Real Estate Principles, Pilot Edition Quizzes6 Real Estate Principles, Pilot Edition 10. Any...

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Quizzes (Answer Keys Located on Page 20)

Real Estate Principles, Pilot Edition QuizzesInstructions: Quizzes are open book. All answers are multiple choice.

Answer key is located on page 20.

Quiz 1 — Chapters 1-4

Agency in real estate related transactions includes relationships between brokers and their:1. a. principals. b. agents.c. Both a. and b.d. A real estate broker is never an agent.

An open listing only imposes __________ standard of representation.2. a. a minimal effortsb. a best effortsc. a partial effortsd. There is no standard of representation in an open listing.

A broker’s agency can be created by either a written or __________ agreement.3. a. oral c. coercedb. hold-harmless d. None of the above.

The Agency Law Disclosure in one-to-four unit residential transactions must be attached 4. to:

a. purchase agreements. c. exchange arrangements.b. a seller’s listing agreement. d. All of the above.

Should an agent fail to deliver the Agency Law Disclosure on a targeted transaction, he 5. risks:

a. payment of a $1,000 fine. c. jail time.b. the loss of his fee. d. All of the above.

The seller’s signature is required on the Agency Law Disclosure to acknowledge the receipt 6. of a copy:

a. at the listing stage. c. Both a. and b. b. on presentation of a buyer’s offer. d. Neither a. nor b.

The agency relationship of brokers and their agents is required to be disclosed to all parties 7. in a sale, called a:

a. confirmation of agency. c. profit and loss statement. b. dual agency. d. balance sheet.

The __________ is an association of real estate licensees who agree to the pooling of list-8. ings and the sharing of fees.

a. multiple listing service (MLS) c. state barb. California Association of Realtors (CAR) d. Free Masons

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Real Estate Principles, Pilot Edition

A broker who fails to disclose his dual agency to a client at the moment it arises:9. a. has 90 days to disclose his dual agency.b. will lose his brokerage fee. c. incurs no liability for his client’s money losses.d. will not be subjected to Department of Real Estate (DRE) disciplinary action.

The seller’s broker has 10. __________ owed to all parties in the transaction, including the non-client buyer, to disclose material facts about the listed property to all parties.

a. a general nonfiduciary duty c. a general fiduciary dutyb. a specific fiduciary duty d. no duty


The California Legislature created the 1. __________ to oversee, regulate, administer and en-force the real estate law.

a. Department of Consumer Affairs b. Department of Motor Vehicles c. Department of Real Estate (DRE) d. Department of Agriculture

The chief officer of the Department of real estate (DRE) is the:2. a. Real Estate Commissioner. c. Governor of California.b. President of the United States d. Real Estate Solicitor.

To be eligible for a broker or agent license, the applicant must:3. a. provide proof of legal presence in the U.S.b. complete the mandatory education. c. pass the qualifying exam. d. All of the above.

All real estate brokers and sales agents must complete at least __________4. of continuing education (CE) every four years to renew a license issued by the Department of Real Estate (DRE).

a. 15-Hours c. 45-Hoursb. 30-Hours d. 50-Hours

A fictitious business name license, also known as a __________, will be granted to a broker 5. who has complied with the filing requirements.

a. MIA (missing in action) c. DOA (dead on arrival)b. DBA (doing business as) d. None of the above.

A __________ is the sale or lease of the operations and goodwill of an existing business 6. enterprise or opportunity.

a. business opportunity c. bulk saleb. business proposition d. short sale

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The transfer of more than one-half the inventory of a business’ materials or goods to a per-7. son other than the business’ customers is called a:

a. fire sale. c. strategic default.b. bulk sale. d. blockbuster.

Mobilehomes have a unique legal status, being:8. a. real estate. c. Either a. and b. b. personal property. d. Neither a. nor b.

The 9. __________ is available to individuals who have obtained a judgment against a licensee and are unable to recover the judgment from the licensee for losses caused while acting as an agent.

a. Real Estate Recovery Fund c. Homeowner Relief Fundb. Broker Recovery Fund d. Borrower Education Fund

Mortgage loan brokers who make, arrange or receive fees for the origination of loans con-10. trolled by __________ must become endorsed by the Department of Real Estate (DRE).

a. the Truth-in-Lending Act (TILA)b. the Real Estate Settlement and Procedures Act (RESPA)c. the Real Estate Deputyd. None of the above.


The Federal Fair Housing Act (FFHA) prohibits discrimination in the sale, rental and ad-1. vertisement of:

a. residential units. b. commercial properties.c. industrial properties.d. personal property.

_________ involves the restriction of a person seeking to buy or rent a dwelling in a com-2. munity in a manner that perpetuates segregated housing patterns.

a. Blockbusting c. Redliningb. Redeveloping d. Steering

__________ is the practice of a real estate agent who encourages homeowners to sell quick-3. ly by inducing fear that another race or class of people are moving into the neighborhood.

a. Filibustering c. Blockbustingb. Gerrymandering d. Redlining

California’s Unruh Civil Rights Act specifically prohibits discrimination on behalf of:4. a. businesses. c. individuals.b. government institutions. d. educational institutions.

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Failure to provide the disabled with access to a newly constructed residential property with 5. four or more units is considered:

a. unlawful discrimination. c. filibustering.b. good business practice. d. None of the above.

Anti-discrimination law is enforced by the:6. a. Department of Fair Employment and Housing. b. Fair Employment and Housing Commission.c. Department of Housing and Urban Development (HUD).d. Both a. and b.

