California Real Estate MCQs

The term that best describes a continuous urban corridor joining at least two cities is

megalopolis.
standard metropolitan statistical area.
metropolitan area.
standard urban area.

The term real property can also be described as

personal property.
the bundle of rights.
chattels.
land

The rights of a landowner to a river bordering her property are known as

littoral rights.
correlative use rights.
riparian rights.
rights of appropriation.

In the case of a transfer of ownership of a piece of real estate, a fixture is normally

assumed to be included in the transfer.
assumed to remain with the original owner.
transferred only if there is an agreement.
subject to a separate bill of sale

A tenant who operates a jewelry store wants to take his jewelry cases with him at the expiration of the lease. Which of the following is most correc...

He may take the jewelry cases.
He may not take the jewelry cases.
He may take the cases only if he has a prior agreement with the landlord.
He may take the cases if removal will not cause substantial damage.

A legal description of property is not adequate unless

a street address is included.
at least two different methods are used.
it includes a detailed description of the structures.
none of the above

The lot and block system of property description is not also known as the

lot, block, and tract system.
subdivision system.
rectangular survey system.
plat map system

How many acres does a section of land contain?

40
160
320
640

The type of ownership that provides the most complete bundle of rights is

fee simple qualified.
fee simple absolute
fee simple defeasible.
fee simple freehold.

Which of the following best describes the interests of the holder of a life estate?

possession
possession and use
possession, use, and ownership
possession, use, and ownership—but only as long as they live

The requirement that multiple owners take title to property at the same time is a characteristic of

ownership in severalty.
joint tenancy.
tenancy in common.
all forms of concurrent ownership

Which of the following are most similar to each other with respect to inheriting property?

joint tenancy and community property with right of survivorship
joint tenancy and tenancy in common
tenancy in common and community property with right of survivorship
joint tenancy and community property

Which of the following is a generic term for a group of people joining together to invest in real estate?

corporation
real estate investment trust
limited partnership
syndicate

When is a landowner entitled to compensation for a change in zoning?

when the landowner is denied all practical economic use of the property
when the property loses value
when the property increases in value
The property owner is never entitled to compensation.

A statement of the goals and policies regarding growth of a community is a good definition of the

zoning ordinance.
general plan.
specific plan.
subdivision regulations

The proper way for a landowner who has physical difficulty in developing his property to get relief is to obtain a

rezoning.
conditional use permit.
master plan amendment.
variance.

At which lot does the Subdivided Lands Law take effect?

the first lot
the third lot
the fifth lot
the tenth lot

The primary difference between a common interest subdivision and a standard subdivision is

design.
ownership of common areas.
use restrictions.
parcel size.

The state has enacted legislation providing special consideration or control for development of

rangeland.
earthquake areas.
coastal areas.
all of the above

All liens are encumbrances. All encumbrances are

liens.
limitations.
voluntary.
involuntary

A mechanic’s lien creates

a cloud on title.
a marketable title.
a transferable title.
no problem in transferring title

The land that benefits from an easement is referred to as the

servient tenement.
dominant tenement.
appurtenant tenement.
gross tenement.

A deed restriction prohibiting the sale of property to certain ethnic groups

is enforceable only if the restriction predates civil rights laws.
is enforceable in subdivisions of fewer than five lots.
supersedes civil rights laws.
is illegal and unenforceable.

A private deed restriction that places a restraint on alienation

is void.
restricts the sale of property.
is unenforceable.
all of the above

The process by which eminent domain occurs is called

alienation.
inverse condemnation.
police power.
condemnation

Which of the following types of easement does not run with the land?

the electric company’s easement to cross over your land with their power lines
a driveway easement allowing your neighbor to cross your property to get to the highway
an underground waterline easement across your property for your neighbor to obtain water from the street main
an agreement to allow your neighbor to use your property to park cars on the day of his daughter’s wedding

An easement is an encumbrance

only if it has no time limit.
only if it is an easement appurtenant.
only if it is an easement in gross.
always

An agent represents a

buyer.
seller
customer.
principal.

What is another term for an agent entrusted to act on someone’s behalf?

subagent
surrogate
fiduciary
cooperating agent

The seller of a one-family house is required to disclose to buyers

the fact that the last occupant died of AIDS.
the structural and mechanical condition of the property.
information about a murder that occurred in the house ten years earlier.
the fact that the buyers are the original owners of the property

The agent who brings a ready, willing, and able buyer to a seller is commonly called the

buyer’s agent.
seller’s agent.
procuring cause
fiduciary.

Broker A has a listing agreement to sell Seller B’s house. Broker A brings an offer to Seller B on behalf of Buyer C. Seller B rejects the offer a...

the duty of care.
the duty of loyalty.
the duty of confidentiality.
obedience

Seller A has signed a listing agreement with Broker B. Without the assistance of Broker B, Seller A sells her property and under the terms of the l...

a net listing
an exclusive authorization and right to sell listing
an option listing
an exclusive agency listing

Broker A agrees to represent Seller B in the sale of her house. Seller B agrees to pay Broker A a commission if he successfully sells the house. Wh...

