California Real Estate Salesperson Practice Exam.
Free practice test — 154 quality-checked questions, instant feedback.

1. What is the examination fee for the real estate salesperson exam?

• A. $75
• B. $50
• C. $100
• D. $150

2. A candidate answers 100 of the 150 questions correctly. Based solely on the stated passing standard, what is the outcome?

• A. Fail, because 100 correct is below the required threshold
• B. The result cannot be determined
• C. Pass, because any score above 60 percent passes
• D. Pass, because 100 correct is a majority

3. Which statement correctly pairs the salesperson exam's question count with its passing standard?

• A. 120 questions, pass at 70 percent
• B. 200 questions, pass at 75 percent
• C. 150 questions, pass at 70 percent
• D. 150 questions, pass at 60 percent

4. A parcel of land is owned by two people who each hold an equal, undivided interest, and the arrangement includes a right of survivorship so that when one owner dies the survivor automatically absorbs the deceased owner's share. Which form of concurrent ownership does this describe?

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

5. An owner conveys real property to a relative 'for the duration of her natural life,' with the property to pass to a named third party upon her death. What best describes the interest held by the relative during her lifetime?

• A. A leasehold estate
• B. An easement in gross
• C. A life estate
• D. A fee simple absolute

6. Which of the following is the most complete and unlimited estate a person can hold in real property?

• A. A life estate
• B. A fee simple absolute
• C. A tenancy at will
• D. An estate for years

7. A homeowner grants a utility company the right to run power lines across the edge of her lot. The utility does not own or possess the land itself but may enter to maintain the lines. This right is best classified as:

• A. A joint tenancy
• B. An easement
• C. A possessory freehold estate
• D. A remainder interest

8. Two investors take title to a rental property together. Each owns a distinct fractional share, the shares need not be equal, and either may leave his share to his own heirs by will. There is no right of survivorship between them. This describes:

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

9. When a person owns real property entirely alone, with no co-owners sharing the title, this is referred to as ownership:

• A. In common
• B. By the entirety
• C. In severalty
• D. In joint tenancy

10. An unpaid contractor who supplied labor and materials to improve a property records a claim against that specific property to secure payment. This is an example of what type of encumbrance?

• A. A life estate
• B. A restrictive covenant
• C. A mechanic's (or construction) lien
• D. An easement appurtenant

11. A subdivision's recorded documents prohibit any lot owner from operating a commercial business on a residential lot. An owner who wants to run a business is bound by this private restriction. Such a restriction is best described as:

• A. A private deed restriction or restrictive covenant
• B. A government zoning ordinance
• C. A tenancy in common
• D. An easement in gross

12. An owner conveys her orchard "to my brother for the duration of his life, and then to my daughter." When the brother later dies, what happens to title to the orchard?

• A. It passes to the daughter as remainderman
• B. It passes to the brother's heirs through his estate
• C. It reverts to the state
• D. It is split equally between the daughter and the brother's heirs

13. A grantor deeds a cottage "to my longtime friend for the friend's life" and names no one to take the property afterward. Upon the friend's death, title to the cottage will:

• A. Revert to the grantor
• B. Pass to the friend's heirs by inheritance
• C. Escheat automatically to the county
• D. Be held in trust until a remainderman is appointed

14. A seller signs a properly drafted deed naming the parties, containing a legal description and a granting clause, then locks it in a desk drawer, intending to hand it over "someday." The seller dies before ever giving the deed to the buyer. Was the conveyance effective?

• A. No, because the deed was never notarized and recorded
• B. Yes, because the deed was signed by the grantor
• C. Yes, because the deed contained all required written elements
• D. No, because the deed was never delivered and accepted

15. A broker receives an earnest money check from a client and deposits it into the brokerage's general operating account to "keep things simple." How should this conduct be characterized?

• A. Acceptable, provided the funds are transferred to a trust account before closing.
• B. A violation of the duty of obedience, because the client did not authorize the deposit.
• C. A violation of the duty of accounting, because client funds must be kept in a separate trust or escrow account and never commingled with the broker's own funds.
• D. Acceptable, as long as the broker keeps accurate internal records of the deposit.

16. A buyer submits a written offer on a home. The seller crosses out the proposed closing date, writes in a date three weeks later, signs the document, and returns it. What is the legal status of the buyer's original offer?

• A. It has been accepted, because the seller signed the document.
• B. It has been rejected and extinguished, because a material change to the terms operates as a counteroffer.
• C. It remains open, and the buyer may still accept the original terms.
• D. It is automatically extended for three weeks to match the new closing date.

17. A buyer asks her broker which form of ownership gives her the most complete bundle of rights in a parcel, including the ability to leave it to her heirs or sell it at will. Which estate should the broker identify?

• A. A fee simple absolute
• B. An easement appurtenant
• C. A life estate
• D. A month-to-month leasehold

18. A first-time buyer tells his agent, "I want the deed that protects me the most — I want the seller standing behind this title no matter when a problem arose." Which deed best fits this request?

• A. A tax deed
• B. A general warranty deed
• C. A quitclaim deed
• D. A deed of trust

19. A homeowner selling her own residence without an agent refuses to sell to an applicant because of the applicant's race, claiming that owners selling their own homes are exempt from fair housing rules. Which statement is correct?

• A. She is incorrect — discrimination based on race, established under the Civil Rights Act of 1866, has no exemptions.
• B. She is correct — for-sale-by-owner transactions are exempt from all discrimination rules.
• C. She is incorrect only if the buyer also belongs to a second protected class.
• D. She is correct as long as she does not use a real estate licensee or discriminatory advertising.

20. To clear up a possible claim from a divorce years earlier, an ex-spouse signs a quitclaim deed in favor of the current owner. What did the quitclaim deed actually convey?

• A. Marketable title guaranteed against all defects
• B. Title warranted only against defects arising during the ex-spouse's ownership
• C. A life estate measured by the ex-spouse's life
• D. Whatever interest the ex-spouse may have had, with no warranties

21. After closing, a buyer promptly records her deed in the public land records. What is the primary legal effect of recording?

• A. It guarantees the title is free of all encumbrances
• B. It substitutes for delivery and acceptance of the deed
• C. It gives constructive notice to the world and establishes the buyer's priority
• D. It makes the deed valid between the buyer and the seller

22. A property is subject to a mortgage recorded several years ago and, more recently, to an unpaid property tax lien. If the liens are enforced, which one generally comes first, and why?

• A. The mortgage, because it was recorded first
• B. Neither; the liens share priority in proportion to the amounts owed
• C. The property tax lien, because tax liens generally take priority over all other liens regardless of recording date
• D. The mortgage, because voluntary liens always outrank involuntary liens

23. Lot 14 enjoys a driveway easement across neighboring Lot 15 to reach the public road. In describing this easement appurtenant, which statement is accurate?

• A. Lot 15 is the dominant tenement because the driveway is on its land
• B. Lot 15 is the servient tenement because it bears the burden of the easement
• C. Lot 14 is the servient tenement because it uses the driveway
• D. Both lots are dominant tenements because the easement touches both

24. The owner of a dominant tenement that benefits from a recorded easement appurtenant sells the parcel. Does the new owner get the benefit of the easement?

• A. Yes, but only if the deed mentions the easement by name
• B. No, unless the servient owner signs a new easement agreement
• C. Yes, because an easement appurtenant runs with the land
• D. No, because easements are personal to the owner who negotiated them

25. A broker is reviewing a purchase agreement to confirm it is legally valid. Which of the following is NOT one of the essential elements required for a valid real estate contract?

• A. Mutual assent between the parties
• B. Legally competent parties
• C. A lawful object
• D. An earnest money deposit

26. A buyer submits a written offer on a home. The seller signs it but first crosses out the proposed closing date and writes in a later one. What is the legal effect of the seller's response?

• A. It keeps the original offer open while the parties negotiate the date
• B. It is a counteroffer that rejects and extinguishes the buyer's original offer
• C. It is a valid acceptance because the change is minor
• D. It binds the buyer unless the buyer objects in writing

27. An offeror who has made a written offer to purchase a parcel of land calls the seller's broker and withdraws the offer. The seller had signed the acceptance moments earlier but had not yet communicated it to anyone on the buyer's side. Which statement is correct?

• A. The revocation is effective because acceptance had not yet been communicated
• B. A binding contract exists because the seller had already signed
• C. The revocation is ineffective because it was not made in writing
• D. The offer cannot be revoked once the seller begins reviewing it

28. A landlord and tenant orally agree to a residential lease with a term of two years. If the tenant later refuses to honor the agreement, which doctrine most directly affects the landlord's ability to enforce it?

