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Flashcards in Quick Quiz 1 Deck (50)
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1

Businesses operating in California can take the form of an individual proprietorship, partnership, or corporation. Each form has its advantages and disadvantages. One of the advantages of operating as a general partnership is that

each partner has the use of the assets of the other partners.
Since a general partner can be held personally liable for the partnership debts, the partner wants to make every effort to help manage the business. He or she has the advantage of using the other partners' assets in developing the business.

2

What is an advantage to the seller of real property in using a conditional sales contract in the sale of property instead of giving a grant deed and taking back a large trust deed?
A) A deficiency judgment can be obtained in the event of default.
B) Foreclosure proceedings are faster thereby permitting the vendor to recover possession quickly from the buyer.
C) None of these
D) The seller can prohibit the vendor from recording the contract if the contract includes a clause prohibiting such recording.

CORRECT C) None of these
The other three choices do not offer a benefit to a seller using a land contract. There are probably no advantages since law changes in 1985.

3

The quickness with which assets can be converted into cash is known as

liquidity.
Liquidity is the ability to convert assets into cash at a price close to true value. Stocks that are traded publicly are a relatively liquid investment. Real estate is considered to be a longer-term investment as it is not highly liquid.

4

Which type of financing would LEAST likely create a need for a cash down payment from a borrower?

VA (NOT CONVENTIONAL, FHA OR CAL-VET)
A down payment is not a requirement of a Veterans Administration guaranteed loan (unless the certificate of reasonable value is less than the purchase price). However, the lender may require one. Conventional loans nearly always require some down payment, and FHA and Cal-Vet loans do require down payments.

5

Which is a freehold estate?

Estate in fee
Freehold estates are either (1) fee simple estates or (2) life estates. The wrong answer choices here are all less-than-freehold estates: (1) estates for years; (2) periodic tenancies; (3) estates at will; and (4) estates at sufferance.

6

A contract signed under duress would be

voidable.
When the mutual consent to a contract is induced by fraud, duress, menace, or undue influence, the contract is voidable at the option of the wronged party.

7

To determine the square footage of a house, measure the

outside of house.
The outside dimensions of a house are used to determine its square footage. The garage is not considered when determining square footage of a house and is measured separately because a garage can be replaced at a lower cost per square foot.

8

Mr. Sharp lists his house with Agent Long, who finds a buyer and induces Mr. Sharp to accept the buyer's offer by making a verbal promise to find Sharp another suitable residence before escrow closes on the sale. Escrow closed, and Long was unable to perform. It is most likely that

Sharp will initiate civil court action.
The seller cannot rescind his contract with the buyer, but may institute civil action for damages sustained for the unfulfilled promise of the broker that induced him to enter the purchase contract.

9

Annual property taxes for a personal residence are

1% of the assessed value plus additional cost for bond indebtedness.
Proposition 13 limits the annual property tax rate to 1% of assessed value plus an additional amount to pay for voter-approved bond indebtedness.

10

Davidson has an easement on Parkins's property. If Davidson is not a property owner, her easement is a(n)

easement in gross.
Davidson has a personal right to use Parkins's property (servient tenement). Since Davidson does not own property, and therefore there is no dominant tenement, it is an easement in gross.

11

The federal Fair Housing Law was enacted for the purpose of

providing fair housing opportunity for all persons throughout the United States.
This is the law's basic purpose: to provide all persons in the United States with fair housing opportunities.

12

The trustee will deliver to the trustor a

reconveyance deed.
In a deed of trust arrangement, the trustor is the owner-borrower who has placed bare legal title in trust with a third neutral party called the trustee. When the debt to the lender (beneficiary) is satisfied, the trustee reconveys the title back to the trustor by using a reconveyance deed. A trustee's deed would be used in case of foreclosure and would not be delivered to the trustor.

13

A salesperson unlawfully takes kickbacks in connection with licensed real estate activities. The employing broker finds out about the kickbacks, fires the salesperson, and warns others in the office not to do this. Under these circumstances

both the salesperson and the broker could be disciplined by the real estate commissioner.
A broker is responsible for supervision of employed salespersons. A failure to supervise salespersons which might contribute to the salesperson's violation of laws could lead to disciplinary action against the broker as well as against the salesperson. Only the real estate commissioner can revoke a real estate license, never the court.

14

Which is NOT essential in the creation of an agency?

Payment of consideration
While it can be created by actions, words, and conduct, an agency relationship is typically created by a listing contract or buyer representation agreement. All parties are required to have capacity and the object of the relationship must be that which is considered lawful. A broker owes a fiduciary duty to the principal. Payment of consideration is not essential to create an agency.

15

On FHA loans, mutual mortgage insurance

insures the mortgagee against loss through foreclosure.
FHA mutual mortgage insurance insures the lender (mortgagee) against loss in the event a foreclosure sale fails to satisfy the debt obligation. The mortgage insurance premium (MIP) is paid by the borrower (mortgagor).