Broker A has an exclusive authorization and right-to-sell listing agreement.
A unilateral express contract exists between Broker A and Seller B.
Broker A has an exclusive agency agreement with the seller.
A bilateral express contract exists between Broker A and Seller B.

Seller A wants to walk away with $200,000 after the sale of her house and all expenses are paid. She agrees that Broker B can keep, as his fee, an...

a net listing
an option listing
an exclusive agency listing
an open listing

A cooperating broker may represent

the buyer.
the seller.
the listing broker.
any of the above

Who of the following owes fiduciary responsibility to the buyer?

the seller’s agent
the buyer’s agent
the subagent of the seller
the subagent of the seller’s agent

A real estate salesperson is always considered an

employee.
independent contractor.
agent of the buyer.
agent of the seller.

Which of the following is not a type of listing agreement?

open listing
multiple listing
net listing
exclusive agency listing

A broker hired to sell a house is considered a

universal agent.
general agent
special agent
limited agent

Seller A wants to get the broadest exposure for the sale of her house but does not want to pay a commission if she sells the house herself. What ty...

open listing
pocket listing
multiple listing
exclusive authorization and right-to-sell listing

Broker A has a listing to market Seller B’s house. He also has a buyer’s agency agreement to find a house for Buyer C. If Buyer C becomes intere...

none
the creation of an open listing
a potential conflict of interest
the creation of a dual agency

All agency agreements for the sale of property must be in writing except creation of an agency by

implied agreement
estoppel.
ratification.
There are no exceptions

Broker A agrees in writing to keep details of Seller B’s property in his files but indicated that he will not actively market it. Seller B agrees ...

express bilateral.
express unilateral
implied bilateral.
implied unilateral.

An uncashed deposit check usually may be held and not deposited by the broker for how many days before an offer is accepted?

three
five
seven
until the offer is accepted

The most profitable single use that will generate the highest value for a piece of property is called its

economical use.
feasible use.
highest and best use.
anticipated use.

Which of the following is not a characteristic of value?

change
utility
transferability
demand

Two lots, each valued at $50,000, when combined have a value of $125,000. What term best describes this added value?

supply and demand
substitution
utility
plottage

In appraising a property, the process by which dissimilarities are accounted for in comparing a subject property and a comparable property is calle...

reconciling the values.
making adjustments.
equalization.
estimating value

Which of the following is an example of functional obsolescence?

having to get to a bedroom by going through another bedroom
a gas station located next to a house
a house badly in need of exterior painting
a house located within walking distance of a train station

Which of the following is deducted from potential gross income to arrive at effective gross income?

operating expenses
debt service
vacancy and collection loss
all of the above

An appraisal may have more than one date on it. The date of the value estimate is the

inspection date.
effective date.
report date.
certification date.

If you assume that depreciation occurs at an even rate, what method of calculating depreciation would you be using?

economic age life method
breakdown method
market extraction method
index method

In the income approach to estimating value, another term for the capitalization rate is

before-tax cash-flow rate.
cash-on-cash rate.
expense ratio.
rate of return

A parking lot in a downtown area being developed with office buildings is most likely

the highest and best use of the property.
an interim use of the property.
an economically feasible use of the property.
the best use of the property

The gross rent multiplier approach is a useful income approach in appraising

special-purpose buildings like churches.
retail shopping malls.
office buildings.
single-family homes.

In order to arrive at a final value estimate after applying all three approaches to value, which of the following will an appraiser do?

Average the three values.
Reconcile the three values.
Adjust the three values so that they’re equal.
Select the value closest to the sale price.

Potential gross income of an investment property is the same as

scheduled rent plus other building income.
current rent only.
market rent plus other building income.
market rent only

Which approach to valuation estimates land and building value separately?

cost approach
income capitalization approach
sales comparison approach
gross rent multiplier approach

What type of value is the term ad valorem most closely associated with?

investment value
assessed value
market value
depreciated value

Appraisers paid on the basis of a percentage of the value of a property are

called fee appraisers.
usually only employed by banks and mortgage companies.
employed by investors to guarantee the most accurate appraised value.
in violation of appraisal ethical standards

“An improvement to a property is worth the value it adds, if any, to the whole property, not its individual cost or value” is a good definition...

conformity.
change.
anticipation.
contribution

Rising mortgage interest rates will tend to

lower property values.
raise property values.
have no effect on property value.
only affect appraised but not actual values.

A person wanting to buy a $200,000 home by putting down $40,000 in cash and borrowing $160,000 is making use of what financial concept?

leverage
equity yield
total yield
discount rate

A buyer purchases a $275,000 house with $60,000 down and a mortgage loan of $215,000. In order to secure a preferred interest rate, the borrower mu...