The federal rules that restrict discriminatory practices amongst lenders were created by 7. the:

a. Unruh Civil Rights Act. b. Federal Fair Housing Act (FFHA).c. American with Disabilities Act (ADA).d. Equal Credit Opportunity Act.

Failing to provide financing in certain communities is called:8.

a. redlining. c. panic selling.b. redevelopment. d. subordination.

The __________ requires lenders to compile and submit their home loan origination data to 9. their respective supervisory agencies.

a. Equal Credit Opportunity Act b. Home Mortgage Disclosure Act (HMDA)c. Home Affordable Modification Plan (HAMP)d. Federal Fair Housing Act (FFHA)

A broker should refuse to use phrases that indicate a preference in advertising, such as:10. a. “black home.” c. “Jewish home.” b. “adult building.” d. All of the above.


Funds belonging to others which a broker and his agents handle when acting in a transaction 1. are called:

a. assets. c. bonds. b. trust funds. d. security deposits.

A broker must regularly account to an owner on the status, expenditure and location of ne-2. gotiable trust funds, called a(n):

a. balance sheet. c. owner’s statement.b. deposit receipt. d. amortization schedule.

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In California, real estate cannot be sold: 3. a. contingent upon the buyer obtaining financing. b. to finance the purchase of a replacement property.c. “as-is.”d. “as disclosed.”

When a seller’s broker relays information from the seller to the prospective buyer, the 4. seller’s broker:

a. is shielded from liability for the information he provides.b. is to inform the buyer of the source of the information to avoid personal liability. c. need not disclose the source of the information.d. A seller’s broker is barred from passing on information provided by his client.

Brokers owe a fiduciary duty to the client to use __________ in a continuous effort to meet 5. the objective of the employment.

a. due diligence c. moderate caution b. minimal effort d. None of the above.

All records of an agent’s activities on behalf of a buyer or seller during the listing period 6. must be retained by the agent’s broker for:

a. one year. c. three years.b. two years. d. four years.

The methods for gathering adverse facts about the property’s fundamental characteristics 7. include:

a. advising the seller on risk avoidance procedures.b. conducting a visual inspection of the property.c. responding to inquiries by the prospective buyer.d. All of the above.

A seller of a one-to-four unit residential 8. property must complete and deliver to a prospective buyer a statutory form called a:

a. Transfer Disclosure Statement (TDS).b. Condition of Property Disclosure Statement.c. Both a. and b. d. Neither a. nor b.

If the Transfer Disclosure Statement (TDS) is delivered to the buyer after he enters into a 9. purchase agreement, the buyer may cancel the purchase agreement under a statutory:

a. two-day right to cancel. c. three-day right to cancel.b. put option. d. Right of First Refusal.

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Any individual who holds himself out as being in the business of preparing a home inspec-10. tion report on a one-to-four unit residential property is referred to as a(n):

a. appraiser. c. handyman.b. home inspector. d. subcontractor.


Locations where a property might be subject to natural hazards include:1. a. very high fire hazard severity zones.b. potential flooding and inundation areas.c. seismic hazard zones.d. All of the above.

To unify and streamline the disclosure by a seller and his agent about natural hazards affect-2. ing a property, the California legislature created a statutory form called the:

a. Transfer Disclosure Statement (TDS).b. Natural Hazard Disclosure Statement (NHD).c. Conflict of Interest Disclosure.d. Settlement Statement.

The use of a(n) __________ to prepare a Natural Hazard Disclosure Statement (NHD) re-3. lieves the seller’s agent of any liability for errors not known to the agent to exist.

a. accountant c. natural hazard expertb. escrow officer d. All of the above.

Any flood zone designated with the letter __________ is a special flood hazard area and 4. must be disclosed on the Natural Hazards Disclosure Statement (NHD).

a. “A” or “V” c. “A,” “B” or “C”b. “X” or “Y” d. “Z” or “8”

The Natural Hazard Disclosure Statement (NHD) requires the seller’s agent to disclose to a 5. prospective buyer whether they have knowledge the property:

a. has a roof greater than three years old.b. is located in a fault zone.c. is located in a area with a high crime rate.d. has a pool.

A statement by a structural pest control (SPC) company indicating the property is free of 6. infestation in the visible and accessible areas is referred to as a:

a. Certificate of Completion. c. Pest Elimination Voucher.b. Certificate of Occupancy. d. Pest Control Certification.

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Environmental hazards located off the property, but which have an adverse effect on the use 7. of the property, include:

a. industrial zoning in the neighborhood of the property.b. military ordnance sites within one mile of the property.c. airport influence areas established by local airport land commissions.d. All of the above.

If they exist, environmental hazards are a(n) __________ requiring upfront disclosure by 8. the seller’s agent.

a. material fact c. incurable breachb. selling point d. ancillary fact

The federal lead-based paint (LBP) disclosure form is required on all __________ residen-9. tial construction.

a. pre-1978 c. pre-1995b. post-1978 d. post-1995

A real estate agent has no affirmative duty to voluntarily disclose information to a poten-10. tial buyer regarding a prior occupant whose death occurred on the real estate more than __________ years prior to the purchase offer.

a. one c. threeb. two d. All of the above.


Ownership of a unit in a condominium project includes compulsory membership in:1. a. the local trade union. c. Facebook. b. the homeowners’ association (HOA). d. the board of directors.

A conflict of interest exists when:2. a. an agent has a positive or negative bias toward an opposing party in a transaction.b. the agent’s bias might compromise his due diligence efforts. c. Both a. and b.d. Neither a. nor b.

A broker risks __________ of his license should he fail to disclose a known conflict of in-3. terest to his client.

a. revocationb. extension c. renewald. A broker need not disclose conflicts of interest.

