(Test Bank) 2022 California Real Estate Exam Multiple Choice Questions & Answers

Unknown, 1

Business

Test Bank

1st Edition

• $10.00 $35.00

---

Description

Test Bank for 2022 California Real Estate Exam Multiple Choice Questions & Answers, The downloadable file consists of 180 pages, and the total size of the file is 0.97 MB. Purchase now only for highly discounted price.

---

---

Study Note Preview

2022 California Real Estate Exam Multiple Choice Questions & Answers (Test Bank) An appraiser's definition of "Value" would be: a. present worth of all rights to future benefits arising out of ownership. b. the ability of one commodity to command other commodities in exchange. c. relationship between the thing desired and the potential purchaser. d. all of the above. - ✔✔d. all of the above. These are elements of value. Which of the following abbreviatio ns is associated with the FHA? a. NAR b. CPM c. MIP/MMI d. MBA - ✔✔c. MIP/MMI MIP - Mortgage Insurance Premium/Mutual Mortgage Insurance. An investor group recently sold a parcel of land for $217,500, which was 45% more than they paid for it. The land i s described as follows: N½ of the NW¼ of the SE¼ of Section 13 plus the W½ of the NE¼ of Section 13. What was the original price they paid per acre for the property? a. $1,500 b. $1,200 c. $1,000 d. $750 - ✔✔a. $1,500 $217,500 ÷ 145% (1.45) = $150,000 or iginal price Acreage: N½ of the NW¼ of the SE¼ = 20 acres W½ of the NE¼ = 80 acres Therefore, price per acre = $150,000 ÷ 100 = $1,500. Which of the following is NOT a lien? a. Encumbrance b. Homestead c. Zoning d. All of the above - ✔✔d. All of the above A lien is a charge against property, whereby the property is made security for payment of the debt, i.e., attachment. A property sells for $121,000. The purchaser gives $10,000 down payment, agrees to place an additional $5,000 down, and ta ke over an existing VA first loan of $100,000, with the remainder to be in the form of a 2nd note and trust deed. For these cond itions, how much would the documentary tax stamps be? a. $1.10 b. $5.50 c. $133.10 d. $23.10 - ✔✔d. $23.10 Do NOT pay on old existing loan being taken over. Therefore, ($121,000 - 100,000) ÷ 1,000 x ($1.10) = 21.0 x $1.10 = $23.10. If an appraiser were called upon to evaluate a public building, which had unique and distinctive architecture, he wou ld employ which of the following methods of valuation? a. Replacement (cost approach) b. Comparison c. Capitalization d. None of the above - ✔✔a. Replacement (cost approach) Since there is no income for capitalization and no means for comparing sales, re placement cost is the only approach available. The members of the National Association of Real Estate Brokers are called: a. Realtors®. b. Consolidated Brokers. c. Realtists. d. None of the above. - ✔✔c. Realtists. If the taxes on a newly acquired property will amount to 1.25% of the purchase price, what will the first installment (6 months) bill for a home costing $125,500 be? a. $765.35 b. $742.51 c. $784.38 d. $795.97 - ✔✔c. $784.38 $125,500 x (.0125) ÷ 2 = $784 .38. The best source for establishing the age of a home would be the: a. county tax assessor. b. building and safety department. c. county recorder's office. d. either a or b. - ✔✔a. county tax assessor. The county tax assessor is the best source for es tablishing the age of a home. "Gross multiplier" is used to determine value of certain types of income properties. It is determined by: a. dividing the gross rental income by the appraised value. b. multiplying the market price by the capitalization rate . c. dividing the sales price by the gross monthly rental. d. multiplying the gross monthly rental by a reasonable cap rate. - ✔✔c. dividing the sales price by the gross monthly rental. Gross Rent Multiplier is a rough, quick way of converting gross rent into market value. Which of the following could be used with a purchaser without the immediate involvement of a title change? a. Grant deed b. Land contract c. Quit claim deed d. Warranty deed - ✔✔b. Land contract The land contract does not pass title until some later time, whereby the buyer (vendee) has performed certain requirements (i.e., accumulate a minimum amount of equity for down payment); title in the meantime remains with the seller (vendor). It is prefer able to use the replacement cost method of appraisal on new buildings, as opposed to old buildings, because: a. it is easier to estimate depreciation. b. values of land change. c. it is difficult to estimate historical values. d. local codes are changed f rom time to time. - ✔✔a. it is easier to estimate depreciation. As the age of the improvements on a property increases, it becomes more difficult to forecast the allowable depreciation. The following are