Simulated Exam #3 223

SIMULATED EXAM #3
1. A(n) belongs to and benefits an adjacent property and is said to run with the land
as an interest the adjacent property holds in the burdened real estate.
a. easement in gross c. encroachment
b. appurtenant easement d. personal easement
2. A(n) is a voluntary conveyance of the right to keep land in its natural or historic
condition.
a. solar easement c. coastal easement
b. conservation easement d. air easement
3. Which of the following does not create an agency relationship?
a. Implication. c. Express agreement.
b. Ratification. d. Coercion.
4. The Agency Law Disclosure form is not mandated to be presented to all parties when listing,
selling, buying or exchanging:
a. commercial property. c. mobilehomes.
b. trust deed notes. d. single family residential property.
5. All of the following create an agency relationship, except:
a. a verbal agreement. c. implication.
b. ratification. d. subordination.
6. When a seller’s agent takes a listing which does not authorize the listing broker to accept a
deposit from a buyer, the broker is to advise their agent that:
a. the broker will not be able to accept a deposit from a buyer.
b. it is an implied right of a broker to accept a deposit in behalf of the seller on any offer.
c. a deposit will be accepted and retained by the broker from the buyer, but only as an
agent for the buyer.
d. the deposit has to be paid directly to the seller’s agent.
7. When a dual agency is established in a one-to-four unit residential sales transaction, the
broker and their agents may pass on information relating to the from one party to
the other.
a. price of comparable homes in the neighborhood
b. maximum pricing obtainable from the buyer
c. minimum pricing sought by the seller
d. the terms of payment the seller may be willing to accept
8. When an opinion is coupled with advice expressing no further need for the buyer to investigate
and confirm the prediction, the opinion is elevated to the level of a:
a. guarantee. c. misnomer.
b. distinct possibility. d. fact.
9. All of the following maintain the stability of a residential neighborhood, except:
a. a high home sale turnover rate and increasing population density.
b. being located in the pathway of growth.
c. having many family households with school age children.
d. the conformity of residents with similar occupations.
224 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

10. The cost of a capital improvement and its effect on market value are:
a. always the same. c. generally the same.
b. never the same. d. rarely the same.
11. Which of the following basic real estate economic principles is the best expression of how the
value of real estate is maximized?
a. Anticipation. c. Contribution.
b. Highest and best use. d. Overleveraging
12. The method of appraisal which emphasizes the present worth of future benefits to be received
by the owner is the:
a. replacement cost approach. c. summation approach.
b. reproduction cost approach. d. income approach.
13. Consider an appraiser analyzing the site location of the subject property and three comparable
properties. The first comparable property is superior to the subject. The second comparable is
to superior to the first comparable but inferior to the third comparable. If the differential were
valued at $50,000 for each level of difference, the adjustments will be:
a. Comp one, -$50,000; Comp two, -$100,000; Comp three, -$50,000.
b. Comp one, +$50,000; Comp two, +$100,000; Comp three, +$50,000.
c. Comp one, -$50,000; Comp two, -$100,000; Comp three, +$150,000.
d. Comp one, -$50,000; Comp two, -$100,000; Comp three, -$150,000.
14. A listing broker needs to present all offers until:
a. an offer is accepted. c. all contingencies are removed.
b. escrow is opened. d. escrow is closed.
15. A lease is classified as a(n):
a. freehold estate. c. personal property interest.
b. estate at sufferance. d. remainder in interest.
16. All of the following are NOT examples of an implied covenant under a lease, except:
a. Possession. c. Quiet enjoyment.
b. Nuisance. d. Rental amount.
17. The license of an active salesperson working at a branch office is held at the:
a. Department of Real Estate (DRE) headquarters in Sacramento.
b. broker’s primary place of business.
c. branch office.
d. salesperson’s personal residence.
18. An owner of an investment firm has a securities dealer license, but not a real estate broker
license. The owner advertises and sells real estate for their clients. Since these transactions
require a real estate broker license, who will prosecute the owner for violating the real estate
law?
a. The U.S. Attorney General. c. The California Real Estate Commissioner.
b. The California Attorney General. d. The local District Attorney.
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19. A seller sues their broker for making a false promise when they entered into an oral listing
agreement. What is the likely outcome?
a. The Statutes of Frauds protects the agent since the listing contract wasn’t in writing.
b. The seller is at fault for allowing the agent to work without a written contract.
c. Oral agreements cannot demonstrate evidence of a false promise.
d. The agent is liable for any damages as a result of the false promise regardless of the
Statute of Frauds since the agent breached their agency duty to the seller.
20. All of the following are NOT a fiduciary duty of the buyer’s agent, except:
a. Acting with the utmost loyalty and care toward the buyer.
b. Steering the buyer to racially compatible neighborhoods.
c. Telling the buyer which lender to use.
d. Overseeing the preparation and delivery of the transfer disclosure statement (TDS).
21. A federally chartered bank charges an additional $200 fee on loans made to non-English
speaking borrowers. This fee is:
a. permitted if the fee is justified by the additional cost of translating contracts and hiring
an interpreter.
b. in violation of the Holden Act.
c. not in violation of any Fair Housing laws or regulations.
d. prohibited under the Statute of Frauds.
22. The Fair Employment and Housing Act defines housing accommodations as improved or
unimproved real property used or intended to be used as a residence by the owner and which
consists of not more than:
a. four residential units. c. one single family residence (SFR).
b. ten residential units. d. five or more residential units.
23. The Homeowner’s Guide to Earthquake Safety needs to be delivered to the buyer of any one-to-
four unit residential property built prior to:
a. 1975. c. 1960.
b. 1965. d. 1950.
24. Ethics is most nearly defined as:
a. a broker’s responsibility to the public, their principal and other brokers.
b. honesty.
c. sincerity.
d. fiduciary.
25. Property can be transferred without consideration with a gift deed. However, the transfer by a
gift deed may be voided by:
a. the grantee. c. a debtor of the grantor.
b. a creditor of the grantor. d. the trustee.
26. The least protection from a defect in a property’s title is provided by a(n):
a. standard policy of title insurance. c. guarantee of title.
b. American Land Title Association d. abstract of title.
(ALTA) title policy.
226 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