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A Department of Real Estate (DRE) licensee acting solely as a principal in a real estate 4. transaction:

a. need not disclose the existence of his license. b. must make a full disclosure of his status as a licensee.c. has created a conflict of interest.d. A DRE licensee cannot be a principal in a real estate transaction.

The right of the government to take private property for public use is referred to as:5. a. theft. c. eminent domain.b. put option. d. None of the above.

Real estate is characterized as:6. a. movable. c. Either a. or b.b. immovable. d. Neither a. nor b.

The first component of real estate is land, which includes:7. a. soil. b. rocks.c. reasonable airspace above the earth.d. All of the above.

The right to remove minerals from another’s real estate is called a(n):8. a. easement. c. security interest.b. profit a prendre. d. land grant.

The intent to make an item a fixture can be determined by:9. a. duration of attachment.b. the age of the item.c. the manner of attachment, use and purpose of the item.d. the physical characteristics of the item, such as color.

Real estate includes any incidental rights to the real estate which are not located on the real 10. estate nor reflected on its title, called:

a. appurtenant rights. c. real rights.b. leasehold interest. d. duty of care and maintenance.


A tenant holds a(n) _________ in real estate for a fixed period of time.1. a. fee interest c. leasehold interestb. fee simple interest d. life estate interest

In a __________, a landlord and tenant agree to successive rental periods of the same 2. length, such as in a month-to-month tenancy.

a. periodic tenancy c. tenancy-at-sufferanceb. tenancy-at-will d. None of the above.

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A(n) ________ grants its holder a nonexclusive personal privilege to use property, but no 3. right to occupy it to the exclusion of others.

a. easement c. covenantb. license d. lease

On expiration of a lease, a tenant who remains in possession of a property without an agree-4. ment or acceptance of rent by the landlord for the extended occupancy becomes a:

a. holdover tenant. c. Both a. and b.b. tenant-at-sufferance. d. Neither a. nor b.

The flexibility of a __________ allows a landlord and tenant to terminate a month-to-5. month tenancy by giving the appropriate notice to vacate to the other party.

a. periodic tenancy c. tenancy at sufferanceb. fixed-term tenancy d. tenancy at will

Improvements that become part of the real estate include:6. a. built-ins. c. attached flooring.b. walls. d. All of the above.

On expiration of a lease, the passage of real estate fixtures from the tenant to landlord is a 7. conveyance called:

a. waste. c. sacrifice.b. tariff. d. reversion.

A landlord may have to pay for the improvements made by a tenant if he does not post and 8. record a(n):

a. Notice of Nonresponsibility. c. unlawful detainer.b. Liability Waiver. d. All of the above.

____________ refer to a landowner’s incidental property right to withdraw water from an 9. adjacent river for beneficial use on his riparian land.

a. Appropriative rights c. Riparian rightsb. Prescriptive rights d. Overlying rights

California established the10. __________ to act as a referee for all disputes over water rights.a. Department of Real Estate (DRE)b. Department of Motor Vehicles (DMV)c. Federal Water Conservation Authority (FWCA)d. State Water Resources Control Board


A(n) __________ is a written employment contract between a client and a licensed real 1. estate broker.

a. job application c. lease agreementb. listing agreement d. certificate of deposit

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Agency duties carry with them the __________ of loyalty and full disclosure owed by the 2. broker (and his sales agents) to the client.

a. fiduciary duties c. partial dutiesb. general duties d. subliminal duties

Under a(n) __________, a client can enter into listings with as many brokers as he wants 3. without becoming obligated to pay more than one fee.

a. exclusive agency listing c. open listingb. exclusive right-to-sell listing d. All of the above.

Under a(n)__________, the broker does not earn a fee when the client, acting indepen-4. dently, accomplishes the objective of the employment himself.

a. exclusive right-to-sell c. exclusive agency agreementb. exclusive right-to-buy d. None of the above.

To best accomplish a level of financial certainty between a buyer’s agent and the buyer, a 5. buyer’s agent must enter into a written employment agreement with a prospective buyer, called a:

a. buyer’s exclusive right-to-buy listing agreement. b. seller’s listing agreement.c. fee sharing agreement.d. triple-net lease agreement.

__________ through the internet has sparked a relatively new approach agents are using to 6. reach potential clients.

a. Social networking c. cold callingb. Social engineering d. door knocking

The primary document used to negotiate the transaction between a buyer and seller is a:7. a. listing agreement. c. purchase agreement.b. counteroffer. d. waiver.

The __________ of a property is the highest price on the date of valuation a willing seller 8. and buyer would agree to, both having full knowledge of the property’s various uses.

a. fair market value c. replacement cost b. depreciation schedule d. None of the above.

The third step in the appraisal process is applying the data collected using the __________ 9. appraisal method.

a. capitalization approach c. comparative market approachb. cost approach d. Any of the above.

__________10. is a process employed to facilitate the closing of a transfer of real estate be-tween two parties.

a. Escrow c. Listing b. Appraisal d. Coercion

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An agreed boundary which remains in place for more than ____ years is binding on subse-1. quent owners even if the recorded legal description is different.

a. two c. fourb. three d. five

Written or oral agreements on a boundary’s location are called _________ since they are 2. not implied.

a. void agreements c. uncertain agreementsb. express agreements d. probable agreements

The agreed-boundary doctrine can be used to: 3. a. make a lot line adjustment. c. set a boundary.b. convey property. d. Both a. and b.

