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California Real Estate Exam Multiple Choice
Questions | 100% Correct Answers | Verified
| Latest 2024 Version
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 abbreviations 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 is 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, b. $1, c. $1,
d. $750 - ✔✔a. $1, $217,500 ÷ 145% (1.45) = $150,000 original 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. b. $5. c. $133. d. $23.10 - ✔✔d. $23. 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.
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 establishing 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 preferable 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 from 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" relationship, 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 single-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.
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 purposes. 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. The 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 fee. 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 financing 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 loan 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 depreciation: 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 which 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.
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 depreciation. 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 using 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 deductions 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. income approach. d. any or all of the above. - ✔✔d. any or all of the above. Appraisers use all three approaches 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 installed 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, b. $40, c. $34, d. $32,468 - ✔✔c. $34, 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 properly 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 agreement 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.
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 rented 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 additional 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. Accretion - 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 the 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, Escrow Fees = 210 New Loan Discount Fee = 534 Prepayment Penalty = 2% x $102,800 = 2, Total Seller Costs = $11, Equity = Sale Price minus 1st loan = $150,000 - $102,800 = $47, 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. $400, b. $425, c. $450, d. $500,000 - ✔✔c. $450, 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, 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 present. 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 additional 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 deed? 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 automatically 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 reproduction 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 same. b. overall financing costs tend to decrease.