27. For delivery of a deed to occur, a grantor must intend to convey title and the grantee needs to:
a. record the deed with the county. c. check the public records.
b. accept the deed as immediately effective. d. notarize and sign the deed.
28. A grant deed signed with an “X” is:
a. valid. c. unenforceable.
b. voidable. d. void.
29. In a carryback transaction, the seller as the beneficiary:
a. lends money to the trustee.
b. delivers a promissory note to the trustor.
c. signs the trust deed and delivers it to the trustee.
d. receives the promissory note and trust deed.
30. A dragnet clause in a mortgage covers:
a. future court actions that might be anticipated.
b. any additional parties added in the future to the loan.
c. whatever future advances may be made on a loan.
d. all activities of the heirs and assignees of the borrower.
31. A clause in a trust deed that declares the total unpaid balance due and payable upon a transfer
of the property is called a(n) clause.
a. arbitration c. due-on sale
b. liquidated damages d. forfeiture
32. Consider a recorded trust deed that refers to a template of standard clauses contained in a
previously recorded trust deed. The previously recorded trust deed is called a
trust deed.
a. disguised c. preliminary
b. fictitious d. long form
33. Economic rent is rent:
a. received for similar space in an open market free of duress or otherwise affected by
external conditions.
b. the property would produce in a perfect market.
c. necessary to produce a reasonable return on investment.
d. allowed by government controls, such as federal monetary policy or local rent control
ordinances.
34. Two similar locations are leased on a long term basis, one for a government building and
the other for a used car lot. Using the capitalization approach to appraise the properties, the
government building would demand a capitalization rate (cap rate).
a. lower c. higher
b. similar d. Cannot be determined.
35. All of the following contribute to obsolescence, except:
a. Outdated appliances.
b. Changes in flight pattern from local airport.
c. Misplaced improvements.
d. Physical deterioration.
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36. The appraised value of a building is $800,000 but costs $1,200,000 to replace. This difference is
an example of:
a. supply and demand. c. accrued depreciation.
b. anticipation. d. remainder depreciation.
37. All of the following a dual agent may release, except:
a. the last names of either party. c. confidential pricing information.
b. the size of their fee. d. material facts about the property.
38. A dual agency is required to be disclosed to each client:
a. after escrow closes. c. before the parties meet.
b. the moment the conflict arises. d. any time prior to the close of escrow.
39. An agent is an individual who represents another, called the:
a. cooperating broker. c. appraiser.
b. principal. d. trustee.
40. Agency, whatever the type, is created by:
a. membership in a real estate trade union.
b. the conduct of each broker and their agents when interacting with a buyer or seller in a
transaction.
c. membership in a multiple listing service (MLS).
d. acquisition of a real estate license from the Department of Real Estate (DRE).
41. An easement differs from a license in that a license:
a. can be revoked. c. is created by a written agreement.
b. is assignable. d. is transferable.
42. The Energy Efficient Ratio (EER) rating concerns:
a. air conditioning and heating units.
b. environmental conservation requirements.
c. electrical energy usage.
d. utility efficiency of an income-producing property.
43. A sewer district’s right to run pipes through a homeowner’s property is an example of a(n):
a. servient tenement. c. easement in gross.
b. personal loss. d. riparian right.
44. In order to obtain an easement by prescription, one must:
a. use the property. c.physically confront the owner of the
property.
b. live on the property. d. own the property.
45. If an appraiser finds the interior walls and the inside of the exterior walls have a similar
temperature, this indicates:
a. the doors and windows are well sealed.
b. the insulation is sufficient.
c. more ventilation is needed on the property.
d. the heater is sufficient.
228 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