The location of the common property lines might be represented by an improvement which 4. acts as a demarcation of the property line, called a:

a. spite fence. c. implied boundary. b. common boundary improvement. d. None of the above.

A(n) __________ is an interference with another’s possession of real estate.5. a. nuisance c. encroachmentb. trespass d. All of the above.

A __________ is any wrongful and unauthorized entry onto real estate in the possession of 6. another.

a. trespass c. transient possessionb. forcible detainer d. right of way

Examples of trespass resulting from indirect entry include:7. a. depositing dirt or debris on another’s property.b. diverting a river or surface waters across another’s property.c. leaving toxic waste on another’s property.d. All of the above.

A nuisance is anything which:8. a. is injurious to health. c. obstructs the use of property.b. is offensive to the senses. d. All of the above.

The illegal sale of a controlled substance is considered a(n):9. a. nuisance per se. c. unlawful detainer.b. trespass. d. Both a. and b.

A ________ is a nuisance which affects an entire segment of the population.10. a. private nuisance c. public nuisanceb. continuing nuisance d. temporary nuisance

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The property which benefits from an easement is referred to as the:1. a. servient tenement. c. dominant tenement.b. diminutive tenement. d. All of the above.

A(n) ___________ belongs to an individual and is his personal right.2. a. easement in gross c. easement running with the landb. appurtenant easement d. encroachment

________ easements restrict an owner’s ability to maintain or construct any improvements 3. which interfere with a neighbor’s solar energy system.

a. Light c. Viewb. Air d. Solar

If a property is landlocked, the owner of the property may be able to acquire a(n):4. a. easement by necessity. c. easement by grant.b. partial easement. d. prescriptive easement.

An easement is terminated by ___________ if the easement holder places an excessive 5. burden on the property encumbered by the easement.

a. abandonment c. forfeitureb. merger d. prescription

A(n) ________ is a recorded restriction which requires a property to be used for a specific 6. purpose.

a. negative covenantb. Declaration of Covenants, Conditions and Restrictions (CC&Rs)c. covenant which does not run with the landd. affirmative covenant

A valid deed must:7. a. be in writing and identify the grantor and the grantee.b. contain a granting clause and describe the real estate involved.c. be signed by the grantor and accepted by the grantee.d. All of the above.

An executed oral agreement for the transfer of real estate ownership will be enforced under 8. the doctrine of:

a. specific performance. c. Both a. and b. b. estoppel. d. Neither a. nor b.

To establish title by adverse possession, an occupant must show: 9. a. his occupancy is inconsistent and hostile with the owner’s title.b. his possession is based on a claim of right or color of title.c. he has paid all taxes previously unpaid and assessed against the property during his occupancy.d. All of the above.

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At the time of signing the deed, a capable grantor must:10. a. possess his civil rights. b. be of sound mind.c. be an adult at least 18 years of age.d. All of the above.


For delivery of a deed to occur, the grantor must _______ and the grantee must 1. __________.

a. intend to convey title; accept the deed as immediately effectiveb. physically hand the deed to the grantee; record the deed with the countyc. place the deed in the mail; plan to accept the deed on certain conditionsd. intend to convey partial title; record the deed with the county

While not containing the word “grant,” most quitclaim deeds out of custom use the 2. word(s):

a. “release.” c. “quitclaim.”b. “remise.” d. All of the above.

A(n) ________ is a written statement which presents an accurate, factual representation of 3. title to the property being acquired, encumbered or leased.

a. preliminary title report c. abstract of titleb. property profile d. None of the above.

Title insurance is the means by which a title insurance company ________ a person who ac-4. quires an interest in real estate against a monetary loss caused by an encumbrance on title.

a. holds harmless c. indemnifiesb. reimburses d. All of the above.

Most losses due to the reduction in the value of real estate below the title insurance policy 5. limits arise out of an encumbrance on title, including:

a. restrictions on use. c. pendency of condemnation.b. easements. d. All of the above.

_______ title insurance policies insure both the record title and observable on-site activities 6. which affect title.

a. California Land Title Association (CLTA) c. Both a. and b.b. American Land Title Association (ALTA) d. None of the above.

After incurring a loss or damage, the insured must provide the title company with a proof-7. of-loss statement within ______ days.

a. 15 c. 90b. 30 d. 120

All property acquired jointly by a married couple during the marriage, no matter how vest-8. ed, is presumed to be:

a. community property. c. public property.b. separate property. d. None of the above.

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Lis pendens means:9. a. Notice of Pending Action. c. Both a. and b.b. Notice of Litigation. d. Neither a. nor b.

_______ is an example of a lawsuit affecting title or possession of real estate.10. a. Judicial foreclosure of a trust deed lien by a lenderb. Termination or establishment of an easement between neighboring property ownersc. Divorce proceedings involving real estated. All of the above.

Quiz 12— Chapters 54-57

A(n) 1. _______ is the dollar amount of the equity in a homeowner’s dwelling that the ho-meowner qualifies to hold which has priority on title over most judgment liens and some government liens.

a. overriding lien c. interest deduction b. homestead d. All of the above.

A homeowner qualifies for the 2. _______ homestead exemption as the head of a household by providing support for a spouse, dependent children or in-laws.

a. $75,000 c. $150,000b. $100,000 d. $175,000

A(n) ________ determines the priorities of the creditor’s lien and the recorded homestead 3. on title.

a. escrow account c. eminent domain actionb. quiet title action d. declaration of homestead

Notes are categorized by the method for repayment of the debt, such as:4. a. straight notes. c. Both a. and b.b. installment notes. d. Neither a. nor b.

