Simulated Exam #5 281

SIMULATED EXAM #5
1. The holder of a life estate designated as the named life cannot:
a. lease the property. c. will their rights to an heir.
b. sell their interest in the property. d. borrow against their ownership interest.
2. A fee simple absolute estate is defined as:
a. an estate based on a condition precedent.
b. an estate for years.
c. the highest interest one can have in real property.
d. a life estate.
3. Land created by a river or lake that recedes permanently belongs to the owner of the bank or
shore through the process of:
a. alluvium. c. appropriation.
b. reliction. d. escheat.
4. Property improvements that do not become part of the underlying real estate at the end of a
lease term include:
a. a stairwell. c. attached carpeting.
b. a wall. d. large pieces of furniture.
5. In the order in which they are to occur, the three steps of agency disclosure are:
a. elect, confirm, disclose. c. disclose, elect, confirm.
b. disclose, confirm, disclose. d. confirm, elect, disclose.
6. When a broker represents the best interests of opposing parties in a transaction with full
disclosure to both parties, the broker is known as a(n):
a. unethical agent. c. dual agent.
b. subagent. d. finder.
7. Agency Law prohibits which of the following brokerage activities?
a. Accepting commissions from both the buyer and the seller.
b. Acting as an escrow.
c. Selling property they own.
d. Accepting kickbacks from the lender.
8. must remain the undisclosed knowledge of the dual agent, unless authorized
to release the information in a writing signed by the principal in question.
a. Confidential pricing information
b. Material facts regarding the property’s condition
c. The square foot measurements of the property
d. The proximity of military ordinance
9. An individual who has been delegated agency duties by an agent of the client, but is not
employed by the client, is referred to as a(n):
a. multiple listing partner. c. subcontractor.
b. subagent. d. tandem agent.
10. A(n) may be made to an offer received consisting of terms different from
those of the offer rejected.
a. waiver c. ratification
b. counteroffer d. novation
282 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

11. When a purchase agreement requires the seller to pay for a structural pest control inspection
and perform any necessary corrective work, the buyer needs to receive a copy of the structural
pest control report:
a. within five days of opening escrow.
b. within five working days of the date of the pest report.
c. as soon as practicable before the close of escrow.
d. no more than three business days after the close of escrow.
12. Which of the following is the most correct statement about an option to purchase contained in
a lease agreement?
a. The option to purchase will generally pass with an assignment of the lease.
b. The lease creates restrictions upon the optionee.
c. An option needs to provide mutual benefits and obligations.
d. An option creates a fiduciary relationship between the optionor and the optionee.
13. A broker enters into an oral listing agreement with a seller and locates a suitable buyer who
purchases the property. Payment of a commission to the broker is:
a. a violation of the Real Estate Commissioner’s regulations.
b. regarded as a violation of the Statute of Frauds.
c. a civil violation of the law.
d. unenforceable and at the option of the seller.
14. When one party is substituted for another party in a contract, it is called:
a. novation. c. subordination.
b. assignment. d. redaction
15. All records of an agent’s activities during the listing period need to be retained for:
a. four years. c. two years.
b. three years. d. one year.
16. If a principal no longer wants to employ a broker to act on their behalf after entering into an
exclusive right to sell listing, they may:
a. switch the listing to a different broker without the consent of the original broker.
b. revoke the listing contract and not be liable for damages.
c. choose not to cooperate in the marketing effort and risk liability for damages.
d. sue the broker for damages if the home didn’t sell.
17. As the first step in developing a risk reduction program for their office, a broker:
a. identifies all the activities agents perform which could result in a claim of liability
against the broker.
b. monitors ongoing agent compliance with established risk management protocol.
c. requires all their agents to take a driving test through an obstacle course.
d. requires licensees to provide proof of health insurance.
18. If a water heater meets safety requirements, the seller notes the compliance by marking the
box next to “anchored, braced or strapped” on the:
a. purchase agreement. c. Transfer Disclosure Statement (TDS).
b. Environmental Impact Report (EIR). d. Paolo Safety Disclosure.