46. What type of notice is given by recording a deed?

a. Mutual notice. c. Constructive notice.
b. Separate notice. d. Actual notice.
47. Dale bought a home for $300,000. Since then, the property appreciates 10% each year. What is
the value of Dale’s property after three years?
a. $390,000. c. $330,000.
b. $399,300. d. $333,100.
48. When selling listings of another broker, a salesperson is directly responsible to:
a. their broker. c. the listing broker.
b. the multiple listing service (MLS). d. the owner of the property.
49. An agency relationship created by an exclusive listing is classified as a(n):
a. implied agency. c. express agency.
b. ostensible agency. d. agency by necessity.
50. When a seller writes a counteroffer, what happens to the original offer?
a. The original offer becomes a backup offer.
b. The original offer is voided.
c. The original offer is voidable by the buyer.
d. The counteroffer cannot be countered.
51. The correct sequential steps of the appraisal process are:
a. define the problem, gather the data, analyze the data, reconcile the results, reach a
conclusion.
b. gather the data, reconcile the data, arrive at a conclusion.
c. analyze the data, define the problem, reach a conclusion.
d. define the problem, analyze the data, gather the data, reach a conclusion.
52. Which of the following will have the least degree of influence on real estate in the future?
a. The community’s general plan. c. Demographics.
b. Regulation of the real estate industry. d. Weather.
53. An appraiser notices an abandoned auto salvage yard on the adjoining lot of a property they
are appraising. The appraiser should recommend which of the following?
a. A toxic waste study.
b. A zoning change for the property being appraised.
c. A geological study of the surrounding area by a civil engineer.
d. A land survey.
54. A lender can enter into an agreement with both a buyer and a seller for the buyer’s assumption
of the loan and a release of the seller’s liability, called a:
a. novation. c. substitution of liability.
b. indemnity agreement. d. Both a. and c.
55. The Real Estate Settlement Procedures Acts (RESPA) is administered and enforced by the:
a. Department of Real Estate (DRE).
b. Department of Housing and Urban Development (HUD).
c. Department of Business Oversight (DBO).
d. Consumer Financial Protection Bureau (CFPB).
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56. A resident of Nebraska who owns property in California dies while in Vermont. The probate
procedures for this property are handled in:
a. Nebraska. c. California or Nebraska.
b. California. d. federal court.
57. “Et ux” written into a document means:
a. “and extras.” c. “and son.”
b. “and wife.” d. “and others.”
58. Who is primarily responsible for disclosing to a buyer the existence of a Mello Roos tax
assessment on a parcel of real property?
a. The escrow officer. c. The selling agent.
b. The listing agent. d. The seller.
59. The Alquist-Priolo Special Study Zone earthquake disclosure requirement applies only to:
a. specific types of structures such as residential properties located in known earthquake
fault zones.
b. every structure in known earthquake fault zones.
c. specific building types in all counties in California.
d. unimproved properties in high risk areas.
60. It is acceptable for a real estate licensee to refuse to show a home to a minority prospect if:
a. the licensee sincerely believes that showing the property would cause panic in the
neighborhood.
b. the owner has stated in the listing that showings may be made only when they are
present, and the owner is currently out of town.
c. the owner has stated their home is not available to minority persons since they are
exempt from the 1968 Fair Housing Law.
d. the minority prospect has a criminal record and is on parole.
61. A land sales contract clause which prohibits any prepayment at any time after the year of the
sale:
a. is not enforceable.
b. voids the contract.
c. needs to be complied with by the vendee.
d. is voidable at the discretion of the vendee after five years.
62. In a land sales contract, the seller who is also acting as the lender is usually referred to as the:
a. trustee. c. vendee.
b. beneficiary. d. vendor.
63. A licensee’s Department of Real Estate (DRE) license number does not need to appear:
a. in the licensee’s car if it is used to drive clients to properties.
b. on listing and employment contracts.
c. on marketing materials and other points of contact with the public.
d. on purchase agreements.
64. If a broker is to appraise a property and generate an appraisal report, they need to:
a. only appraise properties they are listing. c. charge no more than $500 for the service.
b. be a licensed or certified appraiser. d. advertise their appraisal service.
230 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