Under a(n) ________, no periodic payments of principal are scheduled; the entire amount 5. of principal is paid in one lump sum.

a. adjustable rate note (ARM) c. installment noteb. all-inclusive trust deed note (AITD) d. straight note

________ call for periodic adjustments to the interest rate, the amount of scheduled pay-6. ments and the principal amount (when a negative amortization is involved).

a. All-inclusive trust deeds (AITDs)b. Adjustable rate notes (ARMs)c. Fixed-rate notes (FRMs)d. All of the above.

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7. Graduated payment (GPM) provisions are in great demand when interest rates or home prices:

a. rise quickly.b. decrease quickly.c. decrease slowly. d. stay constant.

California’s usury law limits the interest rate on non-exempt real estate loans to the greater 8. of 10% or the discount rate charged by the Federal Reserve Bank of San Francisco, plus:

a. 5% c. 20%b. 10% d. 25%

In periods when short-term interest rates have peaked or are in decline, it is often advanta-9. geous for buyers to finance purchases by using a(n):

a. fixed rate mortgage (FRM). c. stolen funds.b. adjustable rate mortgage (ARM). d. None of the above.

An owner of real estate who wants to pay off principal on a debt before it is due may be 10. levied an additional charge by the lender, called a(n):

a. grace period. c. prepayment penalty.b. balloon payment. d. late fee.


A complete late charge provision must include:1. a. the span of any grace period following the due date before a payment becomes delinquent.b. the amount of the late charge.c. a requirement for notice from the trust deed holder to impose the late charge and make a demand for its payment.d. All of the above.

The reasonable amount of monetary losses collectible as a late charge include:2. a. the lost use of the principal and interest portion of the delinquent payment.b. the actual out-of-pocket expenses incurred in a reasonable collection effort.c. Both a. and b. d. Neither a. nor b.

The late charge amount on a private lender loan which is not made or arranged by a broker 3. and is secured by an owner-occupied single family residence (SFR) is limited to ________ of the delinquent principal and interest installment.

a. 6% c. 8% b. 7% d. 9%

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A(n) ________ is any final payment on a note which is an amount greater than twice the 4. amount of any one of the six regularly scheduled preceding payments.

a. late charge c. usury limitb. balloon payment d. All of the above.

Notice of a final/balloon payment must be given to the buyer or current owner ________ 5. before its due date.

a. 30 days c. 90 daysb. 60 days d. None of the above.

The ________ is the preferential method used to impose a lien on real estate. 6. a. promissory note c. due-on clause b. trust deed d. Notice of Nonresponsibility

The ________ is the person entitled to the performance of the promised activity referenced 7. in the trust deed, usually the repayment of debt evidenced by a note.

a. borrower c. beneficiaryb. trustor d. common agent

Removing the trust deed from the title to the property on ending the debt relationship be-8. tween the owner and the creditor is accomplished by:

a. foreclosure by issuance of a trustee’s deed.b. full repayment by reconveyance.c. mutual agreement by a deed-in-lieu of foreclosure.d. All of the above.

The occurrence of an event which triggers due-on enforcement automatically allows the 9. lender to call the loan, also known as:

a. waiver by consent. c. recasting.b. acceleration. d. subordination.

The due-on clause is triggered not only by a transfer using a standard grant deed, but by any 10. conveyance of equitable ownership of real estate, such as a(n):

a. land sales contract. c. all-inclusive trust deed (AITD).b. lease option sale. d. All of the above.


On the sale of a parcel of real estate, existing financing encumbering the property may be 1. taken over by a buyer under a:

a. formal assumption between the lender and the buyer.b. subject-to assumption between the seller and the buyer.c. a subject-to transfer of ownership without an assumption agreement of any type.d. All of the above.

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A seller is not liable for a deficiency on the foreclosure of a(n) ________ since it is a non-2. recourse debt.

a. purchase-money debt

b. home equity line of credit

c. cash-out refinance

d. All of the above.

When the lender enters into an agreement with both the buyer and seller for the buyer’s as-3. sumption of the loan and a release of the seller’s liability, this is known as a:

a. substitution of liability. c. Both a. and b.

b. novation. d. Neither a. nor b.

________ involves the seller carrying back a note for the unpaid portion of the price remain-4. ing after deducting the down payment and the amount of the loan the buyer is assuming.

a. Seller financing c. A credit sale

b. An installment sale d. All of the above.

The tax impact a carryback seller will receive on his carryback financing is ________ cat-5. egory income, regardless of whether the property sold was in another income category.

a. portfolio c. earned

b. passive d. None of the above.

A buyer can obtain a conventional loan from:6. a. portfolio lenders. c. warehousing lenders.

b. institutional lenders. d. All of the above.

Portions of the loan application will need to be verified by the lender with supplemental 7. documents, such as:

a. recent bank statements.

b. an appraisal report to establish the value of the property serving as security.

c. a credit report to establish the buyer’s liabilities and propensity to repay the loan.

d. All of the above.

The ________ prepared by the buyer supplies the lender with necessary information about 8. the buyer and the property securing the loan and triggers the loan packaging process.

a. listing agreement

b. escrow instructions

c. Uniform Residential Loan Application

d. appraisal report

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A Real Estate Settlement Procedures Act (RESPA)-controlled lender must provide a buyer 9. with:

a. a good faith estimate of all loan related charges.b. Department of Housing and Urban Development (HUD) published Special Information Booklet.c. HUD-1 or HUD-1A Closing Statement.d. All of the above.

A buyer’s ________ is his ability to make loan payments, as evaluated by his debt-to-10. income ratio.

a. willingnessb. capacityc. loan-to-value ratio (LTV)d. None of the above.