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19. A broker has a listing on a property and locates a buyer who is willing to purchase the property
for greater than the listing price. The broker does not disclose the existence of the offer to the
seller and purchases the property themselves, later selling it to the original buyer. Here, the
broker is guilty of:
a. breaching their fiduciary duty to the seller.
b. extracting an improper secret profit.
c. improperly converting the profits from the sale.
d. Both a. and b.
20. are allowed between two brokers if the broker receiving it is not providing
another service in the transaction, such as financing, insurance or escrow.
a. Referral fees c. Secret profits
b. Hidden fees d. Duplicate fees
21. Broker fees deposited with a broker by a client prior to being earned by the broker are known
as:
a. duplicate charges. c. advance fees.
b. advance costs. d. kickbacks.
22. The Natural Hazard Disclosure Statement (NHD) requires the seller’s agent to disclose to a
prospective buyer whether they have knowledge the property:
a. has a roof more than three years old.
b. is located in a fault zone.
c. is located in an area with a high crime rate.
d. has an outdoor pool.
23. The federal Lead-Based Paint Disclosure (LBP) is required on all residential
construction.
a. pre-1978 c. pre-1995
b. post-1978 d. post-1995
24. Commingling is the opposite of:
a. subrogation. c. subordination.
b. mixing d. separation.
25. A broker maintains a for each owner of trust funds held in a trust account.
a. subaccount ledger c. marketing package
b. carbon record d. deposit receipt
26. An unlicensed assistant can properly:
a. show property to prospective buyers.
b. enter into a listing agreement on behalf of their employing broker.
c. discuss the terms and conditions of a possible sale.
d. prepare a Competitive Market Analysis (CMA) for a prospect.
27. A broker may use funds in a company trust account to:
a. make mortgage payments on behalf of the owners of properties managed by the broker.
b. to pay office salaries.
c. provide advances to salespeople.
d. pay for personal items, so long as the trust account is reimbursed.
284 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

28. A brother and sister held title to a duplex as joint tenants. All their other business and personal
properties were held separately. The sister, who was insolvent, died with outstanding debts
owed to creditors. After her death, title to the duplex is held by the brother:
a. free and clear.
b. as a tenant in common with the sister’s creditors.
c. as a tenant in common with the tenants of the duplex.
d. subject to probate procedures.
29. Although title to an income-producing property held by co-owners for profit is vested in the
names of all the co-owners, it is collectively called a(n):
a. trust c. partnership
b. sole ownership d. fiduciary
30. An abstract of title issued by a title insurance company is:
a. a boilerplate industry form.
b. functions as a preliminary title report.
c. defines the physical borders of the property.
d. a written summary of documents shown in the title history of the property.
31. Which type of title insurance policy insures against all title risks?
a. American Land Title Association (ALTA).
b. Extended coverage policy.
c. California Land Title Association (CLTA).
d. No title policy covers all risks.
32. When a loan is secured collaterally, the loan is a(n):
a. chattel mortgage. c. all-inclusive loan.
b. loan secured by another loan. d. piggyback loan.
33. The promissory note and mortgage are signed by:
a. the mortgagee. c. the trustee.
b. the lender. d. the mortgagor.
34. The Real Estate Settlement Procedures Act (RESPA) prohibited __________ in 1974.
a. kickbacks c. adjustable rate mortgages (ARMs)
b. subprime loans d. piggyback loans
35. Which of the following is most important to a lender when determining whether to fund a
loan?
a. The amount of liquid funds it has on reserve to originate other loans.
b. Its relative risk of funding the loan.
c. Its profit margin on the loan.
d. The appraised value of the property securing the loan.
36. Changes in mortgage financing terms will affect the:
a. price and value of the property. c. value only.
b. price only. d. use of the property.
37. When deciding whether to fund a real estate loan, institutional lenders generally avoid:
a. a high risk yield. c. borrowers with multiple jobs.
b. high income borrowers. d. subprime loans within their portfolio.
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38. The ethics and standards of practice for appraisers are described in:
a. State Real Estate Law.
b. Member of the Appraisal Institute (MAI) Reference Manual.
c. Uniform Standards of Professional Appraisal Practice (USPAP).
d. Fannie Mae (FNMA) Guidelines.