• A. The doctrine of liquidated damages
• B. The Statute of Frauds
• C. The doctrine of specific performance
• D. The parol evidence rule

29. A seventeen-year-old signs a contract to purchase a condominium. How is this contract best classified?

• A. Voidable, because the minor may disaffirm it
• B. Void, because it never legally existed
• C. Unenforceable, because it cannot be enforced in court
• D. Valid, because real estate contracts are exempt from capacity rules

30. Two parties reach a complete oral agreement for the sale of a vacant lot: the price is settled, both are competent adults, and the purpose is lawful. If the seller refuses to convey, how is this agreement best described?

• A. Void
• B. Fully enforceable, because all essential elements are present
• C. Voidable
• D. Unenforceable

31. A purchase agreement states that the buyer's duty to close depends on the buyer obtaining loan approval, a satisfactory inspection, and an appraisal supporting the price. These provisions are best described as:

• A. Warranties made by the seller
• B. Covenants that survive closing
• C. Contingencies that must be satisfied before the buyer is obligated to perform
• D. Liquidated damages provisions

32. A seller under a valid written purchase contract refuses to convey the property, and the buyer sues asking the court to order the seller to complete the transfer. Why are courts willing to grant this remedy in real estate cases?

• A. Because land is deemed unique, so money damages are not an adequate substitute
• B. Because recording statutes require every contract to result in a conveyance
• C. Because the buyer's earnest money automatically converts to equity
• D. Because sellers are always presumed to act in bad faith

33. A buyer defaults on a purchase contract that contains a liquidated damages clause. Under such a clause, what is the seller entitled to do?

• A. Retain the buyer's earnest money as the agreed measure of the default
• B. Recover the full purchase price from the buyer
• C. Sue for specific performance and keep the earnest money as a penalty
• D. Force the buyer's lender to complete the purchase

34. Which sequence of events results in NO binding contract being formed?

• A. Buyer offers, seller responds by materially raising the price, and the buyer then signs the seller's revised terms and communicates acceptance
• B. Buyer offers, then revokes the offer before the seller communicates acceptance, and the seller later signs
• C. Buyer offers in writing, seller signs the identical terms, and the signed acceptance is delivered to the buyer
• D. Buyer offers, seller accepts without changes, and acceptance is communicated to the buyer

35. A buyer signs two documents at closing on her home loan: one contains her personal promise to repay the debt, and the other pledges the home itself as security for that debt. Which pair of instruments has she signed?

• A. A listing agreement and an option contract
• B. A promissory note and a mortgage or deed of trust
• C. A Loan Estimate and a Closing Disclosure
• D. A general warranty deed and a quitclaim deed

36. In State X, a homebuyer who finances a purchase keeps legal title to the property while the lender merely holds a security interest against it until the loan is repaid. State X is best described as following which doctrine?

• A. The Statute of Frauds
• B. Lien theory
• C. The doctrine of substitution
• D. Title theory

37. After a borrower misses several payments, the lender notifies him that the entire remaining loan balance — not just the missed installments — is now immediately due. Which loan provision permits the lender to do this?

• A. An acceleration clause
• B. A liquidated damages clause
• C. A granting clause
• D. A financing contingency

38. A borrower takes out a $250,000 loan and agrees to pay two discount points at closing to lower her interest rate. How much will she pay for the points?

• A. $2,500
• B. $5,000
• C. $500
• D. $25,000

39. An eligible military veteran wants to buy a home but has saved almost nothing toward a down payment. Which loan program is specifically designed to allow him to purchase with potentially no down payment at all?

• A. A conventional loan
• B. Any loan covered by RESPA
• C. A VA-guaranteed loan
• D. An FHA-insured loan

40. A buyer obtains a conventional loan and makes a down payment equal to 15 percent of the purchase price. What will the lender most likely require as a condition of the loan?

• A. A VA guaranty
• B. A three-day right of rescission
• C. Private mortgage insurance
• D. An FHA endorsement

41. A title company offers a lender a cash payment for every borrower the lender sends its way on federally related mortgage loans. This arrangement most directly violates which federal law?

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

42. A homeowner refinances the loan on her principal residence and, two days later, changes her mind about the transaction. Under which law, and through which mechanism, may she still be able to back out?

• A. The acceleration clause, by declaring the balance due
• B. TILA under Regulation Z, by exercising the three-day right of rescission
• C. RESPA, by demanding a revised Closing Disclosure
• D. The Fair Housing Act, by filing a discrimination complaint

43. Which statement correctly matches each loan type with the federal government's role in it?

• A. All three loan types carry the same federal insurance
• B. FHA loans are guaranteed for veterans; conventional loans are insured by the government
• C. Conventional loans are insured by the FHA; VA loans are not government-backed
• D. Conventional loans are not government-backed; FHA loans are insured by the FHA; VA loans are guaranteed for eligible veterans

44. A purchase agreement states that the buyer's obligation to close depends on her obtaining a mortgage loan on specified terms. If she makes a diligent effort but cannot secure the loan, what is the effect of this provision?

• A. She is not yet obligated to perform, because the financing contingency was not satisfied
• B. The seller may compel her to buy through specific performance
• C. The contract becomes a counteroffer
• D. The lender may invoke the acceleration clause against her

45. A licensee proposes to represent both the buyer and the seller in the same purchase transaction. Under what condition is this arrangement permitted?

• A. It is never permitted under any circumstances.
• B. It is permitted automatically as long as the commission is split evenly between the parties.
• C. It is permitted only with the informed written consent of both parties.
• D. It is permitted whenever the licensee orally notifies both parties before closing.

46. Six months after a listing agreement ended, the former listing agent tells a prospective buyer that the ex-client had privately been willing to accept far less than the asking price on a new listing. Which fiduciary duty has the agent most likely violated?

• A. Accounting, because the agent mishandled client funds.
• B. None — all fiduciary duties end when the agency relationship terminates.
• C. Obedience, because the agent failed to follow lawful instructions.
• D. Confidentiality, because that duty survives termination of the agency and forbids revealing information that harms the principal's bargaining position.

47. An owner hires a licensee to manage an apartment building on an ongoing basis, with authority to lease units, arrange repairs, and handle a range of matters that bind the owner. In this role, the licensee is BEST described as a:

• A. Principal, because the licensee controls the property.
• B. General agent, because the licensee may bind the principal in a range of matters.
• C. Customer, because the licensee owes the owner only honesty and fair dealing.
• D. Special agent, because property management is limited to a single transaction.

48. A landlord and tenant orally agree to a two-year lease of a commercial storefront and shake hands on the terms. If the landlord later refuses to honor the arrangement, the lease is BEST described as:

• A. Voidable at the option of either party.
• B. Void, because it never existed as a legal agreement.
• C. Unenforceable, because leases longer than one year must be in writing and signed by the party to be charged.
• D. Fully enforceable, because oral leases of any length are valid.

49. A property is encumbered by a first mortgage recorded in 2019, a judgment lien recorded in 2021, and a property tax lien that arose in 2024. In a forced sale, which lien is generally paid first?

• A. The judgment lien, because judgments outrank consensual liens.
• B. The property tax lien, because property tax liens generally take priority over all other liens regardless of when they were recorded.
• C. All three liens share equal priority and are paid proportionally.
• D. The first mortgage, because it was recorded earliest.

50. A borrower obtains a $300,000 loan and agrees to pay two discount points at closing to buy down the interest rate. How much will the borrower pay for the points?

• A. $6,000
• B. $3,000
• C. $600
• D. $1,500

51. A landowner sells a vacant parcel to a builder and carries back a note secured by a deed of trust recorded in January. In March the builder obtains a construction loan, and the construction lender insists on being in first position. Which provision in the landowner's instrument would permit that result?

• A. An acceleration clause
• B. A prepayment clause
• C. A subordination clause
• D. A defeasance clause

52. An investor signs a straight note in the amount of 180,000 dollars bearing simple interest at an annual rate of 7.5 percent, with interest payable monthly and the entire principal due at the end of the term. What is the amount of each monthly interest payment?

• A. 1,350 dollars
• B. 1,125 dollars
• C. 1,500 dollars
• D. 2,250 dollars

53. An unscrupulous owner deeds a parcel to a first buyer, who pays in full but does not record. Two weeks later the owner deeds the identical parcel to a second buyer who pays fair value, knows nothing about the first transaction, and records immediately. Who holds title under California's recording statute?

