Simulated Exam #4 253

SIMULATED EXAM #4
1. May a street address be used as a legal description on documents used in a real estate sale
transaction?
a. Yes, a street address is acceptable, but it may make it difficult to get a loan on the
property.
b. No, a street address is not a legal description of the property.
c. A street address is acceptable for most purposes, but title insurers may choose not to
insure the property.
d. It is always an adequate means of description.
2. All of the following are examples of personal property, except:
a. An appurtenant easement. c. A trade fixture.
b. A leasehold interest in real estate. d. An automobile or boat.
3. Which of the following normally installs conduits over the course of their professional practice?
a. Roofers. c. Electricians.
b. Carpenters. d. Plumbers.
4. An example of involuntary alienation is a(n):
a. zoning restriction. c. eminent domain action.
b. easement by reservation. d. escheat.
5. The SW 1/4 of the N 1/2 of section 12 contains how many acres?
a. 160. c. 40.
b. 80. d. 320.
6. A listing broker may be the sole agent of the seller or:
a. the sole agent of the buyer.
b. a dual agent of both the seller and the buyer.
c. a dual agent of both the lender and the buyer.
d. a dual agent of the both the seller and the buyer’s broker.
7. A broker represents only the lessee in a commercial lease. This is an example of a(n):
a. general agency. c. dual agency.
b. implied agency. d. single agency.
8. The appraisal method that estimates the cost of all labor and materials in construction is the:
a. comparison method. c. quantity survey method.
b. unit-in-place method. d. capitalization method.
9. If the eventual highest and best use of a parcel of real estate cannot be realized for a period of
time, the current use is referred to as the:
a. temporary use. c. less than highest and best use.
b. current use. d. interim use.
10. When appraising a building which operates as a restaurant, an appraiser likely uses the:
a. market data approach. c. reproduction cost approach.
b. replacement cost approach. d. income approach.
254 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

11. In estimating the value of Fran’s single family residence (SFR), the appraiser uses the same
gross rent multiplier (GRM) that has been computed for comparable properties in the same
neighborhood. The comparable properties generate a rental amount of $3,000 per month and
were recently sold for an average of $450,000. The owner’s property currently generates $3,200
per month in rent. The estimated value of the subject property is:
a. $450,000. c. $510,000.
b. $480,000. d. $540,000.
12. Rental schedules for apartments are realistically established on what basis?
a. The cost to build the property.
b. The number of occupants a property can house.
c. A market comparison of similar apartments.
d. Rental data published in the local newspaper.
13. What is the maximum fee a Real Estate Settlement Procedures Act (RESPA)-controlled lender
may charge to a borrower for the preparation of mandatory disclosures?
a. 0.5% of loan amount. c. $100.00 for jumbo loans.
b. $25.00. d. Nothing.
14. A large down payment on real estate generally does not:
a. reduce the risk of default for the lender.
b. improve the terms of the loan for the borrower.
c. promote more stable ownership.
d. reduce the amount of equity an owner holds in their property.
15. Who pays mortgage insurance premiums (MIPs)?
a. The buyer under a U.S. Department of Veterans Administration (VA)-guaranteed loan.
b. The buyer under a Fannie Mae, Ginnie Mae or Freddie Mac approved loan.
c. The buyer under a Federal Housing Administration (FHA)-insured loan.
d. The buyer under a private mortgage insurer.
16. The Federal Housing Administration (FHA) loan fee can be paid by the:
a. Escrow officer. c. buyer.
b. seller. d. Either b. or c.
17. The relationship between an escrow officer and the parties to a real estate transaction is usually
described as which of the following?
a. An employee. c. A mediator.
b. A facilitator. d. A neutral agent.
18. Which of the following positions requires the most advanced knowledge of accounting
procedures?
a. An escrow officer. c. A real estate broker.
b. A real estate salesperson. d. An appraiser.
19. The Escrow Law is contained in the:
a. Real Estate Law. c. Civil Code.
b. Business and Professions Code. d. California Financial Code.
20. If a prior occupant died on the real estate more than prior to a buyer’s
purchase, the seller’s agent has no affirmative duty to voluntarily disclose the death to the
buyer.
a. six months c. three years
b. one year d. five years
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21. In which of the following years did the U.S. Supreme Court prohibit all racial discrimination in
the sale or lease of real property?
a. 1968. c. 1959.
b. 1964. d. 1955.