39. In real property, the major loss of value comes from:
a. deterioration. c. old age.
b. obsolescence. d. lack of maintenance.
40. While building a new home, a developer received several offers to purchase the property. Prior
to completion, the city announced it was taking 15 feet from the front of the property for a new
bicycle lane. Afterwards, all additional offers to purchase the property were for 20% less. Which
of the following types of depreciation apply?
a. Physical wear and tear. c. Social dissatisfaction.
b. Functional obsolescence. d. Economic obsolescence.
41. The basis of the market data approach to appraisal is found in the:
a. principle of balance. c. principle of conformity.
b. principle of substitution. d. principle of contribution.
42. When two properties are perceived as comparable, buyers tend to concentrate on price. This
principle is called:
a. contribution. c. balance.
b. anticipation. d. substitution.
43. Under the market comparison approach, if a comparable property lacks a feature that is present
in the subject property, the value that feature will contribute is:
a. ignored since it has no effect on the sales price.
b. identified in the appraisal report for comparison purposes.
c. added to the sales price of the comparable property.
d. subtracted from the sales price of the subject property.
44. The appraisal method most commonly used to value land or sites is the:
a. cost approach. c. the land development approach.
b. income approach. d. sales comparison approach.
45. All of the following describe excess land, except:
a. Land which does not add to the total value of the property.
b. Land in excess of that used by comparable properties.
c. Land that is not sufficiently utilized by the improvements on it.
d. Land that is used to store unused property fixtures.
46. For a retailer, the most important factor when choosing the site for a commercial property is:
a. visibility. c. traffic flow.
b. easy access. d. the purchasing power of the area.
47. A broker acting as an agent on behalf of both the landlord and tenant is a(n):
a. single agent. c. double agent.
b. dual agent. d. subagent.
286 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

48. A broker on any type of real estate transaction who fails to promptly disclose their dual agency
is subject to:
a. liability for their clients’ money losses.
b. a $25,000 penalty.
c. disciplinary action by the Internal Revenue Service (IRS).
d. deportation.
49. After a broker enters into a listing agreement for an apartment building with a corporation, the
officers of the corporation die in an accident. What happens to the listing?
a. The listing is withdrawn from the market until new corporate officers ratify the
agreement.
b. The listing is automatically voided as the employing party has died.
c. The listing is unaffected and enforceable.
d. The listing converts to a debt obligation against the corporation in the amount of the
broker’s commission.
50. The Real Estate Commissioner, under the Subdivided Lands Law, deals primarily with the
court.
a. Municipal c. Federal Supreme
b. Superior d. State Appeals
51. In a general plan, what is the method of enforcement used by the planning commission?
a. Escheat. c. Eminent domain.
b. Prescriptive easement. d. Zoning.
52. Riparian rights:
a. grant ownership of adjacent water ways to a neighboring real estate owner.
b. include the right to reasonably appropriate water from a river, stream or brook as
needed.
c. need to be expressed in the mortgage or note and trust deed.
d. may be discovered through a thorough examination of public records.
53. When population growth causes real estate values to increase, this is classified as:
a. substitution. c. excess profit.
b. economic advantage. d. an unearned incremental increase.
54. Which of the following is an example of a subdivision?
a. Six row houses.
b. A triplex converted to condos.
c. A condo converted to six timeshare properties.
d. Eight timeshare properties.
55. A soil pipe is a(n):
a. drainage pipe. c. electrical conduit.
b. sewer pipe. d. any clay or adobe pipe.
56. When one broker authorizes another broker to act as a subagent on the seller’s approval, the
subagent is primarily responsible to:
a. the Department of Real Estate c. the original broker.
(DRE).
b. the seller. d. both the buyer and the seller.
 Simulated Exam #5 287

57. All of the following require an agency relationship, except:

a. consideration. c. a competent principal.
b. mutual consent. d. Both b. and c.
58. Broker Stan acts as a dual agent for both Buyer Esmerelda and Seller Geoffrey. At no point does
Broker Stan reveal their dual agency status. Which is the least likely outcome?
a. The broker is forced to forfeit their broker fee.
b. The broker is disciplined by the Department of Real Estate (DRE).
c. The broker is liable for their principals’ money losses.
d. The broker faces a criminal conviction.