• A. Neither buyer, because a grantor who conveys twice renders both deeds void
• B. The second buyer, as a good faith purchaser for value who recorded first without notice
• C. The two buyers take as tenants in common in equal shares
• D. The first buyer, because the earlier deed was delivered and accepted first in time

54. A buyer of a rural parcel is deciding between a standard coverage title policy and an extended coverage policy. Her main worry is a neighbor whose barn may sit partly across the boundary and a farmhand who appears to occupy an outbuilding under some unwritten arrangement. Which advice is correct?

• A. Extended coverage is unnecessary, because the preliminary report will disclose anyone in possession
• B. Standard coverage is sufficient, because encroachments and occupancy are always matters of public record
• C. Extended coverage is appropriate, because it addresses matters a physical inspection or survey would reveal
• D. Neither policy responds to those risks, which can only be addressed by a separate boundary endorsement

55. Midway through a transaction the buyer telephones the escrow officer and asks her to release the deposit early so he can pay a contractor, explaining that the seller will surely not mind. How should the escrow officer respond?

• A. Decline, because the escrow holder may act only on the mutual written instructions of both parties
• B. Decline, because escrow is the agent of the seller and takes direction only from the seller
• C. Release the funds if the buyer's agent confirms the request in writing
• D. Release the funds, because the deposit belongs to the buyer until closing

56. A buyer purchases an apartment building. The title report is clean, but a family has been living in the ground-floor unit for six years under an unrecorded twenty-year lease at a very low rent. The buyer, who never toured that unit, now wants them out. What is the buyer's position?

• A. The buyer takes subject to the lease, being charged with notice of the rights of parties in open possession
• B. The lease is unenforceable against the buyer, since only recorded instruments bind a subsequent purchaser
• C. The buyer may terminate on thirty days' notice, because an unrecorded lease is reduced to a month-to-month tenancy
• D. The lease is unenforceable, because the title company issued a policy showing no such encumbrance

57. A licensee is handling four closings this month: a home being sold by the executor of a decedent's estate, a duplex being sold by the retiring couple who have lived in one unit for years, a house being transferred between two spouses as part of a marital dissolution, and a house being resold by the lender that acquired it at a trustee's sale. Which seller must deliver a Real Estate Transfer Disclosure Statement?

• A. The executor selling the decedent's estate
• B. The retiring couple selling the duplex
• C. The lender reselling the foreclosed house
• D. The spouse transferring title in the dissolution

58. A seller instructs the listing agent to market a single-family residence strictly "as is" and to have the buyer sign a written waiver of the Transfer Disclosure Statement so escrow can close in ten days. How should the agent advise the seller?

• A. The disclosure cannot be waived, and an "as is" sale does not excuse the seller from disclosing known material defects
• B. The waiver is valid because an "as is" sale shifts the entire burden of investigation onto the buyer
• C. The waiver is valid so long as the buyer is separately represented by a buyer's agent
• D. The waiver is valid once the buyer has received and approved the preliminary title report

59. A buyer's written offer on a house is accepted on Monday. The seller does not produce the Transfer Disclosure Statement until Friday, when the listing agent hands it to the buyer in person. The form reveals a history of roof leaks the buyer had not known about. What is the buyer's position?

• A. The buyer may terminate the offer by delivering written notice within three days of the personal delivery
• B. The buyer may terminate only if the seller agrees to release the buyer from the contract
• C. The buyer is bound to close but may recover damages for the concealed condition after closing
• D. The buyer has no right of withdrawal, having signed the offer before receiving the disclosure

60. A seller of a single-family residence located in a designated very high fire hazard severity zone asks the listing agent what other conditions the Natural Hazard Disclosure Statement is designed to reveal. Which of the following belongs on that statement?

• A. Whether the parcel lies within a state-designated earthquake fault zone
• B. Whether the structure has a documented history of termite infestation
• C. Whether the parcel is subject to a community facilities district special tax
• D. Whether any registered sex offender resides in the immediate neighborhood

61. A listing agent is assembling disclosures for a home in which the prior owner died of natural causes four years ago and, separately, an occupant died of an AIDS-related illness two years ago. Which statement correctly describes the agent's obligations?

• A. Neither death may be mentioned, because a death on the premises is never a material fact
• B. Both deaths must be volunteered to every prospective buyer before an offer is written
• C. Both must be itemized on the Transfer Disclosure Statement as conditions affecting desirability
• D. The death four years ago need not be disclosed, and the agent must not reveal that an occupant died of an AIDS-related illness

62. A buyer asks her agent to search the state's registered sex offender database and report back which registrants live near the home she is considering. What is the agent's correct course of action?

• A. Run the search only after obtaining the seller's written consent to release the information
• B. Direct the buyer to the statutory notice contained in the contract and let her consult the public database herself
• C. Run the search, because the presence of registrants is a material fact affecting value
• D. Decline to mention the database at all, since any reference to it violates fair housing law

63. A seller is transferring a residence located inside a community facilities district that levies a special tax to repay bonds issued for local streets and schools. What does California law require of this seller?

• A. Say nothing, because the levy appears on the county tax bill and is already a public record
• B. Disclose the special tax only if the buyer submits a written request for tax information
• C. Retire the outstanding bond obligation attributable to the parcel before close of escrow
• D. Make a good faith effort to obtain the notice of special tax from the levying agency and deliver it to the buyer

64. A broker lists a hillside single-family home. The seller's written disclosures say nothing about soil movement, but a cracked patio slab and a visibly bowed retaining wall are apparent from the rear yard. What does the broker's statutory inspection duty require?

• A. Engagement of a licensed geotechnical engineer to test the soil before the property is marketed
• B. Nothing further, since the broker is entitled to rely on the seller's written disclosures
• C. A reasonably competent and diligent visual inspection of the reasonably accessible areas, with disclosure of what it reveals
• D. An inspection of the whole property including crawl spaces, the area beneath slabs, and cavities behind finished walls

65. A buyer instructs her agent in writing that her deposit check is not to be negotiated until the seller accepts the offer. The broker holds the uncashed check for four days while the parties negotiate terms. Is the broker's handling of the check proper?

• A. Yes, if the offeror gave that instruction in writing and the seller is told of the arrangement before accepting
• B. No, because a broker may never hold a negotiable instrument beyond one business day
• C. Yes, but only if the check is drawn payable to the escrow holder rather than to the brokerage
• D. No, because all trust funds must be placed on deposit regardless of the offeror's instructions

66. Two and a half years after a transaction closed, a Department of Real Estate auditor asks a broker to produce the purchase agreement, the canceled trust account checks, and the closing statement from that file. The broker replies that the entire file was shredded at the end of the prior calendar year. What is the broker's position?

• A. Acceptable, because retention is required only until the transaction closes and all funds are disbursed
• B. Acceptable, because trust account records are subject to retention rules but transaction documents are not
• C. A violation, because these records must be retained for three years and be available for inspection
• D. A violation only if the broker is unable to reconstruct the file from the escrow holder's copies

67. A salesperson posts an online advertisement for a listing showing only photographs, the asking price, and a mobile telephone number, with nothing to indicate that the person to be contacted holds a real estate license. What is the defect in this advertisement?

• A. It is a blind advertisement, because a licensee must disclose licensee status in advertising
• B. There is no defect, provided the salesperson states her license status when a caller responds
• C. There is no defect, provided the employing broker approved the advertisement before it was posted
• D. It is unlawful because every advertisement for a listed property must name the record owner

68. At a local marketing meeting, several competing brokers agree among themselves that none of their firms will accept a listing at a total commission below six percent, so that discount brokerages in the area cannot undercut them. How is this agreement characterized?

• A. Unlawful only if the participating brokers together hold a majority share of the local market
• B. Unlawful price fixing under antitrust law, whether or not the agreement is written
• C. Lawful so long as the understanding is never reduced to writing and no client is told of it
• D. Lawful, since commission rates remain negotiable between each broker and each individual client

69. A loan processor who holds no real estate license refers three buyers to a broker over the course of a year, and each referral results in a closed sale. The broker wants to reward her with a percentage of each commission earned. May the broker do so?

• A. Yes, provided the total paid in any calendar year remains modest relative to the commissions earned
• B. No, unless the loan processor's own employer consents to the arrangement in writing
• C. Yes, provided the payment is disclosed in writing to the buyers involved
• D. No, because compensation for acts requiring a real estate license may not be paid to an unlicensed person

70. A salesperson negotiates a difficult sale to a successful close, and the delighted seller wants to hand the salesperson a personal bonus check at the closing table in addition to the commission already agreed with the brokerage. What is the correct handling of that bonus?