$27,500
$21,500
$2,150
$600

Which of the following activities of the Federal Reserve System is likely to have the most direct effect on the rates charged for consumer credit?

adjusting the reserve requirements
selling securities to raise funds
adjusting the discount rate
increasing the number of loans made to consumers

After 1989, who insured deposits in all federally chartered banks?

FIRREA
FDIC
FHA
FHLLB

“The difference between the value of a property and all debts attributed to it” is a good definition of

leverage.
LTV.
discounting.
equity.

The terms and conditions of the promise to pay back money borrowed to buy a house is found in the

mortgage.
trust deed
promissory note.
deed of trust.

The process by which a mortgage loan is paid off in equal payments consisting of principal and interest is called

discounting.
amortization.
a term loan.
an equity loan.

The object of creating a negotiable instrument is to

allow a note to be transferred.
be able to foreclose on the property.
make sure payment is made.
avoid foreclosure

A home buyer borrows $280,000 to purchase a home for 30 years at an interest rate of 7%. How much interest will he pay the first year on the loan? ...

$19,600
$5,599
$1,634
Not enough information is provided

California law protects homeowners when the sale of the property cannot cover the outstanding mortgage balance

under all circumstances.
only when the home has been owned for at least two years.
only on refinancing loans.
only on the original purchase mortgage loan

A purchaser wants to buy a house that costs $330,000. The bank is offering a mortgage loan at a loan-to-value ratio of 80%. How much will the purch...

$330,000
$264,000
$66,000
$33,000

What does a discount point do to the effective yield that a lender gets from a mortgage loan?

It raises it.
It has no effect.
It lowers it.
It lowers it, but only if the seller, not the buyer, pays it.

Equity is most accurately defined as

the sale price of the house minus the mortgage amount.
the value of the house minus all liens and encumbrances.
the value of the house minus the mortgage.
the amount of the down payment

The law that controls advertising of real estate loans is

RESPA
ECOA
Regulation Z
FIRREA

A mortgage lender requires a borrower to make monthly payments, in addition to the mortgage payments, to a special account to cover taxes and hazar...

a savings account
a tax account.
an impound account.
a takeout account.

Which of the following is not true of VA and FHA loan programs in California?

Loans are guaranteed or insured by these agencies
Special qualifications or limits exist for these programs
Both programs allow adjustable-rate mortgages
Money is lent directly by these agencies

Which type of mortgage loan typically results in negative amortization?

fixed rate
adjustable rate
growing equity
graduated payment

A type of purchase financing that allows the seller to take immediate possession of the property but delays transfer of title is

a land contract.
a contract for deed.
an installment sales contract.
all of the above

The interest rate charged by the Federal Reserve System to borrow money is called the

open market rate.
prime rate.
discount rate.
reserve rate

Buyer A pays $300,000 for a house putting down $60,000 and borrowing $240,000. The house appreciates 25% during the years he owns it. When he sells...

$15,000
$75,000
$135,000
$375,000

A testator who dies testate has no need of

the laws of intestate succession.
a will.
probate.
the laws of accession

Which of the following is true?

All accessions are accretions.
All accretions are accessions.
All accessions are improvements.
All accessions are fixtures.

Builder A turns over the streets in his new subdivision to the town. He does this by

private grant.
common law dedication.
public grant.
statutory dedication.

Whose signature must be on a deed to make it valid?

the grantee
the grantor
the grantor and the grantee
two witnesses

Extra protection for title problems on property conveyed by a warranty deed is provided by

the acknowledgment.
the signature of the grantee.
the granting clause.
title insurance.

The creation of escrow is conditional on

a meeting of the minds.
procurement of a ready, willing, and able buyer.
execution of a binding contract.
creation of a settlement statement.

Which of the following is not a duty of an escrow agent?

to disclose pertinent material facts
to prepare settlement statements
to bring an interpleader legal action if necessary
to conduct an independent investigation of the transaction

The process by which payments such as taxes are allocated at closing is called

proration.
distribution.
accounting.
settlement

A seller has paid taxes of $2,400 in advance on July 1 for the following year. He closes sale of the property on November 1. Who owes how much to w...

The seller owes the buyer $1,400.
The buyer owes the seller $1,400.
The seller owes the buyer $1,200.
The buyer owes the seller $1,200

The opposite of marketable title can best be expressed as

good title.
chain of title.
abstract of title.
cloud on title.

Which of the following is true regarding title insurance policy coverage for changes in land use as a result of zoning changes?

It is covered by CLTA extended coverage policy.
It is covered by ALTA extended coverage policy.
It is not covered by either ALTA or CLTA extended coverage policy.
It is covered by both standard and extended coverage policies.

The term ad valorem usually is associated with

income taxes.
property taxes.
corporation taxes.
estate taxes.

Assuming that the current assessed value of a property after all exemptions have been applied is $55,000, what is the annual tax on that property?

$55
$550
$5,500
$2,250

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California Real Estate MCQs