59. A(n) occurs when a broker provides services to both a buyer and a seller in
a transaction without disclosure, and is unaware the buyer and seller both consider them their
agent.
a. deniable agency c. ostensible agency
b. intuitive agency d. agency confirmation
60. When listing agents improperly delete or strike through terms or provisions in a signed
purchase agreement, this act is known as:
a. interlineation. c. forgery.
b. rearrangement. d. defacing.
61. Without a liquidated damages provision in the purchase agreement, the seller is entitled to
recover:
a. only 3% of their money losses caused by the buyer’s breach.
b. only 10% of their money losses caused by the buyer’s breach.
c. the entire amount of their money losses caused by the buyer’s breach.
d. none of their money losses caused by the buyer’s breach.
62. A broker under an exclusive listing also holds an option to purchase the property. If the broker
intends to exercise the option, the broker:
a. has a conflict of interest which needs to be disclosed.
b. needs to obtain the seller’s approval of the broker’s exercise of the purchase option in
writing.
c. needs to obtain the approval of the Department of Real Estate (DRE).
d. needs to avoid receiving other offers before exercising the option.
63. All of the following statements regarding an option are true, except:
a. An option may not be exercised after the expiration of the option term.
b. Consideration needs to be provided in exchange for granting the option.
c. The option binds the optionee to performance.
d. An option does not provide the optionee the right to use the land during the option
period.
64. A seller signs three open listing agreements. Which of the following is correct?
a. The listing contract is voidable by any of the brokers.
b. The listings are illegal.
c. The payment of a commission is unenforceable.
d. The broker who delivers an acceptable offer receives the full commission.
288 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

65. A listing broker needs to present all offers received on a listing property until:
a. an offer is accepted. c. all contingencies are removed.
b. escrow is opened. d. escrow is closed.
66. All of the following a seller of a property is not bound by the acts and representations of, except:
a. the escrow officer performing escrow for the transaction.
b. the listing broker employed by the seller.
c. the mortgage broker who funds the buyer’s loan.
d. the buyer’s broker.
67. When asked by the prospective buyer about any aspect of a property, the seller’s agent:
a. is duty-bound to respond fully and fairly to the inquiry.
b. only needs to respond if the question addresses a material fact about the property.
c. is to refer the buyer to address the question to the buyer’s agent.
d. is duty-bound to answer only as authorized by the seller.
68. A preprinted disclaimer contained in the statutory Transfer Disclosure Statement (TDS) states
the disclosures made by the seller on the form:
a. may be relied on by a buyer as a warranty of the actual condition of the property.
b. are not part of the terms of the purchase agreement.
c. Both a. and b.
d. Neither a. nor b.
69. A property manager must deposit all funds collected on behalf of a landlord into a
within three business days of receipt.
a. trust account c. general brokerage account
b. personal account d. savings account
70. Which of the following appraisal reports provide the greatest degree of detail about a property?
a. Uniform Residential Appraisal Report. c. Fannie Mae Form 1004.
b. Appraisal letter. d. Narrative appraisal report.
71. The value of unimproved property is best estimated by which of the following appraisal
approaches?
a. The income approach. c. The cost approach.
b. The sales comparison approach. d. Capitalization rate (cap rate).
72. The unit of comparison when appraising land is:
a. cost per square foot. c. cost per acre.
b. cost per front foot. d. Any of the above.
73. When a dual agency relationship is established in a targeted sales transaction, the broker and
their agents may not pass on any information from one party to the other relating to:
a. the price the buyer may be willing to pay.
b. the terms of payment the seller may be willing to accept.
c. confidential financial information of the parties.
d. All of the above.
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74. The price a reasonable, unpressured buyer would pay for a property on the open market as set
by an appraisal is known as the:
a. mark-to-management value. c. value in use.
b. fair market value (FMV). d. assessed value.
75. The referral of a client to a financially controlled business owned by the broker is required to
be disclosed by use of a(n):
a. Agency Law Disclosure.
b. Affiliated Business Arrangement Disclosure Statement.
c. home inspection report.
d. Conflict of Interest Disclosure.