• A. The salesperson may accept it directly because a voluntary bonus is a gift rather than a commission
• B. The salesperson may accept it directly so long as the employing broker is notified afterward
• C. The bonus must be paid to the employing broker and then passed through to the salesperson
• D. The salesperson may accept it only if the buyer receives an equivalent credit at closing

71. An unlicensed administrative assistant staffs a brokerage office while the agents are showing property. A caller asks about one of the firm's listings. Which task may the assistant lawfully perform?

• A. Advising the caller which of two similar listings represents the better value
• B. Reading the caller the asking price and terms exactly as they appear in the published listing
• C. Discussing with a prospective seller whether the firm would reduce its commission
• D. Hosting an open house alone and answering buyers' questions about the property's condition

72. While a broker is away on an extended leave, one of the salespersons licensed under that broker defrauds a client in a transaction the broker never reviewed. The brokerage has a written policy manual requiring honest dealing with all clients. What is the broker's exposure?

• A. None, because a salesperson who commits fraud is acting outside the scope of the employment
• B. The broker remains responsible for supervising licensed activity and may be disciplined for failing to do so
• C. None, because a written policy manual discharges the broker's supervisory obligation
• D. The broker's liability is capped at the portion of the commission the brokerage actually received

73. A salesperson decides to purchase one of her own listings for herself, intending to renovate the property and resell it at a profit. Which disclosure does California law most directly require of her in that purchase?

• A. Written notice to the Department of Real Estate within thirty days after the purchase closes
• B. Written disclosure to the seller of her licensee status and of her interest as a principal in the purchase
• C. Written disclosure to the seller of the resale profit she expects to realize after renovation
• D. Nothing beyond the agency relationship disclosure form already delivered at the time of listing

74. A listing agent tells prospective buyers that the property has the finest sunset views anywhere on the street and, in the same conversation, that the roof was completely replaced three years ago. In fact only a section of the roof was patched. Which analysis is correct?

• A. Both statements are actionable misrepresentations because both helped induce the purchase
• B. Neither statement is actionable, because sales talk about a listed property is privileged
• C. The views remark is puffing, while the roof statement is an actionable misrepresentation of fact
• D. The roof statement is protected opinion because the agent never personally climbed onto the roof

75. A broker sits down with an owner of a triplex to sign a listing agreement for the building. At what point must the broker deliver the statutory form describing the available agency relationships and their respective duties?

• A. At the time the first written offer is presented to the owner for consideration
• B. In escrow, together with the other disclosures required to be signed before closing
• C. Before the owner enters into the listing agreement
• D. At the first open house, so that prospective buyers receive it at the same time

76. A prospective buyer attends several showings with a licensee who is the seller's agent. Over three weeks the licensee analyzes the buyer's finances, recommends what to offer, and advises the buyer on negotiating strategy against the seller. No written agreement is ever signed with the buyer. What relationship has most likely arisen?

• A. No relationship with the buyer, because a compensation agreement with the seller is already in place
• B. No relationship with the buyer, because agency requires a signed written agreement
• C. A subagency of the seller, in which the buyer is treated as the seller's own principal
• D. An ostensible agency with the buyer, created by the licensee's conduct

77. A listing agent holds an accepted offer on a home, with escrow open and contingencies still outstanding. A second buyer's agent submits a cleaner backup offer at a higher price. The seller has given no written instruction about additional offers. What must the listing agent do?

• A. Hold the new offer until the first buyer's contingencies are either removed or expire
• B. Reject the new offer, because the property is already under contract to another buyer
• C. Present the new offer to the seller promptly
• D. Forward the new offer to the first buyer's agent so the parties can negotiate directly

78. A seller tells the listing agent to say nothing to buyers about the chronic sewer line backups the seller has paid to clear four times in two years, insisting that the agent works for the seller and must follow the seller's directions. How should the agent proceed?

• A. Refuse to conceal the condition and, if the seller persists, withdraw from the listing
• B. Disclose the condition only to buyers who specifically ask about the plumbing
• C. Follow the instruction but require the seller to sign a written indemnity in the agent's favor
• D. Follow the instruction, since obedience to the principal is a core fiduciary duty

79. A licensee is acting as a dual agent with the informed written consent of both the buyer and the seller. During negotiations the seller privately admits he would take fifteen thousand dollars less than the listed price to close quickly, and the buyer privately admits she would pay full price if pressed. What may the dual agent reveal?

• A. Both admissions, because informed written consent to dual agency waives confidentiality on price
• B. Neither admission, absent separate express written permission from the party who made it
• C. Only the seller's admission, because the seller's willingness to reduce is a material fact about the listing
• D. Only the buyer's admission, because the seller is the party who signed the listing agreement

80. An unrepresented buyer walks into an open house and begins working directly with the seller's agent. The buyer asks whether the agent will look out for her interests in the negotiation. What does the agent owe this buyer?

• A. A duty of undivided loyalty to the buyer, since no other licensee is representing her
• B. The same fiduciary duties owed to the seller, because both parties are now in the same transaction
• C. Honesty, fair dealing, and disclosure of known material defects, but not the fiduciary duties owed to the seller
• D. Nothing beyond the accuracy of the written disclosures the seller has already provided

81. An owner signs a listing employing a broker to locate a ready, willing, and able buyer for one specific parcel, with no authority to sign anything on the owner's behalf. In agency terms, the broker occupies which position?

• A. A special agent, with authority limited to a single transaction
• B. A universal agent, because the broker may deal with any member of the public
• C. A general agent, because the employment continues for the whole listing term
• D. An attorney-in-fact, because the broker markets the owner's property to third parties

82. Three months into a six-month listing, and with no offer yet in hand, the property owner dies. The owner's adult children want the broker to keep marketing the home while the estate is opened. What is the status of the listing agreement?

• A. It continues for the remaining three months and binds the heirs to its terms
• B. It is suspended and automatically resumes when an executor is appointed
• C. It continues, because a listing runs with the land rather than with the owner
• D. It terminates, because the death of the principal ends the agency

83. An owner signs a listing with a brokerage and, midway through the term, finds a buyer entirely on her own through a neighbor, with no involvement by the brokerage whatsoever. She closes the sale and refuses to pay any commission, and the brokerage sues successfully. Which listing form did she most likely sign?

• A. An open listing given to several brokerages at once
• B. A net listing under which the broker keeps any amount above a stated price
• C. An exclusive agency listing
• D. An exclusive right to sell listing

84. A broker drafts an exclusive listing that states it will remain in force until the owner gives the broker written notice of cancellation, with no ending date specified. The property sells during the term and the owner disputes the commission. What is the broker's exposure?

• A. None, because the parties are free to set whatever term they mutually agree upon
• B. Claiming compensation under an exclusive listing that lacks a definite termination date is grounds for discipline
• C. None, because the cancellation provision gives the owner an adequate means of ending the listing
• D. The listing is valid but the commission is capped at the local customary rate

85. A listing expires without a sale. Nineteen days later the owner sells the property directly to a couple the former listing agent had shown the home twice and had identified to the owner in writing before expiration. The listing contained a clause covering sales within ninety days after expiration to registered prospects. What is the result?

• A. A commission is owed only if the owner failed to relist the property with another brokerage
• B. No commission is owed, because the owner rather than the broker negotiated the final sale
• C. A commission is owed under the safety clause, because the buyers were registered before expiration
• D. No commission is owed, because an expired listing creates no further obligation of any kind

86. In a transaction the seller pays the entire brokerage compensation, including the amount received by the brokerage that worked with the buyer throughout. The seller argues at closing that because he wrote the check, the buyer's brokerage actually represented him. How does California law treat that argument?

• A. The arrangement automatically creates a dual agency requiring both parties' written consent
• B. The seller is correct, because an agent's loyalty follows the source of compensation
• C. The seller is correct, but only if the compensation was offered through a cooperating arrangement
• D. The payment of compensation does not by itself determine which party a licensee represents

87. An owner and a broker agree that the owner will receive four hundred thousand dollars from the sale and the broker may keep everything above that figure as compensation. The property ultimately sells for four hundred sixty thousand dollars. What is required of the broker?

• A. Refund of any amount exceeding the customary commission rate in the area
• B. Nothing, because this arrangement is void in California and no compensation is payable
• C. Nothing, because the owner received exactly the amount bargained for
• D. Disclosure of the amount of the broker's compensation before the owner is bound to the sale

88. An appraiser is valuing a home that has no swimming pool. The single best comparable sold last month for 620,000 dollars and is identical to the subject in every respect except that it has an in-ground pool, which the local market data indicate contributes 25,000 dollars. What is the indicated value of the subject from this comparable?