essential to the creation of an "agency" relations hip, except: a. parties are competent. b. agreement to pay consideration. c. agreement between principal and agent. d. fiduciary relationship. - ✔✔b. agreement to pay consideration. "Gratuitous agent" would not necessitate consideration. SHE owns a sing le-family residence in which SHE lives. SHE trades HE for another residence which HE is renting to a tenant. Both parties intend to use their newly acquired properties for rental income. Which of the following is true? a. SHE can negotiate a tax -free (deferred) exchange. b. HE can negotiate a tax free (deferred) exchange. c. Both parties can negotiate tax -free exchanges. d. Neither can negotiate a tax -free exchange. - ✔✔b. HE can negotiate a tax free (deferred) exchange. HE is exchanging income property for the same —like-for-like; SHE is not. Examination of the records indicate there are conflicts between the local zoning restrictions and private restrictions contained within the deed that conveyed the property. Which o f the following statements is true? a. The deed restrictions would prevail. b. The zoning restrictions would prevail. c. Since they are in conflict, the earlier restriction would prevail. d. The more restrictive of the two (deed vs. zoning) requirements w ould prevail. - ✔✔d. The more restrictive of the two (deed vs. zoning) requirements would prevail. The more restrictive of conflicting zoning restrictions would prevail. Three general partners borrowed money and agreed to be liable for the repayment, eit her individually or collectively. They signed the security instrument: a. jointly. b. singularly. c. jointly and collectively. d. jointly and severally. - ✔✔d. jointly and severally. They are jointly (collectively) and severally (individually) responsibl e. When all expenses, including taxes and insurance, are paid by the lessee along with a new amount of "rent" as agreed upon to the landlord, this is referred to as a: a. gross lease. b. net lease. c. percentage lease. d. sandwich lease. - ✔✔b. net lease. Net lease. Lessor receives a net amount for lease payment, lessee pays for expenses; property taxes, fire insurance, and operating expenses. A lending institution hires an appraiser to evaluate a property for loan pur poses. Select one of the following factors which would have the greatest influence on her appraisal. a. The type of neighborhood surrounding the property b. The size of the loan c. The credit rating of the loan applicant d. None of the foregoing - ✔✔a. Th e type of neighborhood surrounding the property The appraiser would have a basic interest in the kind of neighborhood and its resulting effect on market value. The other items in the question would be a matter of concern only to the lender. On FHA and VA loans, the lender is allowed to charge the borrower a fee (percentage of the loan) as an initial service fee. This is generally referred to as a(n): a. subordination fee. b. accommodation fee. c. acceleration fee. d. origination fee. - ✔✔d. origination f ee. In which of the following would you use a "package mortgage"? a. When covering more than one parcel of land in a subdivision. b. When encumbering real property and using personal property as additional collateral. c. When securing additional financin g from the lender at a later date without rewriting the original loan. d. None of the above. - ✔✔b. When encumbering real property and using personal property as additional collateral. A loan that is secured by the basic lot and improvement, plus fixtures attached to the home (appliances, carpeting, drapes, air conditioning, and other kinds of personal property). The primary purpose of the Federal National Mortgage Association (FNMA) is to: a. provide large sums of money for the building industry. b. finance the construction of low cost residential housing. c. lend money in the residential marketplace lower than normal interest rates for lower income families. d. Expand available home l oan funds by buying and selling VA, FHA, and conventional loans in the secondary money market. - ✔✔d. Expand available home loan funds by buying and selling VA, FHA, and conventional loans in the secondary money market. For a straight -line schedule of dep reciation: a. earlier years receive more weight. b. later years receive more weight. c. each year receives equal weight. d. none of the above. - ✔✔c. each year receives equal weight. For straight -line, the value is divided by the number of years over whi ch depreciation is run —the same amount for each year. For "accelerated" methods, allow greater amounts of depreciation for the earlier years, and less for the later years A lender with vast funds for investment, who prefers larger loans without collection responsibilities, would