76. The , contained in all purchase agreements, states the existence or
nonexistence of each broker’s fiduciary agency with the various parties to the transaction.
a. agency confirmation provision c. hold harmless agreement
b. broker liability agreement d. attorney fee provision
77. A listing broker enters into negotiations to sell an office building to a limited partnership in
which the broker is a limited partner. The broker does not disclose their interest in the limited
partnership to the seller. Before closing, the seller discovers the broker’s interest and refuses to
sell. What is the likely outcome of a civil suit to collect a commission?
a. The case is transferred to the Real Estate Commissioner.
b. The case is sent to criminal court.
c. No commission would be due to the broker.
d. The broker would likely be awarded their full commission.
78. Accretion results in the acquisition of title to real estate by which of the following methods?
a. Eminent domain.
b. Acquisition through natural causes.
c. Transfer through a valid will or intestate succession.
d. Acquisition of title by adverse possession.
79. An unearned incremental increase in the value of real property does not result from:
a. added amenities to the property.
b. change of zoning.
c. increased density of population.
d. advantageous methods for measuring depreciation.
80. A person who owns an undivided interest in a parcel of real property together with a separate
interest in communal space has an interest in a(n):
a. subdivision. c. commune.
b. condominium project. d. corporation.
81. A property owner dies testate, leaving a spouse and three children. The owner’s estate is
distributed:
a. to their heirs by right of reversion.
b. one-half to their spouse and one-half divided among the three children.
c. equally among the heirs.
d. in accordance with their will.
290 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

82. The right to use, enjoy and alienate real estate to the exclusion of all others most accurately
describes:
a. a possessory right. c. ownership.
b. a tenancy. d. an estate for years.
83. Which of the following may also be called an estate of inheritance?
a. Fee simple. c. Condition subsequent.
b. Remainder interest. d. Future life estate.
84. A residential neighborhood suffers economic obsolescence from which of the following?
a. Functional inadequacies.
b. Airplanes landing at a nearby local airport.
c. Physical wear and tear.
d. Obsolete heating and cooling systems.
85. All of the following are NOT examples of economic obsolescence, except:
a. A leaking roof. c. An oversupply of like-kind properties.
b. No off-street parking. d. A deteriorated bearing wall.
86. If multiple lenders participate in the same loan but in different portions, the loan is a(n):
a. 80/20 mortgage. c. participation loan.
b. piggyback loan. d. apportioned loan.
87. When a broker’s unlicensed assistant prepares marketing material, the Business and Professions
Code requires:
a. the broker to be the original source of all content for the advertisements.
b. the broker to read and approve all material before it is used.
c. the broker’s approval to be in writing before the material is used.
d. the broker to ensure the assistant is provided with accurate information.
88. All of the following transactions are necessary for a broker to maintain trust records, except:
a. A check immediately handed to escrow.
b. A deposit check delivered to the seller.
c. A rent check quickly delivered to the lessor.
d. None of the above.
89. Which of the following is the most important reason for a broker to maintain a trust fund
account separate from the business account?
a. To impress clients.
b. To satisfy Department of Real Estate (DRE) auditors.
c. To avoid the commingling and converting the funds.
d. For ease of accounting.
90. A buyer wishing to recover losses caused by a listing agent’s negligent failure to disclose known
material defects has to pursue their losses.
a. one month c. one year
b. six months d. two years
91. Apartment buildings with or more units are required to have a landlord, resident
manager or responsible caretaker living on the premises to manage the property.
a. 8 c. 16
b. 12 d. 24
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92. A broker is assured a fee under a safety clause in a listing agreement if:
a. information about the property is provided to prospective buyers during the listing
period by the listing agent.
b. the seller is notified of the identification of the prospective buyers who later purchases
the property as soon as possible after termination of the listing.
c. a prospective buyer located during the term of the listing acquires the property as a
result of negotiations commenced during the safety period.
d. All of the above.
93. Which of the following is the maximum term of an exclusive right to sell listing on real
property?
a. One year. c. 90 days.
b. Six months. d. Whatever time period is agreed to by the
seller and broker.
94. Any exclusive right to sell listing needs to contain a(n):
a. definite termination date.
b. commission rate below the state maximum.
c. definite listing price.
d. authorization to accept a deposit from a buyer.