The ________ insures loans with high loan-to-value ratios (LTV) that are made with less 1. demanding cash down payment requirements than loans originated by conventional lend-ers.

a. Federal Housing Administration (FHA) c. MGIC Investment Corp. b. Truth-in-Lending Act d. None of the above.

The most commonly used Federal Housing Administration (FHA) Owner-occupied, One-2. to-Four Family Home Mortgage Insurance Program is the:

a. Section 221. c. Section 203(b).b. Section 223(e). d. Section 251.

The minimum down payment requirement of a Federal Housing Administration (FHA) loan 3. is:

a. 2.5% c. 4%b. 3.5% d. 4.5%

Some lenders and private mortgage insurance (PMI) carriers offer a ________ program in 4. which the lender pays the mortgage insurance premium.

a. Guaranteed Payment Mortgage Plan (GPMP)b. Lender-Assist Mortgage Insurance (LAMI)c. Lender-Paid Mortgage Insurance (LPMI)d. Premium-Paid Mortgage Insurance (PPMI)

To qualify for private mortgage insurance (PMI), a buyer must:5. a. be a natural person, not a corporation, partnership or limited liability company.b. take title as the vested owner of the property. c. Both a. and b.d. Neither a. nor b.

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A buyer will be required to submit ________ for review by a private mortgage insurer.6. a. a copy of the loan applicationb. a credit report current within 90 days and covering a minimum of two yearsc. an appraisal of the real estate to be purchasedd. All of the above.

The amount of interest a private, non-exempt lender can charge is regulated by statute and 7. the California Constitution, collectively called:

a. usury laws. c. private mortgage insurance.b. Fair Housing Laws. d. loan sharking.

The most common penalty suffered by a non-exempt private lender in violation of usury 8. laws is:

a. a five year jail sentence. b. the forfeiture of all interest for the loan.c. the forfeiture of all principal remaining due.d. a $100,000 fine.

Anti-deficiency non-recourse rules no longer apply to carryback debt when the debt be-9. comes secured by real estate other than the real estate sold, called:

a. exhaustion of the security. c. substitution of the security.b. elimination of the security. d. None of the above.

A letter of credit is unenforceable if:10. a. it is issued to a trust deed beneficiary to cover a future default on the obligation.b. the obligation is secured by a purchase money trust deed on owner-occupied, one-to- four unit residential property.c. Both a. and b.d. Neither a. nor b.


The ________ authorizes the beneficiary to instruct the trustee appointed under the trust 1. deed to initiate a non-judicial trustee’s foreclosure to sell a property.

a. right of redemption c. power-of-sale provisionb. right of reinstatement d. put option.

An owner can ________ by paying all sums due under the note and trust deed and reimburs-2. ing the lender’s costs of foreclosure, prior to completion of the trustee’s sale.

a. redeem property in foreclosure c. initiate foreclosureb. subordinate the lender’s interest d. None of the above.

When an owner’s activities cause waste to a property which decrease the value of the lend-3. er’s security, this is referred to as:

a. impairment. c. due-on enforcement.b. acceleration. d. None of the above.

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A trust deed holder can foreclose on a property which serves as the security for a note, by:4. a. judicial foreclosure under mortgage law.b. nonjudicial foreclosure under the power-of-sale provision in the trust deed.c. Both a. and b.d. Neither a. nor b.

Lienholders or buyers who acquire an owner’s interest in a property by deed prior to a judi-5. cial foreclosure sale are called:

a. successors-in-interest. c. owners by default.b. highest bidders. d. equitable owners.

A deficiency judgment is awarded to a lender based on the unencumbered full cash value of 6. the secured property, a value which is set consistent with current market conditions on the date of the foreclosure sale, referred to as:

a. fair market value (FMV). c. fair rental amount.b. fair value hearing. d. None of the above.

Within ________ after recording the Notice of Default (NOD), the trustee is required to 7. send a copy of the NOD by registered or certified mail to holders of a recorded interest in the secured property.

a. one week c. one yearb. one month d. two years

At least ________the date selected by a trustee to hold a trustee’s sale, the trustee must send 8. two copies of the notice of trustee’s sale (NOTS) to each party the trustee previously sent a notice of default (NOD).

a. 20 calendar days before c. three months beforeb. 6 business days before d. 30 calendar days before

Each bid made at a trustee’s sale is a(n) ________ to purchase the property. However, any 9. subsequent ________ bid cancels a prior bid.

a. irrevocable offer; higherb. irrevocable offer; lowerc. revocable offer; higherd. revocable offer; lower

A trustee’s sale is considered final and complete:10. a. when a beneficiary makes a bid.b. when the trustee hands the highest bidder a trustee’s deed.c. on the trustee’s acceptance of the last and highest bid.d. when the lender signs the certificate of sale.

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If the interest qualifies as a(n) 1. ________ from income, interest which has accrued and been paid on a loan can be written off.

a. deduction c. Either a. or b.b. expense d. Neither a. nor b.

Points paid to a lender to originate a loan are considered: 2. a. prepaid interest. c. impound payments.b. nominal interest. d. All of the above.

Loan costs incurred by a lender and paid by an owner on any type of real estate to originate 3. a purchase or improvement loan are ________ by the owner.

a. deducted c. expensedb. capitalized d. none of these

To qualify home improvement loans for interest deductions, the new improvements must be 4. substantial. Improvements are substantial if they:

a. add to the property’s market value.b. prolong the property’s useful life.c. adapt the property to residential use.d. All of the above.