most likely be a(n): a. commercial bank. b. insurance company. c. private lender. d. savings bank. - ✔✔b. insurance company. One particular appraisal method would be more detailed and accurate than others. Which would it be? a. Unit of cubic foot method b. Unit of square foot method c. Unit cost in place d. Quantity survey - ✔✔d. Quantity survey The quantity survey is used by contractors in calculating the cost of construction of improvements. It is rarely used by appraisers because costly details are not necessary for most of their evaluations. To "rescind" is the same as to: a. revise. b. tran sfer. c. resale. d. revoke. - ✔✔d. revoke. To revoke, or take away a license. (The Real Estate Commissioner has this power.) The legal purpose of police power is to: a. keep all types of commercial property out of residential neighborhoods. b. keep the land in every area as similar as possible. c. preserve or protect public health, safety, morals, or general welfare. d. none of the above. - ✔✔c. preserve or protect public health, safety, morals, or general welfare. On which of the following dates do Cal ifornia real property taxes become a lien on the subject property? a. December 10 b. April 10 c. July 1 d. January 1 - ✔✔d. January 1 On January 1 of the preceding the tax year, the lien is placed on the property. December and April dates above are dates taxes become delinquent for their respective periods, and July 1 is the beginning of the tax year. In the development of a subdivision of single -family homes, which of the following would be the least economical? a. Cul -de-sacs b. Long blocks c. Right angle (90%) intersections into major streets d. Short blocks - ✔✔d. Short blocks With more streets, there's more cost and less land for homes. Capitalization is a process by which an appraiser: a. converts income into value. b. determines depr eciation. c. establishes cost. d. finds gross income. - ✔✔a. converts income into value. When he ascertains the true net income for investment, an appraiser uses the "capitalization approach" to estimate value. Net income is determined by an appraiser us ing which one of the following? a. Real property taxes b. Capital additions c. Depreciation reserves d. Mortgage amortization and interest - ✔✔a. Real property taxes Real property taxes are considered as a fixed expense. Appraisers use them as deduction s in computing net income. The other items are not in this category. Three of the following are closely related. Which one is NOT? a. Judgment b. Claim c. Real estate taxes d. Easement - ✔✔b. Claim Claim is associated with insurance, whereby the others are types of encumbrances. Financial enhancement, as compared to comfort and safety when purchasing a home, is generally considered: a. absolute. b. primary. c. secondary. d. none of the above. - ✔✔c. secondary. A true disadvantage of owning real property would be the lack of liquidity. Of the following, which would provide the greatest amount of liquidity to such an investment? a. Amortization b. Leaseback c. Leverage d. Syndication - ✔✔d. Syndica tion A syndication participant would be able to convert property interests into cash, without having to sell the property. For a "blanket encumbrance," the typical release clause requires the debtor to pay more to the lender than each released property i s worth because: a. better lots are sold first. b. compensates for unsold lots. c. lender desires to increase security on overall loan. d. all of the above. - ✔✔d. all of the above. A fire station building and a small appliance sales and repair store were recently leased on long -term leases at the same lease payment. Between the two, the fire station building would probably have a stable capitalization rate, which would be: a. higher . b. lower. c. same as. d. varying; sometimes higher, sometimes lower than the other property. - ✔✔b. lower. Since the lessee of the fire station building would be the government, classified as a more stable tenant, the owner would probably be willing to accept a lower return on investment. In determining the value of a property, an appraiser would use the: a. cost approach. b. market approach. c. income approach. d. any or all of the above. - ✔✔d. any or all of the above. Appraisers use all three appro aches to determine value. "Domicile" most frequently means: a. semi -circled ceiling. b. relationship of parties. c. home or residence. d. none of above. - ✔✔c. home or residence. An investor who owned a 16 -unit apartment complex has evaluated a newly in stalled freeway near his property, which has caused a decrease in monthly rent in the amount of $320. When an 11% "cap rate" for the area is applied, what is the resulting loss in value he has experienced due to the freeway? a. $45,000 