95. An irrevocable right to purchase property within a specific time period is called a(n):
a. option to buy. c. subrogation.
b. novation. d. right of first refusal.
96. All of the following terminate an offer to purchase real property, except:
a. A counteroffer.
b. When the offeror revokes the offer after the offeree notified them of their acceptance.
c. Death of the offeree prior to acceptance.
d. When the stated period given by the offeror is exceeded prior to acceptance by the
offeree.
97. Brokers and agents are required to complete ______ hours of continuing education (CE) every
four years to renew a license issued by the Department of Real Estate (DRE).
a. 50 c. 30
b. 45 d. 15
98. Commission splits between a broker and a salesperson are determined by:
a. an implied contract. c. local custom.
b. an express contract. d. a written contract.
99. The Transfer Disclosure Statement (TDS) requires a broker to:
a. visually inspect the property and inform the buyer of any material facts.
b. inspect the common areas in a condominium community.
c. inspect the inaccessible areas of the property.
d. pay for a mold and radon gas inspection.
100. A Transfer Disclosure Statement (TDS) needs to be delivered to buyers on targeted transaction
by the:
a. court assignee. c. beneficiary.
b. trustee. d. seller.
292 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

101. The holding of the Easton v. Strassburger court case requires brokers to:
a. explain economic conditions to the buyer.
b. notify the buyer of their right to property inspections.
c. explain the meaning of “as is” in regards to a property.
d. reveal all known material facts about a property.
102. Use of the Natural Hazard Disclosure (NHD) statement is required by sellers on:
a. court-ordered transfers or sales and transfers to or by governmental entities.
b. transfers between co-owners and transfers to relatives or spouses.
c. Both a. and b.
d. Neither a. nor b.
103. Senior citizen housing is restricted to housing for persons or older.
a. 52 or 55 c. 55 or 62
b. 55 or 60 d. 65 or 72
104. Broker Stella, who is not a Realtor, uses a sign which says “Realtor” at her home office. She
pays a 17 year-old high school student $10 for each listing they bring into her office. She keeps
her client’s money in her safe at home. All of the following are violations of the real estate
law, except:
a. Paying an unlicensed person to solicit listings.
b. Improper office location.
c. Using the term “Realtor” when she is not a member of the National Association of
Realtors (NAR).
d. Commingling the client’s money with her own money in the home safe.
105. When a broker deposits a client check into the company general account, the broker has
committed:
a. conversion. c. commingling.
b. reconciliation. d. puffing.
106. When a property is vested with “alienable title,” this means it:
a. cannot be conveyed. c. can be conveyed.
b. is encumbered. d. is restricted as to who the property can
be transferred to.
107. Title insurance is the means by which the title insurance company a person
who acquires an interest in real estate against a monetary loss caused by an encumbrance on
title.
a. holds harmless c. indemnifies
b. reimburses d. All of the above.
108. All of the following is included in any policy of title insurance, except:
a. Defects in the chain of title.
b. Lack of capacity of a previous title holder.
c. Legal fees and expenses incurred to defend title.
d. A zoning or regulation dispute.
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109. When the market turns from a seller’s market to a buyer’s market, which of the following is
true?
a. Interest rates go down. c. Prices fall.
b. Prices rise. d. There is no change in price.
110. The value of the nicest home on the block will be reduced by the existence of inferior properties
on the same block. This is known as the principle of:
a. regression. c. highest and best use.
b. progression. d. substitution.
111. All of the following are examples of functional obsolescence, except:
a. an over improvement. c. a one car garage.
b. a swimming pool in cold climate. d. deferred maintenance.
112. The Agency Law Disclosure is not required to be attached to a(n):
a. exchange arrangement.
b. purchase agreement for single family residential property.
c. purchase agreement for commercial property.
d. month-to-month rental agreement.
113. When showing a listed property to potential buyers, what is the listing broker required to
disclose?
a. Only what they have been authorized by the seller to disclose.
b. All facts about the seller’s motivation that might cause the buyer to make an offer.
c. Anything that encourages the buyer to buy quickly.
d. All known material facts about the property.