• A. 620,000 dollars
• B. 570,000 dollars
• C. 645,000 dollars
• D. 595,000 dollars

89. An investor is evaluating a small apartment building that produces net operating income of 84,000 dollars per year. Comparable apartment sales in the same submarket indicate an overall capitalization rate of 7 percent. Using the income approach, what value does this indicate?

• A. 1,200,000 dollars
• B. 588,000 dollars
• C. 840,000 dollars
• D. 1,050,000 dollars

90. An appraiser is asked to value a forty-year-old church building on a large parcel. There have been no sales of comparable churches in the county for many years, and the property generates no rental income. Which approach to value should carry the greatest weight?

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

91. A well-maintained house loses a substantial share of its value after a regional transit authority builds an elevated rail line along the street behind it. Nothing about the house itself has changed. How is this loss in value classified, and can the owner cure it?

• A. Functional obsolescence, curable by reorienting the floor plan away from the rail line
• B. Functional obsolescence, incurable because the noise cannot be designed out of the structure
• C. Physical deterioration, curable by upgrading the windows and exterior wall insulation
• D. External obsolescence, which lies beyond the owner's control and is therefore incurable

92. A large 1950s home has four bedrooms served by a single bathroom, and the only access to the fourth bedroom is through the third. The structure is sound and has been carefully maintained. An appraiser notes a significant value penalty relative to competing homes. What is the source of that penalty?

• A. External obsolescence arising from the age of the surrounding neighborhood
• B. Functional obsolescence arising from an outdated layout
• C. Physical deterioration attributable to the age of the improvements
• D. Regression caused by the influence of adjoining lower-value properties

93. An owner spends heavily to expand a modest tract house into the largest and most luxurious residence on a block of otherwise similar smaller homes. When the home is appraised, it does not command anything close to the value it would carry in a neighborhood of comparable custom homes. Which valuation principle explains this outcome?

• A. Anticipation
• B. Contribution
• C. Progression
• D. Regression

94. A vacant corner parcel is currently zoned for and used as a small parking lot. An appraiser concludes that a three-story mixed-use building would be legally permissible under the zoning, physically possible on the site, financially feasible, and the most productive use. How should the parcel be valued?

• A. At its value in the existing parking lot use, since that is the actual present use
• B. At the average of its value in the current use and in the proposed use
• C. At its value in the mixed-use development, as its highest and best use
• D. At its value only after a building permit for the proposed structure is issued

95. A rental house in a neighborhood collects 2,500 dollars per month in rent. Sales of similar rental houses in the same neighborhood indicate a gross rent multiplier of 160 based on monthly rent. What value does the multiplier indicate for this property?

• A. 4,800,000 dollars
• B. 400,000 dollars
• C. 30,000 dollars
• D. 360,000 dollars

96. A buyer is choosing between two nearly identical homes on the same street, equally desirable in every respect the buyer cares about, one priced at 725,000 dollars and the other at 690,000 dollars. Economic reasoning says the buyer will not pay more than 690,000 dollars for either. Which appraisal principle is at work?

• A. Supply and demand
• B. Substitution
• C. Conformity
• D. Balance

97. An eight-unit building has a gross scheduled income of 120,000 dollars per year. The owner projects vacancy and collection losses of 5 percent, operating expenses of 38,000 dollars, annual mortgage debt service of 30,000 dollars, and an annual depreciation deduction of 18,000 dollars. What is the net operating income?

• A. 76,000 dollars
• B. 46,000 dollars
• C. 82,000 dollars
• D. 28,000 dollars

98. A developer quietly acquires four adjoining narrow lots from four separate owners. Individually each lot is too small to support the project, but combined they will support a mid-rise building, and the assembled site is worth substantially more than the sum of the four purchase prices. What term describes the increment of value created?

• A. Plottage
• B. Severance
• C. Accretion
• D. Subrogation

99. A homeowner spends 80,000 dollars installing a temperature-controlled wine cellar. When the home is later listed, the appraiser's analysis of buyer behavior in that market shows purchasers will pay only about 20,000 dollars more for a home that has one. The seller insists the home must be worth 80,000 dollars more. How should the licensee explain the discrepancy?

• A. The difference is functional obsolescence and will disappear if the home is marketed to luxury buyers
• B. Market value reflects what buyers will most probably pay, and cost does not necessarily equal value
• C. The appraiser must use the owner's documented expenditure, since actual cost is the most reliable evidence of value
• D. The full expenditure will be recognized once the improvement has been in place long enough to be considered permanent

100. A city rezones a corridor from general commercial to low-density residential. An investor who bought a parcel there for a retail project finds it is now worth far less, though it can still be developed with houses. He demands that the city pay him the difference. What is the likely outcome?

• A. The city must compensate him, because the rezoning took a property right without payment
• B. No compensation is owed, because zoning changes are never subject to constitutional challenge
• C. No compensation is owed, because the rezoning is an exercise of the police power and a viable use remains
• D. The city must compensate him for the difference between the two zoning classifications

101. A neighborhood grocery has operated lawfully at a corner since 1961. In 1998 the city rezoned the surrounding blocks exclusively residential, and the store continued in business without interruption. The current owner now wants to double the store's floor area. What is his position?

• A. The store may expand freely, because a use lawfully established before a rezoning is exempt from the new zoning
• B. The store may expand only if the surrounding owners consent in a recorded agreement
• C. The store may continue as a legal nonconforming use, but expanding it will generally not be permitted
• D. The store must close, because the rezoning extinguished the right to operate a commercial use there

102. A congregation wants to build a small church on a parcel in a single-family residential zone. The zoning ordinance lists places of worship as a use that may be allowed in that zone subject to review of parking, traffic, and hours. What approval should the congregation seek?

• A. A nonconforming use permit issued by the building department
• B. A variance, because a church is not a single-family residence
• C. A conditional use permit
• D. A rezoning of the parcel to a commercial or institutional classification

103. A developer has recorded a final map creating twenty-two residential parcels and is ready to take reservations from interested buyers. Under California's law governing the marketing of subdivided lands, what must occur before the developer may sell or lease the parcels?

• A. A public report must be issued and furnished to each prospective purchaser
• B. The county assessor must issue separate parcel numbers for each lot
• C. A certificate of occupancy must be issued for at least one completed model home
• D. A title insurance policy must be prepaid on behalf of every prospective purchaser

104. A married couple acquired a rental duplex during their marriage using earnings from the husband's employment, and title was taken in the husband's name alone. Without telling his wife, he signs a grant deed conveying the duplex to an investor. What is the wife's position under California law?

• A. The conveyance is valid, because the husband alone held record title to the property
• B. The conveyance is valid, because property purchased with one spouse's earnings is that spouse's separate property
• C. The wife's only remedy is a claim for one half of the sale proceeds when the marriage is dissolved
• D. Both spouses must join in a conveyance of community real property, so the deed is subject to being set aside

105. A neighbor has openly fenced, landscaped, and used a fifteen-foot strip of the adjoining owner's lot continuously and without permission for the past nine years. The record owner has paid every property tax bill covering the whole lot throughout that period. Can the neighbor establish title to the strip by adverse possession in California?

• A. No, because adverse possession cannot be claimed against a neighboring residential owner
• B. Yes, because the record owner never objected during the nine-year period
• C. Yes, because open and hostile possession for more than five years is sufficient
• D. No, because the claimant must also have paid the taxes levied on the claimed land

106. A dispute arises at closing over an antique chandelier the seller bolted into the dining room ceiling, replacing a builder-grade fixture she had removed and stored in the garage. The purchase agreement says nothing about either item. Which consideration weighs most heavily in deciding whether the chandelier passes to the buyer?

• A. The relative dollar value of the chandelier compared with the fixture it replaced
• B. Whether the seller paid for the chandelier from separate rather than joint funds
• C. Whether the item can be removed without leaving any mark on the ceiling
• D. The intention of the party who annexed the item, judged from the surrounding circumstances

107. A California homeowner has owned the same house since 1994, and the assessed value on her tax bill has risen only modestly each year even though nearby homes have quadrupled in market price. She sells to a buyer who is startled by the tax bill that follows. What accounts for the change?

• A. The county reassesses every parcel to full market value every five years on a rotating schedule
• B. A change in ownership triggers reassessment to current market value, resetting the base year value
• C. Assessed value tracks the sale price of the most recent comparable sale on the block
• D. The buyer lost the seller's exemption, which had been suppressing the assessment

108. A buyer under a signed purchase agreement transfers all of her rights in the contract to her business partner, who takes over the transaction and closes on the property. The seller was notified but signed nothing releasing the original buyer. If the deal had failed, what would the original buyer's exposure have been?