b. $40,908 c. $34,909 d. $32,468 - ✔✔c. $34,909 Which of the following represents an essential part of a valid grant deed? a. Acknowledgment and recordation b. Offer and acceptance c. Parties capable of contracting d. Parties properly described - ✔✔d. Parties prop erly described The five essential elements of a valid deed are: (1) In writing; (2) Parties properly described; (3) Adequate property description; (4) Operative words (granting); (5) Signed by Grantor. In contracting, if one of the parties enters the agr eement under duress, the contract would be: a. valid. b. voidable. c. void. d. Illegal. - ✔✔b. voidable. Until proved either valid or void, it is voidable. Under a real property sales contract, Buyer "A" makes a $2,000 down payment to Seller "B" on a property he had been renting. The agreement is filed with the county recorder. Subsequently, "A" moves to Florida, without making any further payments, and with no notice of his intentions being made to "B." Which of the following would be true? a. Seller could resell the property and obtain a deficiency judgment against "A." b. New buyer should not be concerned about the previous sales to "A." c. "A's" activity has no effect upon the marketability of the property. d. There would be a cloud on the title to the property. - ✔✔d. There would be a cloud on the title to the property. Seller "B" would need a quitclaim deed from "A," or would need to seek a "quiet title action" in court to clear the cloud on his title so he could sell the property to another. Appraisal fees: a. may vary. b. are always a fixed amount. c. are based on a percentage of the appraised value. d. are set by the loan broker. - ✔✔a. may vary. An appraiser's fee is set by the difficulty of the work and by the level of expertise require d to complete the work. Percentage fees are illegal. An unlawful detainer action may be filed by a landlord in all but one of the following. Which is it? a. Tenant holds over after termination of lease. b. Tenant fails to pay rent. c. Tenant exercises l ease option agreement, but fails to make payment as required. d. Tenant breaches lease by permitting nuisance on the property. - ✔✔c. Tenant exercises lease option agreement, but fails to make payment as required. By process of elimination, this is the exception. The others are three of five lawful situations for exercising this action, the others being: (4) failure to perform any lease covenant, and (5) failure to give up possession when he had previously given written notice of intention to do so. All the following statements are incorrect, except: a. a real property security can be created from a note on a home not located in any subdivision. b. real property securities are always secured by installment sales contracts. c. real property securities a nd real property sales contracts are interchangeable terms. d. out -of-state subdivisions offered in California for sale need not comply with Article 6 of the California Real Estate Law. - ✔✔a. a real property security can be created from a note on a home n ot located in any subdivision. All that is necessary would be the "guarantee" against loss, or a specific minimum yield, made by the selling broker. Which of the following properties could be purchased using FHA financing, but NOT VA financing? The purchase of: a. a business. b. a farm. c. farm equipment. d. income property/property to be rented to a tenant. - ✔✔d. income property/property to be rent ed to a tenant. VA requires the veteran purchaser must "move into" the property being purchased as personal residence. The purchase of "units" (4 maximum) is allowed, if the veteran will be residing in one of the units. An owner acquires title to additio nal land on his river -front property when the river shifts its course. This is acquiring by: a. acclamation. b. accession. c. abstraction. d. alienation. - ✔✔b. accession. Accession - addition to property through efforts of man or by natural forces. Ac cretion - Accession to property through natural forces, for example, alluvium. Alluvium - Gradual increase of the earth on ocean front or bank of stream resulting from action of water. Past expenditures for residential improvements are called: a. costs. b. investments. c. price. d. value. - ✔✔a. costs. They have nothing to do with establishing value. The term "highest and best use," as the fundamental concept of value, is best defined as: a. that which produces the greatest net return on the investment over a given period of time. b. that which produces the highest gross income. c. that which complies with all laws and restrictions. d. that which makes the highest general contribution to t he community. - ✔✔a. that which produces the greatest net return on the investment over a given period of