114. All of the following statements are true concerning an in-house sale, except:
a. the listing broker can buy the property themselves.
b. the listing broker can act as an agent for the seller only.
c. the listing broker can act as a dual agent.
d. the listing broker can act as an agent for the buyer only.
115. Which of the following zoning designations is suitable for land used as the site of multi-
family residential developments?
a. I-3. c. R-4.
b. R-1. d. MU-4.
116. Which of the following creates an agency relationship?
a. Subornation. c. Ratification.
b. Voluntary action of the broker. d. Interlineation.
117. A valid agency relationship does not require a(n):
a. written agreement. c. attorney-in-fact.
b. express agreement. d. Any of the above.
118. “Agency” includes relationships between licensed sales agents and their brokers as well as:
a. escrow officers and real estate licensees.
b. lenders and the agents who recommend them.
c. finders and the brokers who employ them.
d. real estate licensees and the Department of Real Estate (DRE).
294 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

119. All of the following terminate an easement, except:

a. merger of the tenements.
b. release by the owner of the servient tenement.
c. abandonment.
d. destruction of the servient tenement.
120. The is responsible for installation of off-site improvements in a new subdivision.
a. developer c. city or county
b. homeowners’ association (HOA) d. individual property owner
121. Martin needs $25,000 to buy a new car. He owns a note secured by a $50,000 trust deed. A
friend will lend Martin the money if Martin gives him his note and trust deed as security.
Martin would use which document to complete this transaction?
a. A chattel mortgage. c. A hypothecation agreement.
b. A security agreement. d. A pledge agreement.
122. A lender is required to provide a buyer with a copy of the _________ within three business
days of the lender’s receipt of the loan application which provides the mortgage terms and
details quoted by the lender.
a. Truth-in-Lending Waiver c. Loan Estimate
b. Closing Disclosure d. Settlement Statement
123. When a married person dies intestate leaving a spouse and two children, their separate
property is delivered:
a. equally among the children.
b. only to the current spouse.
c. one-third to the spouse and two-thirds to the children.
d. by escheat to the state.
124. Real Estate Settlement Procedures Act (RESPA) underwriting requirements apply to:
a. one unit properties only.
b. one-to-four unit residences.
c. an apartment complex with less than twenty residential units.
d. the purchase of 40 or more acres of raw land.
125. Why do brokers establish client trust fund accounts?
a. To convert client funds for company use. c. To earn interest on client money.
b. In order to impress clients. d. To separate the client’s money from
broker’s money.
126. Balancing a bank statement with a client’s account is known as:
a. auditing. c. statement adjustment.
b. reconciliation. d. commingling.
127. The buyer of a duplex does not receive a Transfer Disclosure Statement (TDS) prior to closing. The
buyer can:
a. do nothing, since they are still obligated to proceed with the transaction.
b. cancel the transaction.
c. cancel the transaction only if title has not formally transferred.
d. file a criminal suit against both the seller and listing broker.
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128. All of the following characteristic(s) are included in a tenancy-at-will, except:

a. no provision for the payment of rent.
b. possession of a property for an indefinite and unspecified period.
c. possession of a property delivered to the tenant with the landlord’s knowledge and
consent.
d. the tenancy is limited to a specific duration of time no greater than one year.
129. The seller of a one-to-four unit residential property is required to complete and deliver a
, generically called a Condition of Property Disclosure Statement, to all buyers in
targeted transactions.
a. mechanic’s lien c. Transfer Disclosure Statement (TDS)
b. Notice of Delinquency (NODq) d. Sellers Financial Disclosure
130. A broker has a listing on a property which grants them an option to purchase the property.
If the broker arranges a later sale of the property with a buyer, then exercises the option and
resells the property at a profit without disclosing to the seller the second transaction with the
buyer, the broker has:
a. received an improper secret profit.
b. committed a federal crime.
c. acted as a dual agent without proper disclosure.
d. performed a smart business practice.
131. An option granted to a buyer:
a. functions as an offer to enter into a contract with the seller.
b. prevents the seller from selling the property to another buyer for the term of the option
period.
c. creates a voluntary lien on the seller’s real estate.
d. creates a relationship identical to that of a vendee/vendor under a land contract.