• A. She would remain secondarily liable, because an assignment does not release the assignor
• B. She would remain fully liable and the partner would have no obligation at all to the seller
• C. None, because the seller's knowledge of the transfer operated as consent to substitute the partner
• D. None, because transferring the contract extinguished her obligations under it

109. A tenant pays a landowner five thousand dollars for the exclusive right to purchase a warehouse at a stated price at any time during the next twelve months. Six months later the landowner receives a better offer and wants to sell to someone else. Which analysis is correct?

• A. The landowner may sell to anyone, because the tenant never promised to buy the warehouse
• B. The arrangement is unenforceable because it lacks mutuality of obligation between the parties
• C. The arrangement is enforceable only if the tenant has already given notice of intent to exercise
• D. The landowner is bound for the full term, because an option binds the optionor while leaving the optionee free

110. A printed purchase agreement for a single-family home the buyer intends to occupy as her residence contains a clause allowing the seller to retain the buyer's deposit as liquidated damages if the buyer defaults. The deposit equals two percent of the purchase price. Which statement about enforceability is correct in California?

• A. The clause is valid only if the seller can show actual losses at least equal to the deposit
• B. The clause is presumed valid because the amount does not exceed three percent of the purchase price, provided both parties separately signed or initialed it
• C. The clause is unenforceable in residential transactions because damages must always be proved at trial
• D. The clause is valid without any separate signature, because the parties signed the agreement as a whole

111. The inspection period in a residential purchase agreement expires on Tuesday, and the buyer has neither delivered a written contingency removal nor asked for an extension. On Wednesday the seller wants to cancel and accept a stronger backup offer. What must the seller do first?

• A. Obtain a written release signed by the backup buyer before terminating the first contract
• B. Deliver a written notice to the buyer to perform and allow the contractual time to run before cancelling
• C. Refund the buyer's deposit, which cancels the agreement as a matter of law
• D. Nothing further, because the contingency expired automatically and cancelled the contract

112. During negotiations a seller told the buyer that the refrigerator, washer, and dryer would stay with the house. The signed purchase agreement lists no personal property and states that it contains the entire agreement of the parties. At closing the appliances are gone. What is the buyer's difficulty in enforcing the promise?

• A. Appliance promises must be recorded separately in the county records to be enforceable
• B. The Statute of Frauds voids the whole purchase agreement when personal property is discussed
• C. The promise concerned personal property, which can never be transferred with real estate
• D. The parol evidence rule bars using prior oral statements to add terms to an integrated written contract

113. A purchase agreement for a residence has been signed by both parties, all contingencies have been removed, and escrow is scheduled to close in three weeks. Before the deed is delivered, a wildfire destroys the improvements. In analyzing who bears the risk, what interest did the buyer hold at the moment of the fire?

• A. Equitable title, with legal title remaining in the seller until the deed is delivered
• B. Legal title, which passed automatically when both parties signed the agreement
• C. A leasehold interest, since the buyer had a contractual right to take possession at closing
• D. No interest whatsoever, since the buyer holds nothing until the deed is recorded

114. A buyer with weak credit agrees to take possession of a rural home and pay the owner monthly installments for eight years, with the owner to convey the deed only after the final payment. Which statement describes the parties' interests during the installment period?

• A. The seller retains legal title while the buyer holds equitable title and possession
• B. The seller holds both legal and equitable title, and the buyer is merely a tenant
• C. Neither party holds title until an escrow is opened to complete the transfer
• D. The buyer holds legal title and the seller holds a lien securing the unpaid balance

115. Two parties have signed a purchase agreement for a home. The buyer has deposited funds into escrow, the loan is approved, and closing is set for the end of the month, but no deed has been delivered and the balance of the price has not been paid. How is this contract classified at this moment?

• A. Executed, because both parties have already signed the document
• B. Unenforceable, because performance remains outstanding on both sides
• C. Executory, because material obligations remain to be performed
• D. Void, because neither party has completed performance

116. A California borrower finances a home purchase using a deed of trust. Fifteen years later she makes the final payment and asks what document should now be recorded, and who signs it. What should she be told?

• A. The lender records a satisfaction of mortgage, signed by the borrower and the lender jointly
• B. The borrower records a quitclaim deed running from the lender back to herself
• C. The county recorder cancels the instrument automatically once the final payment posts
• D. The trustee records a deed of reconveyance at the request of the beneficiary

117. A lender forecloses on an investment property under the power of sale contained in the deed of trust. The trustee's sale brings in ninety thousand dollars less than the outstanding balance, and the lender now wants a judgment against the borrower for the shortfall. What is the result?

• A. The lender may obtain the judgment, since the borrower remains personally liable on the promissory note
• B. The lender may obtain the judgment only if the borrower failed to redeem within the statutory period
• C. No deficiency judgment is available, because the lender chose the trustee's sale route
• D. The shortfall automatically becomes a lien against any other real property the borrower owns

118. A seller carries back a note secured by a second deed of trust on the home she sells to a young family, who occupy it as their residence. Three years later the family defaults, the property has lost value, and the sale proceeds leave the carryback note largely unpaid. What may the seller recover from the buyers personally?

• A. Nothing, because purchase money financing on an owner-occupied dwelling carries no deficiency liability
• B. The unpaid balance, but only after the first lienholder has been paid in full from other assets
• C. The unpaid balance reduced by the fair market value of the property at the time of default
• D. The full unpaid balance, because a seller carryback is a private loan outside the foreclosure statutes

119. A buyer purchases a rental duplex and takes title subject to the existing loan, making the payments without notifying the lender or applying to assume the debt. The loan documents contain a clause allowing the lender to declare the balance due upon transfer of the property. What is the lender entitled to do?

• A. Sue the original borrower for fraud, since transferring the property breached the note
• B. Substitute the new owner as the obligor and raise the rate to current market
• C. Call the entire unpaid balance due under the alienation clause
• D. Nothing, because the payments are current and the lender has suffered no loss

120. A married couple in California takes title to their new home as 'community property with right of survivorship.' Upon the death of one spouse, what happens to the surviving spouse's interest in the property?

• A. The property must pass through probate before the surviving spouse can claim any interest, regardless of the survivorship language.
• B. The deceased spouse's half automatically transfers to that spouse's children, bypassing the surviving spouse entirely.
• C. The surviving spouse automatically owns the entire property outright, and the deceased spouse's interest passes without going through probate.
• D. The surviving spouse and the deceased spouse's estate become tenants in common, each holding an undivided one-half interest.

121. A buyer purchases a condominium unit in a mid-rise building. In addition to owning the interior airspace of her unit, what interest does she typically acquire?

• A. A leasehold interest in the common areas that expires and must be renewed periodically by the homeowners' association.
• B. An undivided tenancy-in-common interest, shared with the other unit owners, in the building's common areas such as hallways, elevators, and grounds.
• C. Sole ownership of the building's exterior walls, roof, and structural frame, to the exclusion of all other unit owners.
• D. No interest whatsoever in any area of the building or grounds outside the boundaries of her own unit.

122. A buyer purchases housing in a building organized as a housing cooperative rather than a condominium. What does the buyer actually acquire?

• A. Shares of stock in the corporation that owns the entire building, together with a proprietary lease giving her the right to occupy a specific unit.
• B. A life estate in the unit that will revert to the corporation upon the buyer's death.
• C. A recorded fee simple deed to the specific apartment unit she occupies, identical in form to a condominium purchase.
• D. An undivided tenancy-in-common interest directly in the real property comprising the building and land.

123. A parcel of farmland borders a year-round natural stream that flows through the property. Under the common-law doctrine most associated with landowners bordering a watercourse, what right does the owner hold?

• A. A right, shared with other landowners bordering the same watercourse, to make reasonable use of the water as it passes through or borders the property.
• B. The right to dam the stream permanently and divert its entire flow to a neighboring parcel the owner also owns.
• C. No right to use the water at all unless the owner obtains a government permit specific to that use.
• D. Exclusive ownership of the entire streambed and all water flowing through it, to the exclusion of downstream landowners.

124. A landowner sells the surface rights to a parcel to a farmer but separately conveys the subsurface mineral rights to a mining company by a distinct recorded deed. After both conveyances, who holds the right to extract minerals from beneath the land?

• A. The mining company, because mineral rights can be severed from the surface estate and owned separately from the surface.
• B. The farmer, because ownership of the surface estate automatically includes all rights below the ground regardless of any separate conveyance.
• C. The original landowner, because severed mineral rights automatically revert to the grantor after a period of years.
• D. Neither party, because mineral rights cannot legally be separated from surface ownership under real property law.

125. A tenant rents an apartment on a month-to-month basis, paying rent on the first of each month with no fixed end date in the rental agreement. Which type of leasehold estate does the tenant hold?

• A. A tenancy at sufferance, because the tenant remains in possession without the landlord's ongoing consent.
• B. An estate for years, because the tenancy has a rent-payment cycle that repeats at fixed intervals.
• C. A tenancy at will, because the arrangement could be ended by either party at any moment without any notice whatsoever.
• D. A periodic tenancy, which continues for successive equal periods until either party gives proper notice to terminate.

126. A tenant leases retail space and installs custom display shelving and a walk-in cooler for her business. The lease is silent on the subject. When the lease ends, what is the tenant's right regarding these items?

• A. The tenant forfeits all rights to the items the moment they are physically attached to the leased space, regardless of their business purpose.
• B. The tenant may remove trade fixtures installed for her business before the lease ends, provided she repairs any resulting damage to the premises.
• C. The landlord may remove and sell the items but must share the proceeds equally with the tenant.
• D. The items automatically become the tenant's personal property to keep, but she must leave them installed and forfeit removal rights.

127. A California homeowner falls behind on an unsecured credit card debt, and the creditor obtains a money judgment against her. She occupies the home as her primary residence. What protection may shield some of her equity in the home from that judgment creditor?

• A. A life estate, which the homeowner can create for herself to place the property beyond the reach of any creditor.
• B. A recorded easement, which prevents any creditor from reaching equity in the homeowner's residence.
• C. A deed of trust, which automatically shields the homeowner's equity from unsecured judgment creditors.
• D. A homestead exemption, which protects a portion of the equity in an owner's principal residence from certain unsecured judgment creditors.

128. A landlord advertising a rental unit tells an applicant, 'I don't accept Section 8 housing vouchers,' and rejects her application solely for that reason, even though she otherwise qualifies. Under California's fair housing law, is this refusal permissible?

• A. No, because California law prohibits discrimination based on a tenant's source of income, which includes housing assistance vouchers.
• B. No, but only because the applicant belongs to a federally protected class unrelated to her voucher use.
• C. Yes, because landlords may always refuse any form of government-subsidized payment without restriction.
• D. Yes, because source of income is not a protected category under any fair housing law applicable in California.

129. A broker is found to have committed fraud against a client in a real estate transaction, and the client obtains a civil judgment against the broker but is unable to collect because the broker has no collectible assets. Which state-administered resource may allow the client to recover some of the loss?

• A. The brokerage's general operating account, which state law requires brokers to keep funded at all times for this purpose.
• B. The multiple listing service, which maintains an escrow reserve to cover fraud judgments against member brokers.
• C. California's Real Estate Recovery Fund, which may reimburse an injured party who cannot collect a judgment against a licensee for certain licensed conduct.
• D. The buyer's own title insurance policy, which covers losses caused by a broker's fraudulent conduct.

130. A residential tenant vacates a rental unit and the landlord withholds a portion of the security deposit for cleaning and repairs. What does California law require the landlord to provide to the tenant regarding the withheld amount?

• A. An itemized written statement explaining the reasons for any amount withheld from the security deposit, provided within the statutorily required time after move-out.
• B. A brand-new deposit invoice increasing the amount owed by the tenant for future disputes.
• C. A verbal explanation only, since California law does not require any written documentation of deposit deductions.
• D. Nothing, because landlords have unlimited discretion to withhold any portion of a deposit without explanation.

131. A purchase agreement contains a clause stating that 'time is of the essence' with respect to the closing date specified in the contract. What is the legal effect of this clause?

• A. It gives both parties an automatic thirty-day grace period beyond the stated closing date before any default can occur.
• B. It obligates the parties to close early, before the date stated in the contract, without further negotiation.
• C. It makes strict, timely performance of the stated date a material term, so that a party's failure to perform on time can constitute a breach.
• D. It has no enforceable effect and is treated as boilerplate language that courts routinely disregard.

132. Both the buyer and seller sign a purchase agreement believing the parcel includes a detached garage, when in fact the garage sits entirely on the neighboring lot and was never part of the property being sold. Neither party discovered this until after signing. What remedy does this situation most likely support?

• A. No remedy at all, since courts never rescind a signed and validly executed purchase agreement for any reason.
• B. Automatic reformation of the neighboring owner's deed to include the garage within the sold parcel.
• C. Criminal prosecution of the seller for fraud, since the seller must have known about the boundary discrepancy.
• D. Rescission of the contract based on mutual mistake, since both parties were wrong about a basic fact central to their agreement.

133. A written contract for the sale of real property is later modified orally by the buyer and seller to change the purchase price. If a dispute arises, what is the legal status of that oral modification?

• A. It is enforceable only if one of the parties is a licensed real estate broker.
• B. It automatically voids the entire original written contract, leaving neither party with any obligations.
• C. It is fully enforceable exactly like a written modification, because oral agreements between sophisticated parties are always binding.
• D. It is generally unenforceable, because a modification to a material term of a real estate contract must satisfy the same statute of frauds requirement as the original written contract.

134. A buyer under a signed purchase agreement wants out of the deal. With the seller's full agreement, a new buyer steps in, signs a fresh agreement with the seller on the same terms, and the seller releases the original buyer from all further obligation under the contract. What has occurred?

• A. A breach of contract, because the original buyer failed to complete the purchase as originally promised.
• B. An assignment, because the original buyer's rights were simply transferred without the seller's involvement.
• C. A novation, because a new agreement between the seller and the new buyer replaced and discharged the original buyer's obligations with the seller's consent.
• D. A unilateral contract, because only one party performed an act in exchange for a promise.

135. A seller signs an open listing with several brokers, agreeing to pay a commission to whichever broker first procures a ready, willing, and able buyer. No broker is obligated to do anything. Which type of contract does this open listing best illustrate?

• A. A unilateral contract, because the seller promises to pay only upon a broker's actual performance, and no broker promises anything in return.
• B. A voidable contract, because either party may cancel it at will for any reason without consequence.
• C. A bilateral contract, because both the seller and every broker are equally bound to perform specific acts.
• D. An executed contract, because performance is already complete the moment the listing is signed.

136. A borrower obtains an adjustable-rate mortgage in which the interest rate is tied to a published financial index plus a fixed percentage the lender adds. What is that fixed added percentage called?

• A. The impound amount, which the lender collects monthly to cover taxes and insurance.
• B. The origination fee, which compensates the lender for processing the loan application.
• C. The discount point, which is a one-time fee paid at closing to reduce the initial interest rate.
• D. The margin, which is added to the index value to determine the borrower's actual interest rate at each adjustment.

137. A lender requires a borrower to pay one-twelfth of the estimated annual property tax and insurance bill along with each monthly mortgage payment, and the lender holds these funds until the bills come due. What is this arrangement called?

• A. A wraparound arrangement, in which the lender's loan wraps around an existing senior loan on the property.
• B. An impound account, which the lender uses to accumulate funds to pay property taxes and insurance on the borrower's behalf.
• C. A discount point arrangement, reducing the borrower's note rate in exchange for the extra monthly payment.
• D. A subordination arrangement, which adjusts the lien priority of the borrower's mortgage relative to other liens.

138. A borrower's loan requires fixed monthly payments for five years, after which the entire remaining principal balance becomes due in a single lump sum far larger than any regular payment. What best describes this loan structure?

• A. A fully amortized loan, since the monthly payments are set at a fixed amount throughout the loan term.
• B. A straight note, since none of the monthly payments include any principal reduction whatsoever.
• C. A partially amortized loan with a balloon payment, since the regular payments do not fully retire the debt before a large final payment comes due.
• D. An adjustable-rate loan, since the size of the final payment differs from the earlier monthly payments.

139. A seller who still owes a balance on an existing low-rate first mortgage sells the property and carries back a new, larger loan that encompasses both the existing mortgage balance and the seller's additional equity, with the buyer making one payment to the seller who then continues paying the original lender. What financing arrangement does this describe?

• A. An assumption, in which the buyer takes over direct, sole responsibility for the seller's existing mortgage payments.
• B. A wraparound mortgage, in which a new junior loan encompasses the existing underlying loan, and the seller continues making payments on the original loan from the buyer's payments.
• C. A subordination agreement, changing the priority of the seller's existing mortgage relative to the new financing.
• D. A due-on-sale enforcement, in which the original lender demands immediate payoff upon transfer of title.

140. A loan officer is explaining the difference between an FHA-backed loan and a VA-backed loan to a borrower who is not a veteran. Which statement correctly distinguishes the government's role in each program?