time. Appraisers always consider the highest net income as the basis for the highest value. A home sold for $150,000 on which the seller was to pay a 6% brokerage fee. Additional costs were: 2% prepayment penalty on existing loan balance of $102,800, escrow fees of $210, new loan discount fee of $534. The seller's cost of sale will be what percent of gross equity? a. 20.5% b. 25% c. 23.4% d. 228% - ✔✔b. 25% Commission = $150,000 x 6% = 50,000 x .06 = $9,000 Escrow Fees = 210 New Loan Discount Fee = 534 Prepayment Penalty = 2% x $102,800 = 2,056 Total Seller Costs = $11,800 Equity = Sale Price minus 1st loan = $150,000 - $102,800 = $47,200 Costs as " %" of Equity = $11,800 ÷ 47,200 x (100) = 25% To whom is the Mortgage Insurance Premium (MIP) on a VA loan paid? a. The broker b. The mortgage company c. The Veterans Administration d. To no one - ✔✔d. To no one FHA has the requirement for such a premium, not the VA. Which of the following would NOT be considered a "fiduciary" relationship? a. Agent to seller b. Attorney -in-fact to principal c. Attorney to client d. Trustor to beneficiary - ✔✔d. Trustor to bene ficiary Fiduciary relationship involves "trust and confidence." This is NOT required between trustor (borrower) and beneficiary (lender). Under which of the following types of financing is a buyer required to purchase term life insurance? a. Cal -Vet b. Conventional c. FHA d. VA - ✔✔a. Cal -Vet The State of California is the beneficiary. If land was selling for $10,000 per acre, what would the following parcel sell for? The SE¼ of the SE¼ of the SE¼ of Sec. 4 a nd the S½ of the SW¼ of the SW¼ of Sec. 3 and the N½ of the NE ¼ of the NE¼ of the NE¼ of Sec. 9 and the N½ of the N½ of the NW¼ of the NW¼ of Sec. 10. a. $400,000 b. $425,000 c. $450,000 d. $500,000 - ✔✔c. $450,000 Sec. 4: SE¼ of SE¼ of SE¼ = 1/4 x 1/4 x 1/4 x 640 acres = 10 Sec. 3: S½ of SW¼ of SW¼ = 1/2 x 1/4 x 1/4 x 640 acres = 20 Sec. 9: N½ of NE¼ of NE¼ of NE¼ = 1/2 x 1/4 x 1/4 x 1/4 x 640 acres = 5 Sec. 10: N½ of N½ of NW¼ of NW¼ = 1/2 x 1/2 x 1/4 x 1/4 x 640 acres = 10 Total Acreage = 45 acres Price (total) = $10,000 x 45 acres = $450,000 The cost of an improved parcel of real property would probably be equal to its value in which of the following instances? a. Highest and best use of the parcel. b. The parcel as a new piece of property. c. When a and b are both pre sent. d. None of the foregoing. - ✔✔c. When a and b are both present. A new piece of property would offer the best possibility of equality for cost and value. Determination of the highest and best use of a parcel would probably justify the cost of additio nal improvements, with the expectation of creating a profit. An "agreement in a deed" would best match up with: a. option. b. prescription. c. covenant. d. subrogation. - ✔✔c. covenant. Which of the following would constitute a proper delivery of a dee d? a. Escrow mailing the deed to the Grantee after signed by seller, and after all other requirements of the escrow had been met, but also after the seller had died. b. After signing, seller gave to broker with instructions to give it to buyer. c. Escrow delivers deed to buyer without completed (signed) instructions. d. After signing the deed, Grantee personally delivers to Grantor. - ✔✔a. Escrow mailing the deed to the Grantee after signed by seller, and after all other requirements of the escrow had been met, but also after the seller had died. Death does not automa tically terminate contract. If it can be proved that the seller intended to deliver to the buyer upon completion of requirements of escrow, it would be a valid delivery. For an appraisal being conducted on a residence built in 1910, which of the following would an appraiser use? a. Original cost of construction b. Original cost of materials multiplied by the change in the cost of living index since 1910 c. Today's cost of reproduction less depreciation d. None of the above - ✔✔c. Today's cost of reproduct ion less depreciation This is the replacement cost method (cost approach). In residential real estate lending, when lenders "soften" their requirements to allow less than qualified buyers to "qualify, ": a. overall financing costs tend to remain the sam e. b. overall financing costs tend to decrease. c. overall financing costs tend to increase. d. overall financing costs are not affected. - ✔✔c. overall financing costs tend to increase. When borrowers with lower incomes and weaker credit ratings are a llowed to borrow, the lender must cover the increased "risk." Thus, the overall increase in costs of borrowing. The best hedge against inflation would be: a. equity assets. b. government bonds. c. mortgages/loans. d. savings accounts. - ✔✔a. equity asse ts. A fine example of an "equity asset" is a