16

The term potable refers to

water.
Potable means suitable for drinking and would refer to water.

17

To achieve planning goals, local, state, and federal governments have the authority to regulate the use of or to purchase private property. In its broadest definition the source of this authority is known as

police power.
To achieve planning goals, local, state, and federal government have the authority to regulate the use of private property provided such right is used only to promote the public health, safety, and general welfare. Government also can negotiate to purchase private property for public use. The source of this authority is the police power of the state. Note: The three other powers inherent in the state are (1) eminent domain: Taking (not purchase) of private property for a public use, with compensation; (2) escheat: reversion of property to the state upon death of an owner without heirs; and (3) taxation.

18

What essential element is necessary between a broker and a principal when dealing with the title, right, or interest in real property?

Written contract of employment
The statute of frauds requires that a listing for the sale of real property, or for the negotiation of a lease for more than a year, must be in writing to be enforceable for the payment of a commission.

19

In real estate financing, lenders will sometimes refer to "nominal rate" when granting a loan. This means

the rate of interest specified in the promissory note.
The word nominal stems from the word "name" and is the rate named in the note.

20

In determining the value of income-producing property, an appraiser may use which appraisal technique?

A Land residual technique
B) Building residual technique
CORRECT C) All of these
D) Property residual technique

21

Since land is unique in character and often cannot be substituted for another parcel, the courts have made available the right to request specific performance. Who would least likely request such an action?

A broker acting as an agent of the seller.
The broker is not a party to the contract and therefore cannot sue for specific performance.
NOT:
A) The buyer of a single-family residence
C) The seller of a single-family residence
D) The seller of a large tract of land

22

All of these are characteristics of a fee simple estate EXCEPT that it is
A) freely transferable.
B) free of all encumbrances.
C) freely inheritable.
D) of indefinite duration.

B) free of all encumbrances.
Due to taxes and special assessments, privately owned real property is never free from all encumbrances. It is possible to own property in fee simple and still have many encumbrances on it (such as a mortgage). The three characteristics of a fee simple estate are: freely inheritable, freely transferable, and of indefinite duration.

23

A money judgment of the court when recorded is always a(n)

involuntary lien.
Judgment liens are recorded against the wishes of the judgment debtor and therefore are considered involuntary.

24

With regards to blind advertising, it is

not permitted. In an advertisement, a licensee must reveal licensed status.
Blind advertising refers to not revealing the licensed status of a salesperson or broker, and is never permitted. It is not a requirement that an ad include the address of the property for sale.

25

An appraiser using the replacement cost approach on an older residential property would use all of these EXCEPT
A) land value.
B) capitalization of income.
C) depreciation.
D) cost of improvements new.

B) capitalization of income.
Capitalization of net income is unrelated to the cost approach to appraisal.

26

The loan-to-value ratio in a mortgage is defined as

amount of a loan as a percentage of the appraised value.
The loan-to-value ratio is the amount of the loan as a percentage of the appraised value. Example: An $80,000 loan on a property appraised at $100,000 would have a loan-to-value ratio of 80%.

27

The federal Fair Housing Law contains provisions to prevent discrimination due to race, color, religion, sex, or national origin. A violation of this law would be considered:
A) unlawful.
B) illegal.
C) All of these.
D) against public policy.

C) All of these.
Discrimination is illegal, unlawful, and against public policy.

28

Which transaction requires the Real Estate Transfer Disclosure Statement?
A) All of these
B) Foreclosure of one to four residential units
C) Sales transaction of one to four residential units
D) Transfer of one to four residential units in bankruptcy

C) Sales transaction of one to four residential units
Civil Code Section 1102, which requires the Real Transfer Disclosure Statement, applies to any sale of real property with up to four dwelling units. Transfers in foreclosure and in bankruptcy are specifically exempt.

29

Berg sells Mann a property, using a conditional sales contract. The contract is recorded and a deposit is made. Mann continues to live on the property but stops making payments and avoids Berg. He then abandons the property one night. In this situation

there is a cloud on the title.
The recording of the contract or taking possession of the property gives constructive notice and therefore creates a cloud on the title under the circumstances outlined. Unless the vendee could be found and persuaded to deliver a valid quitclaim deed to the vendor, a successful quiet title court action would be necessary to make the title marketable.

30

A broker was intentionally renting only to members of the Caucasian race. Under the Unruh Civil Rights Act, he or she would be
A) liable to pay the aggrieved person $250 in penalties.
B) all of these.
C) held liable for actual damages incurred by the aggrieved party.
D) subject to suspension or revocation of his real estate license.

B) all of these.
The Unruh Act covers the civil rights of persons in business establishments. By renting only to members of the Caucasian race, the broker is in violation of this act and is liable for actual damages plus $250. The broker also would be subject to suspension or revocation of his or her real estate license.