Interest paid on any portion of a loan balance which exceeds the fair market value (FMV) of 5. a residence:

a. is deductible. c. is not deductible. b. can be applied to satisfy a debt. d. None of the above.

Numerous advantages are available to sellers of ________ who couple the sale with the 6. purchase of a replacement property.

a. §1031 like-kind properties c. §1085 divergent homesb. §1015 similar properties d. None of the above.

Tenant negotiations that can be performed by unlicensed agents on behalf of a broker who 7. has been retained to manage an apartment building include:

a. accepting signed lease and rental agreements from tenants.b. showing rental units and facilities to prospective tenants.c. accepting rents and security deposits.d. All of the above.

An oral fee agreement between a broker and client is unenforceable unless there is a writing 8. referencing the fee agreement which is signed by the:

a. notary. c. leasing agent. b. client. d. user.

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A(n) __________ sets the leasing agent in competition with the owner and other brokers to 9. be the first to locate a tenant and become entitled to collect a fee.

a. open listing c. exclusive authorization to sellb. safety clause d. right-to-collect clause

A(n) __________ clause protects the broker should the owner cancel the employment with-10. out cause and remove the property from the rental market before the listing expires.

a. right-to-collect c. exclusive agencyb. termination-of-agency d. safety


A(n) __________ runs for an indefinite period of time since it automatically renews monthly, 1. and on the same terms, until modified or terminated by notice.

a. fixed-term lease c. tenancy-at-sufferanceb. month-to-month rental agreement d. None of the above.

A lease terminates at the end of its fixed term without further notice by either the landlord or 2. the tenant, called:

a. renewal of the lease. c. expiration of the lease.b. redemption of the lease. d. early termination.

To avoid disputes over who is responsible for any damage to the premises, the residential 3. landlord and tenant should complete and sign a(n) __________ before the tenant is given pos-session.

a. Notice of Nonresponsibility c. right of first refusalb. open listing d. condition of premises addendum

A lease agreement conveying a term of occupancy exceeding __________ must be written to 4. be enforceable, a requirement of the statute of frauds.

a. six months c. one year b. ninety days d. None of the above.

A(n) __________ provision assures application of California rules of law should a dispute 5. arise with a tenant regarding the lease.

a. attorney fee c. choice-of-lawb. heirs, assigns and successors d. None of the above.

The maximum advance payment that can be charged for a tenant with a pet in an unfurnished 6. residential unit is equal to:

a. two months’ rent. c. three months’ rent. b. the first and last months’ rent. d. four months’ rent.

If no repairs are made, the residential landlord must refund the security deposit, less reason-7. able deductions, within _____ days after a tenant vacates.

a. 7 c. 21b. 10 d. 30

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Tenant screening fees are limited to:8. a. the out-of-pocket cost for gathering the information.b. the cost of the landlord’s time spent obtaining the information and processing an application to rent.c. Both a. and b.d. Neither a. nor b.

When one month’s rent is collected in advance from a residential tenant, the security de-9. posit is limited to an amount equal to:

a. two months’ rent for a furnished unit. b. three months’ rent for a furnished unit.c. Both a. and b.d. Neither a. nor b.

A landlord under a month-to-month rental agreement can increase the rent or shift repair 10. and maintenance obligations to the tenant by serving a(n):

a. unlawful detainer (UD) action.b. 60-Day Notice to Pay Rent or Quit.c. 30-Day Notice of Change in Rental Terms. d. 30-Day Notice to Vacate.


When a tenant does not timely pay rent, the landlord may serve the tenant with a written 1. notice demanding the tenant pay all amounts due or vacate the premises, called a:

a. 30-Day Notice to Vacate. b. 3-Day Notice to Pay Rent or Quit.c. 3-Day Notice of Change in Rental Terms.d. None of the above.

A tenant who commits a(n) __________ is served with a 3-Day Notice to Quit. 2. a. minor breach c. nonmonetary breach b. incurable breach d. statutory breach

A(n) __________ is a set time period following the due date during which rent may be paid 3. without incurring a late charge.

a. grace period c. pre-termination inspectionb. security deposit d. non-smoking addendum

The 3-Day Notice to Perform or Quit requires the tenant to:4. a. perform under the breached lease provision.b. vacate the premises.c. Either a. or b.d. Neither a. nor b.

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Before an unlawful use of a property justifies service of a notice to quit, the use must:5. a. impair the landlord’s continued receipt of rent.b. threaten the physical safety of the property.c. stigmatize the premises.d. All of the above.

Waste occurs when a tenant:6. a. vacates and quits the premises.b. neglects the premises and impairs its value by failing to maintain it as agreed.c. subleases the premises to a subtenant without the landlord’s consent.d. All of the above.

It a tenant has resided in residential property for one year or more, the landlord is required 7. to give the residential tenant a:

a. 30-day Notice to Vacate c. 90-day Notice to Vacateb. 60-day Notice to Vacate d. None of the above.

A landlord breaches the __________ when he fails to comply with building and housing 8. code standards that materially affect health and safety.

a. implied warranty of habitability c. implied duty of fair dealing b. unspoken gentlemen’s agreement d. None of the above.

A residential dwelling is uninhabitable if it is not properly maintained or does not substan-9. tially comply with building codes, including:

a. heating facilities. c. plumbing and gas facilities.b. electrical lighting. d. All of the above.

