Sample Real Estate Salesperson and Broker Exam Prep Test Questions and Answers

001. Several claims are made against a broker for $50,000 after 2009. The maximum that can be recovered from the Consumer Recovery Account is.

(a) $50,000
(b) $200,000
(c) $250,000
(d) $500,000.

CORRECT ANSWER: (a) The year is important. If the question states 2009 or after, the correct answer is $50,000. Before the 2009 law went into effect, the correct answer would be $20,000.

002. Brown entered into a contract to sell his farm to Williams. No mention of personal property was made in the contract. Just before signing the contract, Brown harvested all the crops on the land, for he had no intention of selling the crops to Williams. Williams argued that Brown had breached the contract because he kept the harvested crops. Given only these facts, which party is correct?

(a) Williams: Crops belonged to the land at one time and were therefore part of the sale.
(b) Brown: No crops were specifically mentioned, and the term “real property” refers only to buildings.
(c) Brown: Harvested crops are treated as goods and are covered by provisions of the Commercial Code regarding the sale of goods.
(d) Neither: The laws of the county in which the farm is located will apply.

CORRECT ANSWER: (c) Brown has valid defenses: The crops were harvested before the contract was signed. In addition, crops are generally regarded as personal property. If the farm were an orchard, and Bronson had uprooted the trees and carried them off, that would be a different matter. Answer (b) is incorrect because “real property” clearly refers to more than buildings.

003. A broker signs a three-month Exclusive Right to Sell listing agreement with a seller. After one month the home has not sold, and the seller rescinds the contract. The seller then lists the home with several brokers under open listings and the house is sold. Which of the following is correct?

(a) the seller only owes the selling broker a commission
(b) the seller does not owe any commission to the first broker because the seller rescinded the contract
(c) the seller owes a commission to both brokers if the first broker’s contract included a termination date and the house sold before then
(d) the seller owes no commissions.

CORRECT ANSWER: (c)

004. Adams and Baxter have purchased a property as joint tenants. Adams immediately encumbered the property with a lien by borrowing money on his interest. What would happen if Adams were to die?

(a) Baxter’s property would also become encumbered
(b) Adams’ heirs would inherit the debt
(c) Baxter must pay off the encumbrance or forfeit any claim to that portion of the property that has been liened
(d) The lender would have no recourse against Baxter as the surviving joint tenant.

CORRECT ANSWER: (d) As in the previous question, a surviving joint tenant is not liable for such debts provided that the liens arising from such debts were not foreclosed. In neither question is there any statement that the liens had been foreclosed.

005. Robert Smith purchased his home from Henry Jones, who took back Smith’s note secured by a mortgage in partial satisfaction of the purchase price. Under these circumstances, title to the property is encumbered by:

(a) a specific lien
(b) a general lien
(c) an involuntary lien
(d) none of the above.

CORRECT ANSWER: (a) The title to only this property is encumbered by the mortgage, so it is a specific--not general--lien. And it was freely entered into by both parties, so it is a voluntary--not involuntary--loan.

006. A home is listed by a broker. Cracks in the wall are visible. A buyer’s broker should:

(a) recommend a soil test to the buyer
(b) recommend a structural inspection to the buyer
(c) do as advised by the seller
(d) fill the cracks with spackle and repaint.

CORRECT ANSWER: (b) Presuming that the cracks are substantial and not just surface damage, they might be an indication of inadequate structural support or previous damage (e.g., from an earthquake).

007. Elizabeth bought a home under her maiden name (Pryor). Later, after marriage, she sold it under her married name (Post). These circumstances would probably:

(a) create a cloud on the title
(b) cause the property to automatically become community property
(c) create a joint tenancy interest
(d) cause no problems, the sale is perfectly legal.

CORRECT ANSWER: (a) She should grant title as “Elizabeth Pryor Post, formerly Elizabeth Pryor.” In any transfer of title after the owner has changed his or her name, the name used when title was originally acquired must be stated.