65. The owner of a residential property found guilty of discrimination in violation of the Rumford
Act may be required to:
a. sell or rent the property to the aggrieved person.
b. find a similar property to rent to the aggrieved person if one is available.
c. pay a civil penalty of $10,000.
d. Any of the above.
66. A listing agent of a one-to-four unit residential property owes an affirmative duty to a
prospective buyer to gather or voluntarily provide the buyer with facts about:
a. the property’s title conditions.
b. observations they made while conducting their mandatory visual inspection.
c. the suitability of the property to meet the buyer’s objectives.
d. defects which may occur in the future.
67. The Real Estate Commissioner’s stated policy is to create a “color blind” industry that facilitates
voluntary, peaceful, equal opportunities in housing. What does this mean?
a. That race, creed, sexual orientation and color is not a material fact in a real estate
transaction.
b. Brokers and salespeople are to maintain an attitude that is absolutely free from bias.
c. Separate but equal.
d. Both a. and b.
68. Title VIII, also known as the Federal Fair Housing Act, refers to the:
a. Civil Rights Act of 1968. c. Civil Rights Act of 1964.
b. Unruh Act. d. Rumsford Act.
69. A broker may refuse to present a low offer to their seller when the offer is clearly frivolous or:
a. the broker has clear instructions to not submit an offer below a certain price.
b. the offer is submitted by a buyer with a very large family who intends to occupy the
property.
c. the offer is submitted by a member of a protected group.
d. A broker may never refuse to present an offer.
70. Though brokers typically hire agents as independent contractors (ICs), under labor law, an
agent is a(n) of the broker.
a. employee c. manager
b. advisor d. partner
71. A transfer by deed is void when:
a. the grantor’s name is fictitious.
b. the grantee is nonexistent.
c. the grantee’s name is fictitious.
d. the deed is obtained through false representations.
72. All of the following are considered to be a contract, except:
a. A net listing. c. A deed.
b. A mortgage. d. A land sales contract.
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73. The adjusted basis of a personal residence is the property’s:

a. original cost.
b. original cost minus improvements plus interest expenses.
c. original cost plus improvements minus depreciation.
d. original cost plus improvements.
74. Consider a loan broker who negotiates a $4,000 hard money junior trust deed that is due in
three years. The maximum commission the broker can charge is:
a. $400. c. $800.
b. $200. d. $600.
75. Which of the following is least important to an appraiser when appraising a property?
a. The utility of the land. c. The bundle of rights.
b. The condition of the improvements. d. The original cost of the property.
76. A(n) represents both the buyer and the seller.
a. finder’s agent c. free agent
b. dual agent d. subagent
77. A broker’s duty to act with the utmost good faith and diligence for the benefit of the principal
they are contracted to represent is referred to as a(n):
a. fiduciary duty. c. duty free.
b. general duty. d. Sub-agency duty.
78. Failure of the listing agent to provide the seller with the Agency Law Disclosure prior to
entering into the listing agreement:
a. will result in the loss of the brokerage fee on the sale if challenged by the seller.
b. will not result in the loss of the brokerage fee if later disclosed as an addendum to the
purchase agreement.
c. will subject the broker to criminal penalties.
d. has no effect so long as the agency confirmation provision is later timely provided.
79. The Agency Law Disclosure needs to be attached to a(n):
a. month-to-month commercial lease.
b. purchase agreement offer and acceptance.
c. property management agreement.
d. loan application or other financing arrangement.
80. A property owner suffers a loss due to the fraudulent misrepresentation of their broker. The
owner’s first action is to:
a. immediately file a claim with the Real Estate Commissioner.
b. immediately seek damages from the Real Estate Recovery Fund.
c. sue the broker for damages.
d. Report their broker’s misconduct to the buyer’s broker.
81. Under the Agency Law, all of the following duties are required of an agent, except:
a. preparing a five-year pro forma for any income property greater than four residential
units.
b. recording all deeds or delivering them to the appropriate party.
c. disclosing all material facts about a listed property.
d. treating all parties to a transaction fairly.
232 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

