) holds equitable title
• D. A neutral trustee holds both legal and equitable title

177. An apartment tenant transfers only a portion of her remaining lease term to another person, collecting rent from that person while continuing to pay the landlord herself. How is this arrangement classified?

• A. A novation of the lease
• B. A sublease, with the original tenant remaining liable to the landlord
• C. A surrender of the premises
• D. An assignment of the lease

178. A seller extends a written offer to sell her lot to a neighbor, who asks for a week to think it over without paying for that time. Before the neighbor responds, the seller dies. The neighbor then attempts to accept. What is the result?

• A. No contract forms, because the offeror's death terminated the offer before acceptance
• B. The acceptance binds the seller's estate
• C. The offer remains open for a reasonable time after death
• D. The estate must extend a new offer on the same terms

179. After signing a complete, final written purchase agreement, a buyer claims the seller orally promised during negotiations to include the tractor, though the writing says nothing about it. Why will the buyer likely be unable to enforce that promise?

• A. The statute of limitations expired at signing
• B. Tractors can never be sold with land
• C. Oral promises are always enforceable, so the buyer will win
• D. The parol evidence rule bars prior oral statements that contradict or add to a final integrated written contract

180. A buyer signs a purchase agreement but provides no earnest money deposit at all. The seller signs and accepts. Later the seller argues the contract is invalid for lack of a deposit. Is the seller correct?

• A. Yes, unless the broker waives commission
• B. No, but only if escrow has already opened
• C. Yes, because a deposit is essential to every real estate contract
• D. No, because the parties' mutual promises supply the required consideration; a deposit is not essential to validity

181. A seller signs a listing under which the broker earns the agreed commission no matter who produces the buyer during the term, even if the seller finds the buyer without any broker involvement. What type of listing is this?

• A. An exclusive agency listing
• B. An open listing
• C. An exclusive right to sell listing
• D. A net listing

182. A homeowner lists with a single brokerage but reserves the right to sell the home herself without paying any commission if she finds her own buyer. Which listing arrangement matches these terms?

• A. A multiple listing
• B. An exclusive right to sell listing
• C. A net listing
• D. An exclusive agency listing

183. A seller gives several different brokerages nonexclusive authorization to find a buyer, promising a commission only to the one that actually procures the purchaser, and reserving the right to sell on her own. What kind of listing has she given?

• A. An open listing
• B. An option listing
• C. An exclusive agency listing
• D. An exclusive right to sell listing

184. A broker takes a listing under which she keeps everything above a figure the seller wants to net from the sale. What does California law require of the broker in this arrangement?

• A. Payment of half the excess to the buyer
• B. Nothing beyond the ordinary listing rules
• C. Disclosure of the full amount of the broker's compensation and the principal's consent, before the principal becomes bound to the transaction
• D. Immediate conversion of the listing to an open listing

185. A listing expires without a sale, but shortly afterward the seller closes a deal with a buyer whom the broker had introduced to the property during the listing term. The broker claims a commission under a clause in the expired listing. Which clause supports the claim?

• A. The arbitration clause
• B. The liquidated damages clause
• C. The protection (safety) clause covering buyers procured during the listing period
• D. The subordination clause

186. After signing a purchase agreement, the parties agree in writing to change the closing date and add a washer and dryer to the sale. Separately, the buyer's agent had earlier attached a pre-drafted page of standard terms incorporated at signing. Which labels correctly describe these two documents?

• A. The first is an addendum; the second is an amendment
• B. Both are unenforceable side letters
• C. The post-signing change is an amendment; the page incorporated at signing is an addendum
• D. Both are counteroffers

187. Buyer and seller mutually agree to cancel their purchase agreement before closing, with the buyer's deposit returned and both sides released from further obligations. What is this called?

• A. Rescission, restoring the parties to their pre-contract positions
• B. A forfeiture of the deposit
• C. An assignment of the contract
• D. A breach by both parties

188. A retired teacher, unlicensed in real estate, negotiates the sale of her neighbor's house to a colleague and accepts a percentage of the price for her efforts. What licensing principle does this arrangement violate?

• A. Only written negotiations require a license
• B. A license is needed only when the price exceeds a set amount
• C. Performing licensed real estate acts for another for compensation requires a real estate license
• D. None, because the parties were acquaintances

189. A property owner personally sells her own duplex without hiring anyone, and separately an attorney-in-fact under a duly executed power of attorney signs closing documents for an absent principal in an isolated transaction. Why does neither person need a real estate license?