008. The recording of a lis pendens:

(a) does not affect the title
(b) clouds the title and affects marketability
(c) clouds the title but does not affect marketability
(d) affects the current owner but not a subsequent owner.

CORRECT ANSWER: (b) Once recorded with the County Recorder, the notice constitutes a cloud on the title and prevents the owner from conveying a marketable title (one that a fully informed and reasonable purchaser would ordinarily be willing to accept). The title may still be conveyed, although most prospective buyers will be wary because of the lis pendens.

009. Which of the following actions may a bonded salesperson do with regard to a broker’s trust fund?

(a) record deposits
(b) record overages
(c) transfer money into the broker’s account
(d) withdraw funds from the trust account.

CORRECT ANSWER: (a)

010. According to the Statute of Frauds, which of the following is a contract that must be in writing in order to be enforceable?

(a) an employment contract of a business-opportunity broker to sell the stock, fixtures, and goodwill of a business
(b) an employment contract of a business-opportunity broker to find a business to be purchased by the principal
(c) an employment contract of a broker to exchange leases on properties zoned for retail trade
(d) any agreement that is not to be performed within one year.

CORRECT ANSWER: (d) “An agreement that by its terms is not to be performed within a year from the making thereof” must be in writing per Civil Code, Sec. 1624--the Statute of Frauds.

011. Which of the following statements is most correct regarding the activities of mortgage companies?

(a) They do not service the loans they create.
(b) They do not participate in government-insured loans.
(c) They prefer to deal in mortgages that are most readily saleable in the secondary market.
(d) They are regulated by federal law and not state law.

CORRECT ANSWER: (c) Mortgage companies or mortgage bankers make mortgage loans and then sell them to institutional investors for whom the loans are serviced under contract.

012. If a broker negotiates a loan secured by real property, the broker must deliver a copy of a Mortgage Loan Disclosure Statement to the borrower:

(a) within three days after the borrower signs it
(b) within five days after the borrower signs it
(c) when it is signed by the borrower
(d) before escrow closes.

CORRECT ANSWER: (c) The exact wording of the B&P Code is that “an exact copy thereof shall be delivered to the borrower at the time of its execution” (Sec. 10240).

013. Transfer of ownership to real property via the California Veterans Farm and Home Purchase (Cal-Vet) Program is accomplished by means of which of the following documents?

(a) grant deed
(b) reconveyance deed
(c) real property sales contract
(d) warranty deed.

CORRECT ANSWER: (c) The Department of Veteran Affairs buys the property from the seller and later resells the property to the veteran. The Department retains legal title (title of record) until the veteran repays the loan. This form of financial arrangement is essentially a land contract.

014. A real estate broker with several listings dies. Immediately afterward, a broker buys the agency and office from the broker’s heirs. Who owns those listing agreements?

(a) the original broker’s heirs
(b) the new broker
(c) the listings were cancelled when the broker died
(d) the salespersons employed by the old broker.

CORRECT ANSWER: (c)

015. When is a broker who conducts escrow services for a fee exempt from escrow laws administered by the California Department of Corporations?

(a) when the broker has been licensed for longer than five years
(b) when the escrow services that the broker provides relate only to real-estate transactions
(c) when the escrow services the broker provides are exclusively for property transactions incidental to his or her agency capacity
(d) none of the above.

CORRECT ANSWER: (c) According to the Financial Code, Sec. 17006(d), a licensed broker need not be licensed under the Escrow Law for transactions in which the broker is a party or in which the broker is an agent performing an act for which a real-estate license is required.

016. In a closing statement, the buyer would least likely be responsible for:

(a) recording fee for a grant deed
(b) recording fee for a trust deed
(c) notary fee for a grant deed
(d) the cost of preparation of documents.

CORRECT ANSWER: (c) In the case of a grant deed, the notary fees are paid by the seller.

017. Every broker pays into the Consumer Education and Recovery Account. The recovery portion of that account is used for which of the following?