82. On the transfer of real property, a previous grant of an unlocated easement is:
a. valid.
b. void upon transfer.
c. voidable by the servient tenement if not used for five years.
d. voidable by the servient tenement since a deed cannot be the instrument used to create
an easement.
83. A broker cannot act for more than one party in a transaction without disclosing their dual
agency and obtaining:
a. a dual role license.
b. the consent of both clients.
c. a special permit from the Department of Justice (DOJ).
d. approval from the California Association of Realtors (CAR).
84. The property which benefits from an easement is referred to as the:
a. servient tenement. c. dominant tenement.
b. diminutive tenement. d. domicile tenement.
85. When land is subject to an easement, it is said to be:
a. encroached upon. c. an estate at sufferance.
b. encumbered. d. restricted.
86. An acquired right to use land that is less than an estate is known as a(n):
a. leasehold. c. riparian right.
b. remainder. d. easement.
87. An easement may be created for what length of time?
a. Perpetuity. c. The lifetime of a person.
b. An agreed-to period of time. d. Any of the above.
88. When a landowner is given the right to take water from another property, the owner receives
the right of:
a. avulsion. c. percolation.
b. alluvium. d. appropriation.
89. Chuck wills the family estate to Matt with the provision that title will transfer when he marries.
This is an example of a(n):
a. covenant. c. condition precedent.
b. restriction. d. condition subsequent.
90. An owner of a condominium unit owns:
a. the common walls between the units.
b. lawns and walkways in the common areas.
c. the common heating system.
d. the airspace within their unit.
91. Failure to provide the Agency Law Disclosure in targeted transactions:
a. puts the agent’s fee at risk of loss.
b. renders the transaction invalid.
c. affects only the listing half of a commission.
d. affects only the salesperson’s share of the commission.
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92. A licensee takes on the role of an agent in a transaction when they:

a. represent themselves. c. represent the seller.
b. represent the buyer. d. Both b. and c.
93. The fiduciary relationship between an agent and the principal is most similar to the fiduciary
relationship between a(n):
a. borrower and lender. c. trustee and beneficiary.
b. vendor and vendee. d. property owner and tenant.
94. Which of these is most likely to require an appraisal?
a. Any sale of real estate.
b. A new subdivision.
c. A U.S. Department of Veterans Affairs (VA)-guaranteed loan.
d. A land sales contract.
95. The value of a residential property is best measured by which of the following groups of
characteristics?
a. Utility, scarcity, depreciation and desire.
b. Cost, desire, scarcity and transferability.
c. Scarcity, demand, feasibility and cost.
d. Demand, utility, scarcity and transferability.
96. The economic life of a frame dwelling is most nearly:
a. 100 years. c. 39 years.
b. 50 1/2 years. d. 27 1/2 years.
97. For appraisal purposes, “capitalization” is a process used to:
a. convert future benefits to present net worth.
b. determine both physical and functional depreciation.
c. establish an appropriate rate of return for the investor.
d. properly market a property for sale in the multiple listing service (MLS).
98. Under California law, a trust deed:
a. transfers equitable title to the vendee.
b. names only two parties to the agreement.
c. automatically records the release of the property when the loan has been paid off.
d. creates an encumbrance on the property described in the deed of trust.
99. An unsuspecting buyer who acquires the ownership of real estate without actual knowledge
or recorded notice of a pre-existing enforceable purchase agreement held by another buyer
regarding the same property is referred to as a(n):
a. bona fide purchaser. c. piggyback purchaser.
b. insolvent purchaser. d. arm’s length purchaser.
100. The primary purpose of any deed is to:
a. create constructive notice of a transfer or alienation of title.
b. produce a recorded document.
c. identify the property involved in a real property transfer.
d. give evidence of the change in title or transfer of an interest in real property.
234 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