22. The U.S. Attorney General acts to enforce federal open housing laws whenever:
a. state regulations are not properly upheld by state officials.
b. a conspiracy exists to undermine federal open housing laws.
c. a complaint filed involves more than four units.
d. a complaint filed involves less than four units.
23. When renting residential property, the amount of a deposit a lessor may legally receive from a
lessee is determined in part by which of the following:
a. the size of the rental.
b. whether the unit is furnished.
c. competition from other apartment buildings in the area.
d. the number of tenants who will occupy the rental.
24. The total security deposit allowable for an unfurnished residential unit may not exceed:
a. one month’s rent. c. three months’ rent.
b. two months’ rent. d. $1,000.
25. In May, 2018, Wayne leased a unit in his apartment complex to a tenant under a two-year
lease. The tenant prepaid the last two months’ rent when they entered into the lease. For
federal income tax purposes, the prepaid rent is considered as income for Wayne:
a. in May, 2018.
b. in May, 2020.
c. that is “held in trust” until it is due.
d. only when it is used as current rent.
26. All of the following are duties of a property manager, except:
a. collecting rents. c. arranging repairs.
b. showing vacant units. d. preparing depreciation schedules for
owners.
27. The Real Estate Law is part of:
a. the Corporation Code. c. the Statute of Limitations.
b. the Business and Professions Code. d. Code of Civil Procedures.
28. A subdivider needs to give a copy of the final public report to a buyer and obtain a receipt from
the buyer before entering into a binding contract. How long does the subdivider or their agent
need to keep a copy of the receipt for the final public report?
a. One year. c. Five years.
b. Three years. d. Eight years.
29. A voidable contract remains binding upon the parties until the contract is:
a. voided. c. determined to be legal.
b. rescinded. d. unqualified.
30. When coercion or duress are applied to a party in a contract, the contract is:
a. void. c. illegal.
b. voidable. d. unenforceable.
256 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

31. The effective date for a residential purchase agreement is the date:
a. the deposit was given to the seller by the buyer.
b. the contract was written.
c. the buyer signed the contract.
d. the seller’s acceptance of the offer was properly communicated to the buyer.
32. A contract for the sale of rural property requires a:
a. rural mailing address. c. legal description.
b. county assessor parcel number. d. reference to the size of the parcel.
33. An offer to purchase real property was signed by a prospective buyer on November 12 and
submitted to the seller. The terms of the offer allow five days for acceptance by the seller. Due
to a medical emergency in the seller’s family, the seller did not accept the offer until November
20. Which of the following statements is true?
a. The buyer may demand a return of their deposit.
b. The buyer is required to continue with the purchase since they did not withdraw their
offer prior to acceptance.
c. The buyer is in breach of the contract if they refuse to continue with the purchase.
d. If the buyer does not complete the purchase as agreed, the seller and the broker are each
entitled to one-half of the deposit.
34. All of the following is true in a sale-leaseback transaction, except:
a. The seller stays in physical possession of the property.
b. The seller guarantees the buyer’s performance of the loan.
c. The seller receives a capital contribution for their business.
d. The seller becomes a tenant in the property.
35. When a buyer purchases property without being informed it is on a septic system, the buyer
may:
a. report the seller to the Department of Real Estate (DRE).
b. rescind the contract.
c. demand the sewer be connected to the property.
d. file a complaint with the local utilities.
36. All of the following are examples of a void deed, except:
a. A forged deed.
b. A deed signed and delivered by a seller under the age of 18.
c. A deed obtained through undue influence or threat.
d. A deed materially altered without the grantor’s consent.
37. A real estate license was issued for only 150 days. The reason for this shortened license period
was that the licensee:
a. was in arrears for child support payments.
b. did not fulfill all of their educational requirements.
c. is in a divorce suit.
d. is a foreign national.
38. A property management agreement does not authorize a property manager to:
a. locate tenants. c. collect rents.
b. enter into rental and lease agreements. d. oversee costly repair projects.
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39. Consider a seller who carries back a note secured by a deed of trust. If a loan broker takes on the
duty of collection, state law requires them to:
a. deliver a broker’s loan statement to the note holder.
b. post a bond.
c. have written authorization from the holder of the note to service the loan.
d. deposit the funds in a separate trust account.
40. A(n) __________ is a statement made by a broker concerning a possible condition which has
not yet occurred based on readily available facts.
a. fact c. guarantee
b. opinion d. assurance
41. A shoe factory is being built that will employ mostly women. A broker who manages nearby
apartment buildings instructs their employees to direct their advertising to married women
without children and charge more rent to certain minority groups. Are either of these practices
in violation of the fair housing laws?
a. Directing advertising to married women without children is a violation of fair housing
laws.
b. Charging certain ethnic groups a higher rate is a violation of fair housing laws.
c. Both a. and b.
d. Neither a. nor b.
42. Under the provisions of the federal Fair Housing Law, aggrieved persons who have been
discriminated against in their acquisition of housing may file a:
a. civil action in federal courts.
b. civil action in state or local courts.
c. complaint with the Department of Housing and Urban Development (HUD).
d. Any of the above.
43. If a dispute arises during escrow between the buyer and seller preventing the close of escrow,
the escrow agent may:
a. cancel the escrow. c. arbitrate the dispute.
b. file an interpleader action. d. use their discretion to resolve the issue.
44. If the state acquires title to an owner’s property by escheat, how long must it wait before
disposing it?
a. No holding period is required. c. Five years.
b. One year. d. Seven years.
45. Rental housing loans can be insured or guaranteed through:
a. the Federal Housing Administration (FHA).
b. CalVET.
c. California Housing Finance Agency (CALHFA).
d. the American Land Title Association.
46. Rental income minus operating expenses, debt service and income tax payments equals:
a. gross operating income. c. net spendable income.
b. net operating income. d. the return of investment.
258 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

47. By dividing the net operating income (NOI) generated by an income-producing property by
the price paid or offered for a property, a buyer can determine the:
a. capitalization rate (cap rate). c. gross rent multiplier (GRM).
b. net spendable income. d. capital basis.
48. When using the replacement cost method of appraisal, the appraiser calculates all of the
following, except:
a. the land value.
b. the cost to build the improvements on the property.
c. the capitalization rate (cap rate).
d. accrued depreciation.
49. A salesperson who works for a broker who dies:
a. may continue working for up to 60 days or until another broker takes over the office.
b. needs to close escrow on all pending transactions.
c. may continue working if there is an office manager appointed by the broker with two
years of management experience within the last five years.
d. needs to stop real estate activity immediately.
50. All of the following transactions do NOT require compliance with the agency law, except:
a. The sale of a single family residence sold independently by the owner.
b. Upon the entry into a three-year lease arranged by a broker on a residential property.
c. On the sale of a five-unit residential building that is sold by a licensed broker.
d. Both b. and c
51. The selling agent presents their buyer’s offer to the seller. When is the best time for the agent to
give the seller the Agency Law Disclosure form?
a. On the opening of escrow. c. After presenting the offer to the seller.
b. Before the seller signs the offer. d. As soon as practicable.
52. In addition to a fiduciary duty owed to the client in a transaction, a salesperson owes a(n)
to act with good faith and honesty towards the opposing party.
a. partial duty c. legislative duty
b. general duty d. gratuitous duty
53. A real estate agent needs to confirm their agency relationship:
a. as soon as practicable.
b. before escrow closes.
c. as soon as escrow opens.
d. whenever asked by either party in the transaction.
54. All of the following are examples of a possible agency relationship in California, except:
a. Single agent. c. Dual agent.
b. Implicit agent. d. Secret agent.
55. The creation of an agency requires:
a. express agreement. c. subornation.
b. consideration. d. None of the above.
56. All of the following are encumbrances, except:
a. A lease. c. A mechanic’s lien.
b. A homestead. d. A mortgage.
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57. All of the following are liens, except:

a. Conditions, covenants and restrictions (CC&Rs).
b. Property taxes.
c. Trust deeds and notes.
d. Judgments.
58. A(n) belongs to an individual and is their personal right.
a. easement in gross c. easement running with the land
b. appurtenant easement d. encroachment
59. All of the following are true statements about easements, except:
a. An easement is owned by the dominant tenement.
b. An easement in gross is a right in another’s land created for the benefit of adjacent land.
c. An owner cannot have an easement over their own land.
d. An easement limits the use of the land by the owner.
60. The parallel wooden beams used to support ceiling loads and floors in home construction are
called:
a. studs. c. joists.
b. rafters. d. headers.
61. An appurtenant easement granted to a neighboring property owner fails to state the term of
the easement. How long does the easement last?
a. Perpetuity. c. The lifetime of the dominant tenement.
b. 99 years. d. 55 years.
62. It is essential that every party to a real estate transaction receives a full and complete disclosure
of who is representing whom because of:
a. the federal law of agency.
b. the mandate from private real estate associations.
c. the doctrine of imputed notice.
d. the good neighbor principle.
63. A real estate broker acts from a position of trust for the seller or buyer they have been contracted
to represent. This relationship is legally described as a(n):
a. attorney-in-fact. c. fiduciary relationship.
b. ostensible agent. d. independent contractor relationship.
64. Failure to provide the Agency Law Disclosure form:
a. exposes the agent to criminal penalties. c. exposes the agent to license penalties.
b. puts the agent’s fee at risk of loss. d. forfeits the agent’s license.
65. The simplest method of estimating the replacement cost of an improvement is the:
a. quantity survey method. c. unit-in-place method.
b. index method. d. comparative method.
66. Surplus utility is an example of:
a. substitution. c. functional obsolescence.
b. contribution. d. economic obsolescence.
260 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

67. The first thing an appraiser does when appraising vacant land is determine:
a. the fertility of the soil under the property.
b. zoning laws which affect the use of the property.
c. comparable sales prices of other vacant land.
d. the highest and best use of the land.
68. The time period during which a building produces income that can be attributed to the building
itself is known as:
a. physical life. c. actual age.
b. economic life. d. effective age.
69. All of the following are required when a trust deed is paid in full, except:
a. The trustor’s signature. c. A deed of reconveyance.
b. The trustee’s signature. d. Both a. and b.
70. The interest rate on a Federal Housing Administration (FHA)-insured loan is set by:
a. Fannie Mae. c. Ginnie Mae.
b. FHA. d. negotiation between the lender and
borrower.
71. All of the following are methods by which an individual may take title to real property, except:
a. Deed. c. Escheat.
b. Prescription. d. Intestate succession.
72. Escrow can legally prepare or do which of the following activities?
a. Act as a mediator when there is a dispute between the buyer and the seller.
b. Draft escrow instructions and the grant deed.
c. Decide when escrow will close without the consent of the buyer and seller.
d. Structure a wraparound trust deed.
73. An escrow officer may do which of the following when real property is being escrowed?
a. Settle a disagreement regarding the escrow instructions between the buyer and seller.
b. Accept written instructions from the seller and buyer to change the price and terms
without the approval of any broker.
c. Cancel the escrow if the buyer doesn’t perform in a timely manner.
d. Recommend amended escrow instructions which contain a blank to be filled in after
signing.
74. All of the following are legally proper for a licensee to do, except:
a. Puffing.
b. Enter into a pocket listing with the seller’s approval.
c. To show a property only when its flaw would not be obvious.
d. Keep a client’s secret that the roof leaks.
75. A real estate broker may legally negotiate the sale of any:
a. new mobile home.
b. registered mobile home.
c. mobile home that is 32 feet in length or longer.
d. mobile home that is situated in a mobile home park.
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76. The inside of a building is 60 ft. by 90 ft. and the walls on each side are 6 inches thick. What is
the external total square footage?
a. 5,400 sq. ft. c. 4,951 sq. ft.
b. 5,551 sq. ft. d. 4,800 sq. ft.
77. On January 1, 1987, which of the following real estate disclosure laws went into effect?
a. The Agency Law Disclosure.
b. The Seller Financing Disclosure.
c. The Transfer Disclosure Statement (TDS).
d. The Real Estate Settlement Procedures Act (RESPA).
78. Which of the following needs to be in writing to be enforceable under the Statute of Frauds?
a. A lease with a one-year term.
b. A lease listing agreement with a one-year term.
c. A partnership agreement.
d. A contract which is to be performed greater than one year after it is entered into.
79. Under the Statute of Limitations, a buyer needs to bring a lawsuit for breach of written contract
against a seller within:
a. six months. c. four years.
b. three years. d. five years.
80. A seller accepts a written offer to purchase their property. Later, the seller refuses to perform to
complete the transaction. Under the Statute of Limitations, the buyer needs to file a civil action
due to the seller’s breach of a written contract within:
a. one year from the seller’s breach. c. four years from the seller’s breach.
b. one year from when the buyer signs. d. four years from when the buyer signs.
81. Broker Francis shows multiple houses he is listing to Buyer Marc and Sally Taylor, a married
couple. The buyers do not like any of the properties. When Buyer Marc is away, Broker Francis
shows a different house to Buyer Sally individually. Buyer Sally likes the property and submits
an offer to the seller with a deposit. Who is the purchase offer submitted from?
a. Sally Taylor.
b. Marc and Sally Taylor.
c. Marc Taylor himself as head of household.
d. None of the above as the offer is invalid since a married person cannot make an offer
individually.
82. Syndi owns a 50 unit apartment building managed by Scott, a licensed real estate broker.
Angela lives in the building and has been designated as the resident property manager. Who
has the ultimate responsibility for the inspection and maintenance of the building?
a. Angela. c. Scott.
b. Syndi. d. All parties are equally responsible.
83. A tenant leases a unit in an apartment complex. The owner later sells the building to a new
owner. The new owner:
a. may force an immediate payoff of the lease.
b. may increase the security deposit.
c. may raise the rent.
d. needs to honor the existing lease contract.
262 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

84. May a broker’s transaction records be kept electronically?

a. No.
b. Yes, but the broker has to provide hard copies to the Department of Real Estate
(DRE) upon request.
c. Yes, but the broker needs to also keep hard copy backups.
d. No, the broker needs to retain all the signed original paper documents for a minimum
of three years.
85. A licensee who designates how title is to be vested without any discussion with their buyer
while filling out the purchase agreement may be guilty of:
a. giving legal advice. c. potential discrimination violations.
b. giving tax advice. d. All of the above.
86. A lender who finances 100% of a property without government guarantees depends on what
to function as security for the loan?
a. Monetary policy. c. Appreciation of the value of the property.
b. Deflationary pressures. d. The borrower’s good intentions.
87. Condominium ownership is least applicable to:
a. industrial properties. c. commercial properties.
b. residential properties. d. properties built prior to 1978.
88. All of the following are required for obtaining an easement by prescription, except:
a. Payment of taxes and assessments for a period of five years.
b. A confrontation with the owner.
c. Open and notorious use which is continuous for five years.
d. Both a. and b.
89. An easement over real property can be terminated by:
a. a deed issued from the servient tenement.
b. revocation by the servient tenement.
c. a release signed by the servient tenement.
d. a release signed by the dominant tenement.
90. An easement may be acquired by prescription in a manner similar to acquisition of land by:
a. escheat. c. adverse possession.
b. eminent domain. d. testate transfer.
91. A real estate broker who obtains documents in a transaction containing an electronic signature
is required to do all of the following, except:
a. create a paper copy of the documents.
b. create a copy of the documents using electronic image storage media.
c. retain a copy of the documents on a USB drive in possession of the broker at all times.
d. retain a copy of the documents at a location other than the broker’s place of business.
92. All of the following will NOT terminate an agency relationship, except:
a. Mutual consent. c. Estoppel.
b. Death of a third party. d. Dispute.
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93. A real estate commission is normally calculated as a percentage of the:

a. asking price.
b. sales price.
c. owner’s equity in the property being sold.
d. fair market value (FMV) of the property being sold.
94. The real estate Agency Disclosure Law became effective on January 1st:
a. 1968. c. 1988.
b. 1978. d. 1998.
95. When representing their client to third persons in the sale of a residential duplex, a licensed
real estate broker is operating under the law of:
a. corporations. c. agency.
b. transactions. d. torts.
96. In the appraisal of a residential property, when is the cost approach most appropriate?
a. For a new property.
b. For a property constructed 15 years ago.
c. For a property constructed over 30 years ago.
d. For an income-producing multi-family property.
97. ln the cost approach to appraisal, the phrase “reproduction cost” differs from “replacement
cost.” “Reproduction cost” measures the:
a. original cost to replace the building.
b. present value of the property based on its economic utility.
c. present cost to build an exact replica of the property.
d. original cost to build the property.
98. To estimate the value of rental property using the gross rent multiplier (GRM) method, an
investor first determined that the monthly gross income generated by a property is $7,500.
They then applied a GRM of 15. The estimated value of the property is most nearly:
a. $1,125,000. c. $1,350,000.
b. $112,500. d. $135,000.
99. The appraisal method used most often to value raw land or sites is the:
a. land development method. c. subdivision method.
b. land residual method. d. comparative method.
100. All of the following a buyer purchasing a property with Federal Housing Administration
(FHA)-insured financing normally does, except:
a. apply to the mortgage lender.
b. apply directly through the FHA.
c. choose an Federal Housing Administration (FHA)-approved property.
d. pay mortgage insurance premiums (MIPs).
101. The broker’s commission is typically paid when:
a. the broker obtains a ready, willing, and able buyer.
b. funds are deposited in escrow.
c. escrow closes.
d. the buyer attends at least five open houses.
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102. Escrow instructions can be executed by:

a. buyers. c. third parties.
b. sellers. d. Any of the above.
103. Paul, a salesperson, presents an offer from their minority buyer to the seller for the exact
listing amount and on the same terms. Unknown to Paul, his broker later brings the seller a
less advantageous offer from a Caucasian buyer. The seller rejects both offers. Soon after, the
seller’s Caucasian neighbor hires Paul and submits an offer to the seller at the listing price,
stating they want to keep the neighborhood white. Who is not in violation of fair housing
laws?
a. Paul. c. The first Caucasian buyer.
b. Paul’s broker. d. The seller.
104. Certified copies of inspection reports filed with the Structural Pest Control Board (SPCB)
within the preceding two years may be requested and obtained by the:
a. seller in the transaction. c. broker or escrow officer.
b. buyer in the transaction. d. Any person.
105. A residential tenant has a duty to care for and maintain a leased premises. This duty includes:
a. disposing of all rubbish, garbage and waste in a sanitary manner.
b. allowing no person who is on the premises with the tenant’s permission to intentionally
damage any part of the premises or the facilities, equipment or appurtenances.
c. occupying and using the premises for the purpose it is intended to be used.
d. All of the above.
106. A Uniform Commercial Code Financing Statement (UCC-1) is removed from record by:
a. filing a termination statement. c. a notice of adjudication.
b. a notice of abandonment. d. a reconveyance deed.
107. Who is responsible for giving a pest control report to the buyer?
a. The pest control company.
b. The escrow company handling the transaction.
c. The seller or their broker.
d. The buyer’s broker.
108. The phrase “company dollar” most nearly means:
a. capital funds invested in a new company.
b. profit after expenses have been deducted.
c. the broker’s share of the commission received.
d. total fees received by all employees at an office.
109. If apartments are converted to condominiums, an existing tenant needs to be given a period
of to either buy the condo or vacate.
a. 30 days from public report issuance
b. 90 days from public report issuance
c. six months from public report issuance
d. six months after notice of intent
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110. All of the following provide constructive notice, except:
a. telephone poles across a property.
b. knowledge of an unrecorded deed to a stranger.
c. a recorded deed to a stranger.
d. a stranger in possession of a property.
111. Recording a deed provides:
a. actual notice. c. contingent notice.
b. constructive notice. d. personal notice.
112. In the context of the relationship between the listing broker and the seller, the broker is a(n):
a. agent of the seller. c. employer of the seller.
b. dual agent. d. subagent of the seller.
113. Appurtenant rights include the right of across adjoining properties.
a. ingress c. Both a. and b.
b. egress d. Neither a. nor b.
114. All of the following are essential to the creation of an agency relationship, except:
a. Consent of the principal.
b. Competency of the principal.
c. A written agreement confirming the agency relationship.
d. A fiduciary relationship that exists prior to creating the agency.
115. All of the following may create agency relationships, except:
a. by ratification. c. by implied contract.
b. without the consent of the principal. d. when necessitated by emergency.
116. All of the following relate to obsolescence, except:
a. neighborhood that is deteriorating.
b. property that has too few closets.
c. property that suffers from a bad architectural design.
d. property that needs to be painted.
117. All of the following are appropriate when appraising under the income approach, except:
a. office properties.
b. residences in an owner-occupied subdivision.
c. industrial buildings under a long-term lease.
d. shopping malls.
118. When the Federal Reserve (the Fed) raises the discount rate charged to its member banks, this
raises interest rates and:
a. increases the supply of money in circulation.
b. encourages mortgage borrowing.
c. reduces the supply of money in circulation.
d. promotes an increase in the homeownership rate.
119. All of the following are required in a lease, except:
a. Advance rent.
b. The length of the lease term.
c. A description of the rental with reference to its location.
d. The amount of the monthly rent and when it is to be paid.
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120. The commission of a leasing agent is generally based upon a percentage of:
a. the total operating costs incurred running the property.
b. the cash paid by a lessee at the time of signing the lease.
c. the total rent collected by the lessor over the term of the lease.
d. the prevailing commission rates commanded by similar brokers.
121. What is the maximum amount that may be paid from the Real Estate Recovery Fund?
a. $20,000. c. $100,000.
b. $40,000. d. $250,000.
122. When a counteroffer is made:
a. the original offer is void.
b. the original offeree is still the offeree.
c. the original offeror is still the offeror.
d. the original offer is considered accepted with the exceptions noted in the counteroffer.
123. The is the primary enforcer of anti-discrimination law in California.
a. Department of Housing and Urban Development (HUD)
b. Department of Fair Employment and Housing
c. Labor Commission.
d. Department of Business Oversight (DBO)
124. Which of the following is least likely to appear as a debit on a buyer’s closing statement?
a. Proration of property taxes.
b. Interest on a loan assumed by the buyer.
c. Discount points for a new Federal Housing Administration (FHA)-insured loan.
d. Homeowner’s insurance premiums.
125. All of the following are a dangerous gas, except:
a. Carbon dioxide. c. Formaldehyde.
b. Carbon monoxide. d. Radon.
126. Mr. and Mrs. Hartford are denied a home loan due to a credit report which contained incorrect
negative information. They sent corrective documentation into the credit reporting agency
which issued the report. If the credit reporting agency fails to correct the credit report, the
Hartfords may file a court action and seek:
a. attorney’s fees. c. court costs.
b. actual and punitive damages. d. All of the above.
127. The Federal National Mortgage Association (Fannie Mae) is active in
by securitizing mortgages into mortgage-backed securities.
a. the primary mortgage market c. CalVET financing
b. the secondary mortgage market d. low income housing
128. One year after the expiration of their real estate license, the licensee wishes to renew their
license. All of the following statements are correct, except:
a. They need to retake the state license examination.
b. They are required to fulfill the continuing education (CE) requirements.
c. The late renewal fee is higher than the on-time renewal fee.
d. They have a two-year grace period in which to renew their license.
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129. Buyer Martin agreed in writing to purchase Seller William’s property for $365,000. The offer
was conditioned on Buyer Martin being able to obtain a U.S. Department of Veterans Affairs
(VA)-guaranteed loan for the purchase price secured by the subject property. Of the following,
which best represents Buyer Martin’s option under this purchase transaction?
a. If the $365,000 VA-guaranteed loan is not obtainable, Buyer Martin may renegotiate
the purchase contract on terms mutually agreeable to Buyer Martin and Seller William.
b. If the Certificate of Reasonable Value (CRV) is less than $365,000, Buyer Martin is
entitled to cancel the transaction.
c. If the CRV on the property is $350,000, the buyer may complete the purchase by making
an additional $15,000 down payment.
d. All of the above.
130. The sequential steps of the Agency Law Disclosure are:
a. disclose, elect, confirm. c. disclose, confirm, dissolve.
b. confirm, elect, disclose. d. disclose, confirm, elect.
131. A real estate agent may not represent all of the principals in a transaction if:
a. they have not obtained the consent of all parties to this agency relationship.
b. they have informed all principals they are acting as a dual agent.
c. they are collecting a commission from each principal with the knowledge of the others.
d. they also represent other clients in other unrelated transactions.
132. All of the following are true regarding easements, except:
a. Easements need to be recorded to be enforceable.
b. All easements are encumbrances, yet not all encumbrances are easements.
c. An easement doesn’t necessarily run forever.
d. All of the above.
133. In appraising a property with two bathrooms, the appraiser used a comparable property with
2 1/2 baths. The appraiser should:
a. add the cost of the half bath to the subject property.
b. deduct the cost of the half bath from the sale price of the comparable property.
c. disregard the difference since it is insignificant.
d. add the cost of the half bath to the comparable property.
134. All of the following are included in The Federal Reserve’s (the Fed’s) monetary tools, except:
a. raising interest rates on government-insured mortgages.
b. raising and lowering the discount rates to member banks.
c. adjusting the reserve requirements for banks.
d. buying and selling U.S. government bonds.
135. Which of the following is least likely to be a benefit of using Federal Housing
Administration (FHA)-insured financing?
a. A low down payment.
b. Minimum property requirements.
c. A long loan term which yields lower monthly payments.
d. Title does not transfer until the loan is fully repaid.
268 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

136. All of the following statements are false concerning typical escrow procedures, except:
a. Once escrow has closed, the escrow agency changes from a dual agency to a separate
agency of each principal.
b. The escrow officer may be an advocate for the best interests of both principals.
c. Once the escrow officer is in possession of a binding contract between the buyer and
seller, it is said to be a “complete escrow.”
d. The escrow officer can be an advisor to both the buyer and the seller.
137. All of the following landlord requirements are NOT a violation of fair housing laws, except:
a. Every tenant is to have a good credit rating and a steady source of income.
b. Every tenant is to provide positive references from their previous landlords.
c. Every unmarried tenant is to have a cosigner on the lease.
d. Every tenant is to pay the first and last month’s rent in advance.
138. A real estate salesperson maintained an active presence in a target community in an effort
to obtain listings. The salesperson told members of the community that property values in the
area were decreasing due to the entry of minority buyers into the neighborhood. This conduct
is:
a. not a violation of any legal or ethical standards.
b. permissible if the representations are true.
c. standard practice and acceptable behavior.
d. grounds for disciplinary action.
139. Appraising a multi-million dollar home in Beverly Hills requires a(n):
a. Certified Residential License. c. Certified General License.
b. Residential License. d. Either a. or c.
140. A(n) is a broker who simultaneously represents the best interest of opposing
parties in a transaction, e.g., both the buyer and the seller.
a. dual agent c. subagent
b. secret agent d. finder
141. The gross rent multiplier (GRM) is calculated by dividing the:
a. asking price of a residence by the adjusted gross rent.
b. listing price of a neighboring property by its operating expenses.
c. cost of the property amenities by the value of the raw land.
d. sales price by the gross monthly income.
142. The maximum potential income an income-producing property is capable of generating is
known as:
a. gross operating income. c. net operating income.
b. gross scheduled income. d. net spendable income.
143. When ordinary repairs are made to broken equipment in an income-producing property,
these repairs are classified as:
a. deferred maintenance. c. corrective maintenance.
b. preventive maintenance. d. property upgrades.
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144. A window on hinges is most likely a:

a. double-hung window. c. bay window.
b. casement window. d. dormer window.
145. Sally grants an easement over her land to Bill so he can access his land. The easement is
recorded. Bill then buys Sally’s land and later sells it to Martha without disclosing the existence
of the easement. Bill ceases to use the easement for a period greater than five years. When Bill
later attempts to use the easement, Martha objects. What is the outcome of this scenario?
a. The easement was lost when Bill purchased Sally’s land.
b. The easement was lost by five years’ nonuse.
c. Martha must allow Bill access his property.
d. Bill may occupy the property under the theory of adverse possession.
146. All of the following transactions are NOT exempt from use of the Agency Law Disclosure,
except:
a. The sale of an industrial building.
b. The sale of agricultural land.
c. Upon the entry into a two-year lease of a residence.
d. Upon the entry into a month-to-month rental agreement.
147. A seller listed their house for sale with a broker for $700,000. The seller informed their broker
the property needed to be sold quickly. The broker showed the property to a buyer and told
them that the seller was desperate and would accept $600,000. Based on the broker’s statement,
the buyer offered $600,000 for the seller’s property. The seller accepted the offer. Concerning
the broker’s actions, which of the following is true?
a. The broker interpreted the seller’s wishes and produced a sale. Their ratification of the
offer made the broker’s actions acceptable.
b. The broker’s actions were reasonable since the seller accepted the offer and was able to
sell quickly.
c. The broker’s actions were proper because the seller stated they wanted an immediate
sale.
d. The broker violated their fiduciary obligation to the seller since they acted in excess of
their authority.
148. The Closing Disclosure published by the Consumer Financial Protection Bureau (CFPB)
summarizes the final mortgage terms and details for the buyer. It needs to be delivered to the
buyer:
a. one week prior to the closing of the transaction.
b. three business days after the buyer submits a loan application.
c. at least three business days before the buyer closes on the mortgage.
d. on the day of settlement.
149. Most of California real estate laws originally come from:
a. Napoleonic Law. c. Spanish Civil Law.
b. Mexican Law. d. English Common Law.
270 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

150. All of the following terminates an existing offer to purchase real estate except:
a. when the buyer revokes the offer after the seller’s acceptance has been communicated.
b. the lapse of time as written in the offer.
c. submission of a counteroffer.
d. the death of the buyer before the seller’s acceptance has been communicated.