• A. Because neither was paid in cash
• B. Because licenses are needed only for commercial property
• C. Both fall within recognized exemptions: owners dealing with their own property and persons acting under a power of attorney
• D. Because both acted through escrow

190. A busy salesperson hires an unlicensed assistant. Which task may the assistant lawfully perform?

• A. Hosting an open house alone and discussing terms with visitors
• B. Preparing and mailing flyers and scheduling appointments at the licensee's direction
• C. Negotiating a price reduction with a buyer's agent
• D. Telephoning prospects to solicit listings

191. A cooperating broker in a closed transaction wants to pay a bonus directly to the salesperson on the other side who did excellent work. How must compensation lawfully reach that salesperson?

• A. Only through the salesperson's own employing broker
• B. In cash to avoid trust accounting
• C. Through escrow made payable to the salesperson personally
• D. By direct check from the cooperating broker to the salesperson

192. A broker offers the manager of a large apartment complex, who holds no real estate license, a referral fee for sending prospective home buyers to the brokerage. What is the legal status of this arrangement?

• A. Lawful if disclosed to the buyers
• B. Prohibited, because compensation for licensed activity such as referrals for a fee may not be paid to unlicensed persons
• C. Lawful if the fee is modest
• D. Lawful because apartment managers are automatically exempt

193. At a local association meeting, several competing brokers agree they will all charge the same minimum commission rate in their market area. What is the primary legal problem?

• A. Price fixing among competitors violates antitrust law; commission rates must be independently negotiated with each client
• B. Minimum rates require seller approval
• C. Commission agreements must be filed with the Department first
• D. The rate they chose was too low

194. One broker deposits client funds into her personal bank account alongside her own money. Another broker takes client funds from the trust account and spends them on office rent. How are these two violations classified?

• A. Both are lawful if repaid quickly
• B. Both are mere bookkeeping errors
• C. The first is commingling; the second is conversion, the more serious offense
• D. The first is conversion; the second is commingling

195. A listing broker secretly arranges for a relative to buy her client's underpriced listing, planning to share in the resale profit, without telling the seller of her interest. What has the broker done?

• A. Taken a secret profit in breach of fiduciary duty, exposing her to discipline and liability to the principal
• B. Violated advertising rules only
• C. Nothing wrong, because the seller received the listed price
• D. Earned a lawful bonus for finding a fast buyer

196. A broker takes on a newly licensed salesperson. What document must exist between the broker and the salesperson from the outset of the relationship?

• A. A surety bond naming the salesperson
• B. A written employment/affiliation agreement between broker and salesperson, retained by the broker
• C. A recorded declaration of agency
• D. A joint bank signature card

197. A brokerage headquartered downtown opens a second office across town where licensed activity will be conducted. What does the Real Estate Law require for the new location?

• A. Nothing, if the main office license is current
• B. A separate corporation for each office
• C. Approval from the local association of REALTORS
• D. A branch office license for the additional location

198. A broker discharges a salesperson after discovering the salesperson falsified a disclosure document in a transaction. Beyond the termination itself, what does the law require the broker to do?

• A. Nothing further, since termination ends the matter
• B. Notify the Commissioner with a certified written statement of the facts when discharging a salesperson for license-law violations
• C. Refund all commissions the salesperson ever earned
• D. Keep the matter confidential to avoid defamation

199. A consumer wins a fraud judgment against a licensee but cannot collect because the licensee is insolvent and has vanished. What recourse does the license law provide, and what happens to the licensee?

• A. The consumer must simply wait for the licensee's assets
• B. The consumer may apply to the Recovery Account, and the license is suspended until the account is reimbursed
• C. The judgment converts into a lien on the Commissioner's office
• D. The Department pays all judgments in full automatically

200. After a disciplinary proceeding, the Commissioner issues a licensee a restricted license. Which statement accurately describes this license?

• A. It is a probationary license that may carry conditions and confers no automatic right of renewal
• B. It permits only property management activity
• C. It cannot be suspended for any reason
• D. It is identical to a regular license once issued

201. A salesperson places online classified ads for her listings that show only a phone number and the words 'Great homes, call now,' with no identification of the brokerage or her licensed status. What advertising violation is this?

• A. Bait and switch advertising
• B. Puffing
• C. Blind advertising that fails to disclose the advertiser is a licensee
• D. Panic selling

202. A real estate brokerage is organized as a corporation. Who must hold a broker license for the corporation to conduct licensed activity?

• A. The corporation's attorney
• B. Every shareholder of the corporation
• C. A designated officer who holds a broker license and is responsible for supervising the corporation's licensed activities
• D. All members of the board of directors

203. A buyer's offer instructs the broker to hold the deposit check uncashed until the seller accepts the offer. How must the broker proceed?