single -family residence, which during an inflationary market condition, has a value that tends to follow the inflationary trends. All of the following are methods for estimating accrued depreciation, except the: a. engineering method. b. market analysis method. c. economic method. d. cost of reproduction method. - ✔✔c. economic method. There are five recognized methods for measuri ng past, or accrued, depreciation: 1. The breakdown method 2. The engineering method 3. The straight -line method 4. The market method 5. The capitalized income method The economic method is not included in this category. A homestead offers NO protection a gainst which of the following filed prior to the filing of the homestead? a. Real property taxes b. Mechanic's liens c. Prior recorded liens d. All of the above - ✔✔d. All of the above An owner has been found guilty of discrimination under the Health a nd Safety Code. What action can the aggrieved party take? a. May purchase the property in question, if still available b. May purchase another like property, if the original property is not available c. May be awarded $500 in damages if neither a nor b available d. All of the above - ✔✔d. All of the above In appraising a residential property, the appraiser must consider the forces currently influencing the neighborhood. Boundaries of such a neighborho od are best established by: a. geographical situation. b. social composition. c. street pattern. d. traffic flow. - ✔✔b. social composition. Theory: most people with mutual interest and desires usually group together in a given area (forming a neighbor hood), creating market influences. All of the following instruments are used to convey an interest in real property, except: a. agreement of sale. b. bill of sale. c. deed. d. lease. - ✔✔b. bill of sale. A bill of sale is used to convey title to perso nal property, NOT real property. The recording of which of the following creates a lien? a. Attachment b. Easement c. Notice of nonresponsibility d. Restriction - ✔✔a. Attachment Attachment is an "involuntary lien." All of the following are methods for appraising unimproved real property, except the: a. development method. b. abstractive method. c. market data method. d. reproduction method. - ✔✔d. reproduction method. There is NO structure to reproduce on unimprov ed property. Therefore, the reproduction method is not applicable. Real estate brokers and salespeople are authorized to engage in listing and selling certain manufactured homes which have been registered with the Department of Housing and Community Devel opment for a minimum of: a. 18 months. b. 6 months. c. 1 year. d. 2 years. - ✔✔c. 1 year. No minimum time limit if manufactured home has been converted into real property. An apartment owner desires to carpet his units. The area to be covered is 60% o f the total 15,000 sq. ft. living space in the building. If the total cost of the carpet (including installation) is $14 per sq. yd., what will be the owner's total expenditure? a. $12,000 b. $14,000 c. $16,000 d. $18,000 - ✔✔b. $14,000 Area to be carpet ed (yds) = 15,000 x 60% ÷ 9 sq. ft/sq yd = 15,000 x (.60) ÷ 9 = 1,000 Total cost = area x $14 = 1,000 sq. yds x 14 = $14,000. Involving the sale of a property, which of the following would be exempt from the "discrimination and unlawful acts" of the Health and Safety Code? a. Duplex financed by VA loan. b. Single family, owner -occupied residence financed by FHA. c. Single famil y, owner -occupied residence unencumbered. d. Twenty unit apartment financed by a conventional loan. - ✔✔d. Twenty unit apartment financed by a conventional loan. Law applies to: (1) owner -occupied, publicly assisted (gov't. financing program) single famil y dwellings; (2) Publicly assisted apartment units (3 or more); (3) Privately financed apartments (5 or more); and (4) Public housing projects. Which of the following is NOT related to a "will"? a. Bequeath b. Bequest c. Devise d. None of the above - ✔✔d. None of the above Bequeath - to give, hand down, leave by will; Bequest - that which is given by terms of will; Devise - gift by will. An appraiser, engaged to appraise a single -family residence, took away an amount of value because of "functional ob solescence." To which of the following was he referring? a. Dry rot b. Poor neighborhood c. Single car garage d. Zoning - ✔✔c. Single car garage In today's world, this feature would be considered "outdated," or in other words, functionally obsolete. There are three methods normally used in the evaluation of real property. However, one of these might prove more effective and accurate than the others, depending on the type of property being appraised. For example, the comparison approach would be the most desirable choice in the appraisal of: