Real estate practice

A general home inspection reveals potential foundation issues. Buyer Mark asks his agent, Laura, for her advice on how to proceed. Which of the following is the BEST response for Laura to give her buyer client?

Laura should advise that the buyer seek the professional opinion of a foundation specialist.

When Julie and Steve hammer out all their differences and fully agree to the terms and conditions that will make up their agreement, what have they achieved?

Being legally competent means having the capacity to enter into a contract (i.e., not being a minor, not being intoxicated, etc.).

The Iron Hotel has an EGI of $619,400. Its annual operating expenses are:

• $10,500 for lawn care

• $87,345 for staff salaries

• $800 for minor repairs

What is the NOI of the Iron Hotel?

$619,400 - $98,645 = $520,755.

A contract that is essentially valid but is without legal remedy is said to be:

unenforceable

Which of these actions might result in a landlord not returning a full security deposit to the tenant?

The tenant damages a property beyond normal wear and tear

If a seller-client asks an agent not to disclose a material fact that they know about to potential buyers, what should the agent do?

remind the seller of their duty to disclose known material facts and disclose the material fact to potential buyers

Which of the following is the BEST definition of protection period?

a limited time frame after an agency agreement ends, during which an agent can be owed compensation in certain circumstances

Paris, a responsible broker, sold a home on June 20th, 2022. Under California law, Paris must maintain the transaction documents of the sale until:

June 20th, 2025

Tom and Becky are two Realtors in a dispute. Tom doesn't want to go into arbitration, but Becky does. What will happen?

The dispute will go into arbitration

Which of the following best describes the part of a listing agreement that describes a property in a way that is distinct and precise enough to distinguish it from all other properties?

legal description

Which type of value is used by tax districts to determine the amount of ad valorem taxes a property will owe?

assessed value

Under which of the following circumstances could an agent be liable for the actions of the principal or client?

The seller-client asks the agent not to disclose a property defect and the agent complies

Generally speaking, when a market's supply increases, you should expect the price to do what?

decrease

LaToye, who lives in Los Angeles, lists her home "as is." What does this mean in terms of property disclosures?

LaToye must still complete a transfer disclosure statement.

What enters a home through cracks in the foundation?

radon gas

How is a valuation different from an appraisal

A valuation does not need to be performed by a licensed appraiser

Which of the following is true regarding the obligation of licensees to disclose information concerning sex offenders to clients?

Licensees are not required by law to disclose or investigate the prescence of sx offenders to clients.

Aing Heights is an apartment complex. It has three different types of units that rent for three different prices:

• 12 studios, $1,100/month

• 14 one-bedrooms, $1,400/month

• 9 two-bedrooms, $1,900/month

What is the PGI of Aing Heights?

$598,800

The document that sellers use to disclose that the property is located in a flood hazard area, fire hazard area, or near an earthquake fault zone is the:

Natural Hazards Disclosure statement

Which of these would not be typically found in a listing agreement?

the desired neighborhood

Which of the following is the BEST definition of a net listing?

an agreement in which the seller names an amount they will accept for a property and the broker receives the excess

Michael, a California REALTOR®, has signed a listing agreement with Thomas, a seller. Michael knows that he will get compensation if the house sells, regardless of who brings the buyer.

What type of agreement can we say that Thomas has?

exclusive authorization and right-to sell listing agreement

Which of the following is NOT included in the California Association of REALTORS®' Real Estate Transfer Disclosure Statement form?

information about local school districts

Why is it not ideal to use current listings when doing a CMA?

The listing price may not reflect the eventual sale price.

What is erosion?

the gradual loss of land over time

Who are the parties to a sales contract?

the buyer and the seller

A buyer sends a formal offer to a seller: $250,000 and the appliances stay. The seller counters: $250,000, no appliances. The seller then reconsiders and accepts the first offer. Is the buyer obligated to buy the home? Why or why not?

No, because the first offer was terminated when the seller countered

Which of the following scenarios would be an example of conversion?

A broker paid their own mortgage payment using client funds

Which of these is a characteristic of asbestos that allows the mineral to crumble easily or become powdery when touched?

friable

In the context of understanding contracts, what is the significance of the word "valuable" in the phrase "valuable consideration"?

It implies that the consideration given is appropriate for what is being offered in exchange

If a buyer receives an emailed copy of the Real Estate Transfer Disclosure Statement after the contingency period has already ended, how many days do they have to cancel their purchase?

five days

You're the listing agent meeting with the seller of a home built in 1969. The seller asks if they will need to give a lead-based disclosure to buyers, considering the home's great condition. You should tell the seller that a lead-based paint disclosure:

is required for all residences built prior to 1978

A property is sold "as is." What does that mean?

The seller will not promise to make any repairs and the property will be sold in its present condition

Which lease requires tenants to pay rent and at least some portion of operating expenses?

net lease

A buyer is worried the home they're buying in cash isn't worth what they're paying. How can they be sure the home is worth what they think it is (or if not, be able to get out of the contract)?

include an appraisal contingency in the contract

Broker Raul is a member of the California Association of REALTORS®. His client is asking to sign a buyer representation agreement that would provide for Raul's compensation only if Raul introduces the purchased property to the buyer.

Can Raul make that happen with the Buyer Representation And Broker Compensation Agreement (BRBC)?

Yes, it is set up as a non-exclusive representation contract by default

Which of the following is considered a REQUIRED disclosure?

a defective sprinkler system

Who is the listing agent?

the broker who represents the seller

What gives a structure (like a house) its support and shape?

the frame

Which of these is an example of a patent defect?

a flooded basement

An agent is doing a CMA on a two-bed, two-bath home. They have a comp that has two bedrooms and one bath that sold for $125,000. In this area, bedrooms are worth $6,000, and bathrooms are worth $3,000. What is the adjusted value of this comp?

$125,000 + $3,000 = $128,000

An agent completed a CMA on a property her client was interested in making an offer on. What kind of value was the agent attempting to determine?

market value

What is the purpose of a listing agreement known as an option agreement?

It includes an option for the agent to be the buyer

After Anna signed a contract to buy Kayla's house, she changed her mind before closing. But Anna's friend Leanna wanted the house and was thrilled to have Anna's contractual rights transferred to her.

Can Anna do this?

Yes. If the contract does not prohibit it, Anna can transfer her contractual rights to Leanna by a process known as assignment

A small town receives the news that a major employer will be opening a regional manufacturing center there soon.

What housing market scenario describes the most likely effect?

Growth in population and the local economy will result in less supply and higher prices

A building has an EGI of $900,000 with operating expenses at $450,000. What is the NOI?

$900,000 - $450,000 = $450,000

When must a buyer-agency agreement be signed?

before a buyer tours a home with an agent

Which term refers to the permanence of land, stating real estate exists in a fixed location and cannot be moved?

fixity

Agent Lula is showing a property to a potential buyer, Elinor. Which of the following facts MUST Agent Lula disclose?

the private airport located one mile away from the property

What is the purpose of a listing presentation?

to persuade a prospective seller client to sign a representation agreement with you

A buyer must withhold 15% of the seller's gross price if the seller is a "foreign person" under which federal law?

FIRPTA

Guillermo is trying to sell his property, but a cloud on the title that he's been unable to resolve is making it really hard to sell. Which characteristic of real estate value is his property MOST clearly lacking?

Transferability

Manuel and Julia had a contract. Julia died. What happens with the contract?

Unless it was a personal services contract, her contractual obligations are not ended, and her estate assumes obligations

An agent is listing a property built in 1964. The agent is required by federal law to provide the buyer with a disclosure on which environmental hazard?

lead based paint

Buyer representation agreements are contracts made between:

a buyer and a broker

Josué just got a property tax bill from the city. What value did the city use to figure out what he owes?

assessed value

Which two rights refer to waterfront properties?

riparian and littoral

Which of these is a building's total possible gross income minus the vacancy costs?

effective gross income

What is the most likely result of a buyer defaulting on their contract?

The seller gets to keep their earnest money

Condoleezza loses a large portion of her property due to a sudden flood. Though she loses a portion of her land area, she does not lose title to her land. What term describes this sudden loss of land?

Avulsion

A sales contract states that if the appraisal of the house comes in below a certain amount, the buyer can terminate the contract without penalty. What is this provision about the appraisal called?

appraisal

The parties to a signed contract have decided that they want to change the closing date. The agent will need to prepare a(n):

amendment

A purchase and sale agreement includes the clause, "time is of the essence." This phrase:

communicates to parties of a contract that they perform their contractual duties by a specific and time in order to avoid breach of contract

A purchase and sale agreement includes the clause, "time is of the essence." This phrase:

communicates to parties of a contract that they must perform their contractual duties by a specific date and time in order to breach of contract

Seller Daniela is completing a Real Estate Transfer Disclosure Statement about her property. She can expect to answer questions about:

known environmental hazards, natural hazards, and zoning

Which of the below most directly affects the economic scarcity of real estate?

desire for land in a certain area

Which of these is the amount a buyer agrees to pay and the seller agrees to accept for a property?