(a) to reimburse for education expenses
(b) to pay out settlements against brokers
(c) to fund research
(d) to develop public outreach programs.

CORRECT ANSWER: (b) The Consumer Recovery Account enables a person who has been defrauded or has had trust funds converted by a real estate licensee (and who satisfies specified requirements of B&P Code Sec. 10471 et seq.) to recover at least some of his or her actual losses.

018. Gomez owned an apartment building with an adjusted basis of $220,000 and a fair market value of $330,000. Gomez exchanged the property for an apartment building with a fair market value of $365,000. Both properties were owned free and clear, and no adjustment (boot) was paid for the difference in value. For federal income-tax purposes, Gomez’s new property will have a basis of:

(a) $110,000
(b) $145,000
(c) $220,000
(d) $330,000.

CORRECT ANSWER: (c) When property changes hands in a tax-free exchange, the basis of property RECEIVED is defined as the basis of the property GIVEN in the exchange--decreased by any boot received or loss recognized and increased by any boot paid or gain recognized. In this case, there was no boot, gain, or loss, so the basis remains $220,000.

019. When selling a business in California, sales and use tax must be paid on:

(a) stock-in-trade included in the sale
(b) furniture and fixtures of the business
(c) the value of the goodwill of the business
(d) all of the above.

CORRECT ANSWER: (b) When a business is sold, fixtures and equipment are subject to sales and use tax, but inventory and goodwill are not.

020. An unlawful detainer action may be brought against any of the following, except:

(a) a tenant who holds over beyond the term of the lease
(b) a tenant who continues to possess the property after failing to pay rent
(c) a tenant who continues to possess the property after committing a nuisance on the property
(d) a tenant fails to make payments after exercising an option to buy the property.

CORRECT ANSWER: (d) A nuisance comes under the heading of “neglect or failure to perform conditions or covenants of the lease ...”. Answers (a)-(c) are three valid causes for an for an unlawful detainer action. The fourth is a tenant’s failure to quit after giving written notice to vacate the premises at a specified time. An unlawful detainer action is a method of evicting a tenant who is in default of a lease; it does not apply to an option agreement.

021. A tenant with a 5-year lease gets permission from the landlord to terminate the tenancy after three years. The tenant’s turning over possession to the landlord is called:

(a) surrender
(b) reformation
(c) novation
(d) accord and satisfaction.

CORRECT ANSWER: (a) A surrender cancels all future obligations under the lease, by mutual agreement of landlord and tenant. By contrast, abandonment is an act by the tenant alone.

022. A broker entered into a listing contract in which the broker is to be paid any proceeds above the selling price of $585,000. What type of listing is this?

(a) net listing
(b) gross listing
(c) differential listing
(d) illegal listing.

CORRECT ANSWER: (a)

023. The cost approach that generally finds the upper limit of a property’s value is known as:

(a) in-place cost
(b) historic cost indexed to cost new
(c) reproduction cost new
(d) replacement cost new.

CORRECT ANSWER: (c) The reproduction cost new is the cost of reconstructing a replica of the appraised building. As you might imagine, such costs can be astronomical, especially for older or unique properties. The technique to calculate the cost base that is most often used is the replacement cost new, which is the cost of using contemporary materials and methods to approximate those of the appraised building.

024. Economic obsolescence most nearly means which of the following?

(a) functional obsolescence
(b) physical obsolescence
(c) social obsolescence
(d) outdated fixtures.

CORRECT ANSWER: (c) Again, economic obsolescence points to external factors. Influences such as a change in demand for a location or the closure of a local industrial plant can result from social causes.

025. The license number for an agent must be included on all marketing materials plus which of the following?

(a) the Transfer Disclosure Statement
(b) the Agency Disclosure form
(c) signs that point to an open house
(d) the Sales Contract.

CORRECT ANSWER: (d) At the end of most Sales Contracts is a section entitled something like “Broker Compensation Agreement and Acknowledgment of Agency Relationships,” where the broker’s and agent’s BRE numbers are filled in.