132. An option becomes a binding contract on both parties when:
a. financing is available. c. it expires under its terms.
b. it is exercised. d. consideration is given.
133. No matter how vested, all property acquired jointly by a married couple is presumed to be:
a. public property. c. community property.
b. separate property. d. trade fixtures.
134. The prosecution of a non-licensee who performed activities that required a license is handled
by:
a. the Real Estate Commissioner. c. the U.S. marshal.
b. a local district attorney. d. a county sheriff.
135. A lender may charge a borrower for preparing federal lending disclosures.
a. a reasonable fee c. $0
b. $25 d. 1% of loan amount
136. Just as disclosure laws are written to protect the consumer, who benefits the most when a
lender requires an impound account of property taxes and insurance for a real estate loan?
a. The lender and the trustee. c. The seller and the lender.
b. The beneficiary and the trustee. d. The lender and the trustor.
296 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

137. With only a few days left before the close of escrow, the buyer asks the broker for permission
to move into the vacant house. The broker is to:
a. ask the buyer to deposit the balance of the down payment into escrow first.
b. give the buyer access and approval.
c. refuse to give the buyer access and approval.
d. seek approval from the seller.
138. The authority a broker has when acting as an agent for a principal is:
a. that which is granted by the Commissioner of the Department of Real Estate
(DRE).
b. whatever the broker chooses to take.
c. that which is conferred by the principal.
d. whatever the broker accepts as limited by the statute of frauds.
139. An agency relationship in real estate between a licensee and a principal is terminated in
several ways. All of the following terminates an agency relationship, except:
a. The death or incapacity of either the seller or broker.
b. Revocation at any time by the principal.
c. Destruction of the property.
d. None of the above.
140. A lot 300 feet deep lost 10 percent of its depth. What is the effect of the loss in depth on the
value of the lot?
a. A 10% decline in value.
b. A decrease of value in excess of 10% due to the change in utility.
c. The price per front foot will increase.
d. The price per square foot will increase.
141. When using the market comparison approach to appraise a single family residence (SFR),
property comparisons are based on:
a. the gross rent multiplier (GRM). c. the rental income the property generates.
b. price per cubic foot. d. the entire property.
142. When changes are made in a residence to correct functional obsolescence, this activity is
termed:
a. reproduction. c. remodeling.
b. replacement. d. repair.
143. What is the name of sheet metal that protects a building from water seepage?
a. Sill. c. Flashing.
b. Weep hole. d. Shingles.
144. Open roof sheathing is a component of a(n):
a. wood shake roof. c. composite shingle roof.
b. gravel and tar paper roof. d. fiberglass tile roof.
145. Property is defined as:
a. rights or interests which a person has in a thing owned.
b. real if it is a trade fixture.
c. personal if it is a fixture.
d. a license to use something owned by another for a temporary period of time.
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146. Under which type of title insurance policy is a title insurance company least likely to
physically inspect the property?
a. Standard policy. c. Extended coverage policy.
b. Abstract of title. d. Preliminary title report.
147. A residential duplex was purchased for $400,000. The buyer assumed an existing note and
trust deed against the property for $300,000. The documentary transfer tax for this county is
$.55 per $500 of consideration. The transfer tax is:
a. $110. c. $55.
b. $440. d. $220.
148. Two salespersons submit offers on the same property listed by a third salesperson within the
same office. Before any offer is presented, the salesperson who submitted the first offer argues
the seller should be given time to make a decision about their offer before being presented the
second offer. The listing agent is to:
a. agree to do so.
b. refuse to present the second offer at all if the seller likes the first.
c. present both offers in the order received, allowing the seller to make counter offers on
each.
d. present both offers at the same time.
149. Which of the following is least likely to be searched by a title company when performing a
title search?
a. The county clerk’s office. c. The secretary of state.
b. The county recorder. d. The federal registry.
150. The Real Estate Settlement Procedures Act (RESPA) applies to:
a. agricultural loans written by a bank.
b. a U.S. Department of Veterans Affairs (VA)-guaranteed loan.
c. a commercial loan for a twenty-unit apartment complex.
d. automobile loans written by a federally chartered bank.