Price

Which of the following is usually listed as the remedy of last resort in dispute resolution clauses contained in agency agreements?

legal action

Why shouldn't an agent use the income approach to value an owner-occupied residential property?

The income approach can only be used to value income-producing properties

Which of the following actions should an agent perform as part of their due diligence visual inspection of a property?

turn on faucets and check if they’re working

California REALTOR® Shane is the listing agent for a single-family home. He knows that he will earn compensation if he procures the buyer for the home, but he will not earn compensation if another broker OR the owner procures the buyer.

What type of listing agreement does Shane have?

open listing

In addition to stating that landlords must have "just cause" to terminate a tenancy, what major tenant protection does the California Tenant Protection Act of 2019 provide?

rent control

Ashley and Leslie have entered into a written contract agreement where they both have promises to fulfill. Based on this information, you can infer that they have entered into what kind of contract?

bilateral

Which of these is the actual amount paid in a typical transaction occurring under normal conditions?

market price

Dom's client requested that their house not be shown while they are on vacation for a week. While the client is away, a broker contacts Dom to view the house, but Dom tells them that unfortunately, he cannot show the house until his client has returned. Are Dom's actions ethical? Why or why not?

Yes. Dom is respecting his client’s request that the house not be shown during a certain time

A listing agent receives two written offers for the same property within a few hours of each other. Both offers propose a purchase price below the listed asking price, but they vary in financing and other terms.

The listing agent should:

present both offers to the seller and coach the seller on possible responses

An agent is required to disclose known information about:

the property’s proximity to a nearby military airport

Buyers tell their agent they only want to be shown homes that do not feature any stairs.

What type of home construction are they describing?

ranch

A contract entered into under duress or as result of fraud or misrepresentation is:

voidable

A building sold for $500,000 and has a net operating income of $25,000. What was the cap rate of the sale?

Hint: "Ask IRV."

$25,000 divided by $500,000 equals a 5% cap rate.

If the seller has already sent a counteroffer to a prospective buyer and then receives another offer that is even better:

they should withdraw the first counter before answering the new offer

Why is the protection period in a buyer representation agreement important?

This protects you in the event that you and your client part ways, and then they decide to put in an offer on a home you showed them.

Investor Ian is interested in purchasing an apartment building. The metric he cares most about is how much profit the property will produce after deducting its day-to-day expenses. Which metric should he heavily rely on?

Net operating income

The EPA requires that a lead-based paint disclosure be presented to buyers of all residential property built prior to:

1978

Why might a buyer deposit earnest money?

to show the seller that they are serious about an offer

When a party makes changes to an offer and then presents a new offer, it is called a(n):

counteroffer

Agency agreement contracts are governed by:

agency law and contract law

What kind of licensure is required to perform a CMA?

There is no license required to perform a CMA.

George makes an offer of $100,000 to Fran to purchase her home. Fran accepts George's offer. Fran is the:

offeree

Owner Olga enters into an exclusive authorization and right-to-sell listing with California REALTOR® Betty. Owner Olga ends up finding a buyer herself.

Which of the following statements are TRUE about this scenario?

Betty is eligible for full commission

A seller's agent got three offers for the property he's representing. One was noticeably better than the other two, so the agent only showed the best offer to his client. Did the agent handle this situation correctly? Why or why not?

No, the agent should have presented all of the offers to his client.

Which of the following is an example of an acceptable use of a trust account?

holding earnest money while a transaction is waiting on approval

After appraising their property for $510,000, Richard tells his clients that his appraisal fee is an additional $400 for any property appraised over $500,000. Is this ethical? Why or why not?

No, fees cannot change due to the value of appraisal

Which of the following is an example of a natural hazard that requires disclosure by the seller?

proximity to an earthquake fault-line

Which lease requires tenants to pay a basic rent and nothing else?

gross lease

Agent Osborn marketed an open listing property on his website for three weeks to see if he could generate any interest. When Osborn found out after the fact that a buyer had printed a hard copy of his website page, visited the home, and ultimately purchased the property directly from the seller, Osborn asked to be paid a commission.

Osborn based his request on what principle?

procuring cause

A listing agreement is between:

a seller and a broker

Agent Audrey can earn compensation on a listing unless the seller procures the buyer.

What kind of listing does Audrey probably have?

exclusive agency listing

Characteristics that make real estate valuable include:

demand, utility, scarcity, and transferability

The purpose of the California Department of Real Estate is to effectively and efficiently provide services around licensing, subdivision, and consumer needs and to:

regulate and monitor the real estate industry in order to protect the public’s interest