• A. The broker may hold the check uncashed as instructed, disclosing that fact to the seller before acceptance
• B. The broker must return the check and demand a wire transfer
• C. The broker must cash the check immediately despite the instruction
• D. The broker should deposit the check into the office operating account temporarily

204. A broker wants her unlicensed office bookkeeper to be able to sign trust account withdrawals when the broker travels. Under what condition may the Department's rules permit this?

• A. If withdrawals stay under a set dollar amount
• B. Never; only the broker may ever sign
• C. If the unlicensed employee is covered by a fidelity bond or insurance protecting the funds, with the broker remaining responsible
• D. If the bookkeeper passes the salesperson examination first

205. A broker operating several offices rarely reviews transaction files, has no written office policies, and lets salespersons draft and sign contracts without oversight. A salesperson's misconduct then injures a client. What is the broker's regulatory exposure?

• A. Automatic transfer of the license to the salesperson
• B. None, because each salesperson bears sole responsibility
• C. Discipline for failure to exercise reasonable supervision over licensed activities
• D. Exposure only to civil suit, never discipline

206. An entrepreneur plans a business that will, for compensation, solicit borrowers and lenders and negotiate loans secured by real property on behalf of others. Does this activity fall within the definition of licensed real estate brokerage?

• A. No; lending activity is governed solely by federal law
• B. No; only property sales require a license
• C. Yes, but only if the loans exceed a set amount
• D. Yes; soliciting borrowers or lenders and negotiating loans secured by real property for others for compensation is licensed activity

207. A salesperson mails first-contact solicitation letters to homeowners seeking listings. Beyond the brokerage name, what identifying information must appear in such solicitation materials?

• A. The salesperson's commission split
• B. The names of past clients
• C. The salesperson's home address
• D. The salesperson's license identification number

208. An applicant conceals a prior professional-license revocation on her real estate license application, and the Department discovers the concealment after issuing the license. What may the Commissioner do?

• A. Nothing, because issuance is final
• B. Increase the licensee's renewal fees as a penalty
• C. Only issue a private warning letter
• D. Suspend or revoke the license, since procuring a license by fraud or material misstatement is grounds for discipline

209. A salesperson, acting within the scope of her employment for her broker, makes a material misrepresentation that injures a buyer. Apart from the salesperson's own accountability, may the employing broker face consequences?

• A. Yes; the broker may be liable and subject to discipline for a salesperson's acts within the scope of the employment
• B. Only if the buyer first sues the seller
• C. No, because each licensee answers only for personal conduct
• D. Only if the broker co-signed the purchase agreement

210. While representing a seller, a broker quietly accepts a fee from an escrow company for steering the transaction its way, never mentioning this to the seller. Which duty has the broker violated?

• A. The duty against blind advertising
• B. No duty, since escrow selection is the broker's prerogative
• C. The fiduciary duty of full disclosure, which forbids undisclosed compensation from third parties in the principal's transaction
• D. Only a duty to the escrow company's competitors

211. A licensed salesperson sells her own condominium directly to a buyer she met at an open house for a different property. What must she disclose to the buyer in this transaction?

• A. Nothing beyond what any private seller discloses
• B. Her commission history for the past year
• C. That she holds a real estate license and is acting as a principal in the sale
• D. The name of every client she has represented

212. After a formal hearing, the Real Estate Commissioner finds a broker committed fraud in a transaction. Which sanctions are within the Commissioner's own power to impose, as opposed to a criminal court's?

• A. Suspension or revocation of the broker's license
• B. Seizure of the broker's personal residence
• C. Imprisonment of the broker
• D. An award of punitive damages to the victim

213. A broker lets an aspiring agent who has not yet received any license 'work the phones' soliciting sellers, promising to pay her once she is licensed. Which statement is accurate?

• A. Only the aspiring agent, not the broker, is at risk
• B. The arrangement is proper because payment is deferred
• C. The broker violated the law by employing an unlicensed person to perform licensed acts, and the promised fee for that unlicensed activity is not lawfully payable
• D. The activity is lawful if supervised closely

214. A written offer to purchase states that acceptance is effective only upon written notice delivered to the buyer's agent. The seller signs the offer and tells a friend she has accepted, but no notice is ever delivered to the buyer's agent, and the buyer later withdraws. Was a contract formed?

• A. Yes, because the seller's signature alone completed the contract
• B. Yes, because telling any third party counts as acceptance
• C. No, because acceptance was never communicated in the manner the offer required
• D. No, because offers can never specify how acceptance must occur