• A. FHA insures lenders against loss on qualifying loans, while VA guarantees a portion of qualifying loans for eligible veterans; neither program itself directly lends the funds in most cases.
• B. FHA guarantees loans for eligible veterans, while VA insures loans for the general public regardless of military service.
• C. FHA and VA both directly originate and fund every loan made under their programs, acting as the lender in each transaction.
• D. Neither FHA nor VA has any involvement with residential mortgage loans; both agencies deal exclusively with commercial financing.

141. A seller conveys property using a grant deed rather than a quitclaim deed. Without any additional express language in the deed, what does California law imply the grantor is promising to the grantee?

• A. That the grantor will defend the title against any claim, from any source, arising at any point in history, exactly like full warranty coverage.
• B. That the grantor has not already conveyed the same property to someone else and that the property is free of undisclosed encumbrances made by the grantor.
• C. That the property is free of every possible defect in title, including those created by prior owners long before the grantor acquired it.
• D. Nothing at all, since a grant deed carries the exact same lack of warranties as a quitclaim deed.

142. A city needs a strip of a homeowner's backyard to widen an adjacent public road. The homeowner does not want to sell. Under what legal process can the city acquire the needed strip of land even without the owner's consent?

• A. Eminent domain, which allows the government to take private property for public use so long as it pays the owner just compensation.
• B. Adverse possession, since the city can simply occupy the strip openly for a period of years and thereby acquire title.
• C. A quitclaim proceeding, in which a court orders the homeowner to sign over the strip without any payment.
• D. A mechanic's lien foreclosure, since the city is effectively improving the property by widening the adjacent road.

143. A buyer tells her agent she wants to look at homes only in neighborhoods with 'families like ours.' The agent, without being asked, limits the buyer's showings to neighborhoods based on the racial composition the agent assumes the buyer prefers. What has the agent done?

• A. Nothing improper, because the buyer's own comment authorized the agent to limit showings by neighborhood demographics.
• B. Provided competent, client-focused service by tailoring showings to what the agent believed the buyer wanted.
• C. Violated only the agent's duty of loyalty to the seller, since steering only affects listing-side obligations.
• D. Engaged in unlawful steering, by limiting the buyer's housing choices based on the racial composition of neighborhoods rather than the buyer's objective criteria.

144. A listing agent regularly refers her sellers to a particular home-warranty company and receives an undisclosed payment from that company for each referral, without telling her sellers about the payment. What is the problem with this arrangement?

• A. There is no problem, because referral payments from vendors are always permitted regardless of disclosure.
• B. The problem exists only if the home-warranty company happens to be owned by a family member of the agent.
• C. There is no problem, because the payment comes from the vendor rather than directly from the seller's proceeds.
• D. The agent has failed her fiduciary duty of full disclosure by accepting undisclosed compensation connected to services provided to her principal.

145. A property owner orally promises a broker a commission if the broker finds a buyer, but the two never sign any written listing agreement. The broker finds a buyer and a sale closes, but the owner refuses to pay, citing the lack of a signed agreement. What is the likely outcome?

• A. The broker automatically obtains an ownership interest in the property equal to the value of the unpaid commission.
• B. The broker will likely be unable to enforce the oral promise, because agreements to pay a real estate commission are generally required to be in writing to be enforceable.
• C. The owner is criminally liable for failing to honor the oral promise once the sale has closed.
• D. The broker will easily collect the commission, because oral commission agreements are always enforceable in real estate transactions.

146. After a seller delivers a Transfer Disclosure Statement and the buyer accepts, but before escrow closes, the seller discovers a previously unknown slab leak that has caused hidden water damage. What is the seller's obligation regarding this newly discovered information?

• A. The seller must immediately cancel the transaction and relist the property with the new information included.
• B. The seller must provide an amended disclosure statement disclosing the newly discovered material fact before the transaction closes.
• C. The seller may wait until after closing to mention the issue, since the buyer already accepted the original disclosure statement.
• D. None, because once the original disclosure statement has been delivered and accepted, no further updates are ever required regardless of new discoveries.

147. A broker wants to charge property owners an upfront fee, collected before any services are rendered, specifically to cover the cost of advertising their listings in a marketing campaign the broker is designing. What must the broker do regarding the advertising materials and fee arrangement before using them?

• A. The broker must deposit all advance fees directly into the broker's personal checking account rather than a trust account.
• B. The broker must comply with the specific requirements governing advance fee arrangements, since fees collected before services are rendered are treated as advance fees subject to added regulation.
• C. Nothing at all, because advance fees are entirely unregulated so long as the broker eventually performs the advertised services.
• D. The broker must obtain a separate real estate license category before charging any fee described as an advance fee.

148. A seller instructs her listing agent to reject any offer from a buyer whose name 'sounds foreign' without even presenting those offers to her. The agent knows this instruction would require racial or ethnic discrimination. What is the agent's correct course of action?

• A. The agent may follow the instruction only if the agent personally disagrees with fair housing laws.
• B. The agent should follow the instruction but simply avoid documenting it in writing to protect the client from liability.
• C. The agent must follow the instruction exactly as given, because the duty of obedience to the principal is absolute and overrides all other legal considerations.
• D. The agent must refuse to follow this instruction, because an agent's duty of obedience extends only to lawful instructions, not those requiring illegal discrimination.

149. A seller who signed an exclusive listing agreement for a fixed term decides midway through to fire the broker and lists with someone else, even though the original agreement gives the broker no right to be terminated early. What is the legal effect of the seller's action?

• A. The termination automatically transfers the original broker's right to a commission to the new broker the seller hires.
• B. The termination is completely void and has no effect; the original broker remains the seller's only legal agent regardless of the seller's wishes.
• C. The seller has the power to terminate the agency relationship at any time, though doing so without cause may expose the seller to liability for breach of the listing contract.
• D. The termination is effective only if the original broker consents in writing to being released.

150. A property manager collects rent from tenants on behalf of the property owner and is expected to provide the owner with periodic records of funds received and disbursed. Which fiduciary duty does this obligation reflect?

• A. The duty of obedience, because the manager is simply following the owner's instructions about rent collection procedures.
• B. The duty of confidentiality, because rent records must be kept secret from anyone outside the owner's immediate family.
• C. The duty of loyalty, because collecting rent always creates an inherent conflict of interest with the property owner.
• D. The duty of accounting, which requires an agent to keep and provide accurate records of all funds and property received on the principal's behalf.

151. A listing agent's spouse becomes interested in purchasing the very property the agent has listed for sale. What must the agent do to properly handle this potential conflict of interest?

• A. Decline to allow the sale to proceed at all, since an agent's relative can never lawfully purchase a listed property.
• B. Quietly negotiate the best price possible for the spouse without informing the seller of the relationship.
• C. Nothing, because a spouse's purchase never creates any conflict of interest for a listing agent.
• D. Fully disclose the relationship to the seller in writing and obtain the seller's informed consent before the transaction proceeds.

152. An appraiser is asked to estimate the market value of a home. Which sale would best support that value estimate as a comparable, all else being equal?

• A. A foreclosure sale in which the lender sold the property quickly to recover as much of the loan balance as possible.
• B. A sale between family members at a price set far below what similar homes have sold for in the area.
• C. A sale forced by a court-ordered liquidation with a compressed marketing period of only a few days.
• D. A recent sale between a willing, informed buyer and a willing, informed seller, neither acting under undue pressure, with the property exposed to the market for a reasonable time.

153. An appraiser using the cost approach on a fifty-year-old home must estimate the cost to construct a substitute structure. She chooses to estimate the cost of building a new structure with equivalent utility using current materials and design, rather than duplicating the home's original materials and craftsmanship exactly. Which cost concept is she applying?

• A. Reproduction cost, because she is creating an exact duplicate of the original structure using the same materials and techniques.
• B. Accrued depreciation, because she is measuring the loss in value the structure has experienced since it was built.
• C. Effective age, because she is estimating how old the structure appears to function relative to its actual chronological age.
• D. Replacement cost, because she is estimating the cost of a substitute structure with equivalent utility using current construction methods and materials.

154. An investor is willing to pay a premium price for an apartment building today because she expects rents in the area to rise significantly over the next several years. Which appraisal principle best explains her willingness to pay more now based on expected future benefits?

• A. The principle of anticipation, which holds that value is created by the present worth of expected future benefits from owning the property.
• B. The principle of regression, which holds that the value of a superior property is dragged down by inferior properties nearby.
• C. The principle of conformity, which holds that value is maximized when a property is similar to others in its neighborhood.
• D. The principle of substitution, which holds that a buyer will not pay more for a property than the cost of an equally desirable substitute.