When criminal activity is 10. __________ due to known prior criminal activity, the landlord has a duty to take reasonable measures to prevent harm to persons on the property from fu-ture similar criminal activities.

a. remotely possible c. reasonably foreseeableb. absolutely impossible d. unlikely


Construction of residential and nonresidential buildings is primarily regulated by the state 1. of California through:

a. conditions, covenants and restrictions (CC&Rs).b. building codes.c. the Department of Real Estate (DRE)d. the Department of Motor Vehicles (DMV)

A(n) __________ is anyone who offers or agrees to construct, alter, repair, improve or de-2. molish any building, road, project, development or improvement.

a. appraiser c. real estate agentb. escrow officer d. contractor

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The placement of a house upon the lot is referred to as its:3. a. preference. c. orientation.b. zoning classification. d. location.

The federal __________ assigns a rating to each home determined by an energy specialist 4. called a Home Energy Rater.

a. Home Energy Score c. Both a. and b. b. mortgage insurance premium d. Neither a. nor b.

The __________ establishes the conditions for approval of a subdivision map, and provides 5. the planning commission the authority to regulate the design and physical improvements to be installed in a common interest development (CID).

a. Subdivided Lands Act c. local surveyorb. Subdivision Map Act d. general contractor

Contractors and subcontractors have a constitutionally protected right to file a(n) __________ 6. against property they have improved should they not be paid for labor and materials.

a. lis pendens c. unlawful detainer b. Notice of Nonresponsibility d. mechanic’s lien

After completion of construction, a(n) __________ is to be recorded within 15 days.7. a. Notice of Completion c. conditional notice of cessationb. Notice of Nonresponsibility d. None of the above.

A landlord who has actual knowledge a tenant is making improvements must record and 8. post a(n) __________ to avoid the attachment of the mechanic’s lien to the fee interest held by the landlord.

a. Notice of Nonresponsibility c. contractor’s lien b. Notice to Vacate d. All of the above.

Demand for all types of real estate:9. a. falls as the number of local jobs increases.b. rises as the number of local jobs increases.c. rises as the number of local jobs decreases.d. None of the above.

Few would question the severity of the Great Recession, which officially started December 10. 2007 and ended:

a. August 2008. c. August 2009. b. July 2012. d. July 2010.

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Answer References For Print Version

The following are the answers to the quizzes for Real Estate Principles, Pilot Edition and the page numbers in the printed material where they are located.

Quiz 1 1. C 4 2. B 4 3. A 5 4. D 12 5. B 13 6. C 13 7. A 15 8. A 19 9. B 2110. A 24

Quiz 6 1. B 155 2. C 162 3. A 163 4. A 166 5. C 173 6. B 176 7. D 177 8. B 178 9. C 18110. A 182

Quiz 111. A 2992. D 3053. C 3104. D 3125. D 3126. B 3147. C 3238. A 3299. C 335

10. D 336

Quiz 2 1. C 26 2. A 26 3. D 28 4. C 35 5. B 41 6. A 42 7. B 43 8. C 43 9. A 4410. B 44

Quiz 7 1. C 186 2. A 187 3. B 188 4. C 192 5. A 193 6. D 198 7. D 201 8. A 201 9. C 20410. D 206

Quiz 121. B 3392. B 3413. B 3464. C 3505. D 3526. B 3527. A 3528. A 3549. B 360

10. C 361

Quiz 3 1. A 58 2. D 60 3. C 60 4. A 63 5. A 64 6. D 70 7. D 73 8. A 76 9. B 7910. D 84

Quiz 8 1. B 209 2. A 210 3. C 212 4. C 213 5. A 219 6. A 223 7. C 225 8. A 232 9. D 23410. A 241

Quiz 131. D 3682. C 3683. A 3714. B 3755. C 3766. B 3797. C 3838. D 3849. B 388

10. D 391

Quiz 4 1. B 89 2. C 92 3. C 98 4. B 100 5. A 103 6. C 106 7. D 108 8. C 113 9. C 11410. B 120

Quiz 9 1. D 253 2. B 253 3. C 255 4. B 257 5. D 260 6. A 265 7. D 266 8. D 269 9. A 27010. C 272

Quiz 141. D 3952. A 3973. C 4004. D 4015. A 4026. D 4087. D 4128. C 4159. D 420

10. B 426

Quiz 5 1. D 126 2. B 126 3. C 130 4. A 133 5. B 135 6. D 139 7. D 144 8. A 144 9. A 15010. C 153

Quiz 10 1. C 275 2. A 276 3. D 277 4. A 281 5. C 283 6. D 285 7. D 292 8. C 292 9. D 29310. D 294

Quiz 151. A 4292. C 4303. B 4324. C 4405. C 4436. D 4447. A 4458. B 4499. C 454

10. C 457

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Quiz 16 1. C 459 2. A 462 3. A 465 4. C 468 5. A 472 6. A 473 7. B 482 8. A 486 9. A 48710. C 487

Quiz 17 1. C 491 2. A 494 3. B 495 4. D 498 5. C 499 6. A 501 7. D 506 8. B 510 9. A 51210. B 512

Quiz 18 1. B 518 2. C 518 3. D 521 4. C 526 5. C 534 6. C 541 7. C 545 8. C 550 9. B 55110. C 553

Quiz 19 1. B 559 2. B 560 3. A 561 4. C 564 5. D 568 6. B 569 7. B 573 8. A 580 9. D 58010. C 586

Quiz 20 1. B 591 2. D 592 3. C 595 4. A 596 5. B 600 6. D 603 7. A 606 8. A 608 9. B 61110. C 615

Answer References Continued For Print Version

The following are the answers to the quizzes for Real Estate Principles, Pilot Edition and the page numbers in the printed material where they are located.

Real Estate Principles, Pilot Edition Quizzes6 Real Estate Principles, Pilot Edition 10. Any...

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