101. It is permissible to sell property that is sold “as is” when:

a. the buyer is told to perform a careful property inspection prior to making an offer and
waives any right to challenge the “as is” clause.
b. the purchase agreement includes an inspection clause.
c. the buyer is provided with a timely Transfer Disclosure Statement (TDS) and informed
of all known property defects prior to making an offer.
d. An “as is” sale is never permissible.
102. A residential buyer needs to be notified about the proximity of a military establishment that
contains explosives if the establishment is within ____ mile(s) of the property.
a. one c. five
b. two d. eight
103. If a residential landlord under a month-to-month rental agreement desires to increase rent
less than 10%, the landlord serves a:
a. 30-day notice of change in rental terms.
b. 60-day notice of change in rental terms.
c. 90-day notice of change in rental terms.
d. three-day notice to pay rent or quit.
104. Various listing contracts create different obligations and promises on the part of the broker
and the property owner. Under which contract will the property owner be required to pay a
commission, even when they sell the property themselves?
a. A net listing. c. An open listing.
b. An exclusive right to sell listing. d. An exclusive agency listing.
105. A seller insists on selling their property “as is” and refuses to disclose known problems on the
Transfer Disclosure Statement (TDS). The broker is aware the roof leaks, but does not inform
the buyer who purchases the property. The buyer can sue:
a. the seller only.
b. the broker only.
c. both the seller and their broker.
d. no one, since “as is” is recognized as constructive notice of a problem.
106. Under the Interstate Land Sale Act, a buyer of real estate has a right of rescission.
a. three business day c. one-week
b. four business day d. two-week
107. In order to be enforceable, a land sales contract needs to:
a. be in writing.
b. include a mediation clause.
c. state the appropriate vesting for the vendee.
d. have a term no greater than 10 years.
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108. A broker presents an offer to purchase real property made by a minority buyer. The seller
rejects the offer due to the buyer’s race. Here, the broker may:
a. explain to the seller that their refusal is a violation of the Fair Housing Act of 1968, and
that they are open to civil and criminal penalties.
b. advise the buyer of their right to file a complaint with the Department of Housing and
Urban Development (HUD).
c. sue the seller for their commission.
d. All of the above.
109. An apartment building owner’s newspaper advertisement is in violation of fair housing
laws if it states:
a. “adults only.” c. “no pets.”
b. “no smoking.” d. “spacious bathrooms.”
110. A listing broker can have any of the following agency relationships except:
a. buyer’s agent. c. dual agent.
b. seller’s agent. d. listing agent.
111. refers to the placement of a house upon its lot.
a. Orientation c. Zoning
b. Physical location d. Subordination
112. In the land of another, all of the following is an acquired right of use, but not an estate, except:
a. Mortgage. c. Devise.
b. Trespass. d. Easement.
113. An easement that does not specify a location is:
a. voidable. c. valid.
b. unenforceable. d. void.
114. Which of the following is the best example of functional obsolescence?
a. The close proximity of noxious fumes generated by a neighboring property.
b. Adverse zoning within the adjoining neighborhood.
c. No air conditioning in a building located in an arid, desert environment.
d. Rotted eaves.
115. Which of the following type of rental income would be the highest?
a. Scheduled gross income.
b. Gross operating income.
c. Net operating income (NOI).
d. Net spendable income.
116. The gross rent multiplier (GRM) is determined by:
a. dividing the sales price by the gross scheduled rent.
b. subtracting the vacancy factor from the scheduled rent.
c. dividing the price by the number of available rental units.
d. dividing sales price by net spendable income.
236 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

117. All of the following are NOT classified as finance charges under the federal Truth-in-Lending
Act (TILA), except:
a. Document preparation fees. c. Title insurance costs.
b. Loan assumption fees. d. Appraisal fees.
118. What does “discounting” refer to in the context of real estate finance?
a. The process of calculating the annual percentage rate (APR) of a given loan.
b. Liquidating real property that secures a debt in default.
c. The loan proceeds disbursed to the lender when reselling a note and trust deed.
d. Subordinating a debt.
119. When the Federal Reserve (the Fed) intends to tighten the amount of money in circulation,
it sells government bonds on the open market and:
a. lowers the discount rate.
b. raises the amount of reserves required for member banks.
c. purchases a greater volume of foreign currency.
d. deregulates the mortgage lending industry.
120. The Franchise Investment Law exists to protect:
a. sub-franchisors who have an exclusive geographic territory.
b. prospective franchisees prior to the purchase of a franchise.
c. investors in franchisor corporations.
d. the general public.
121. A tenant who remains in possession of a property on expiration of a lease without an
agreement or acceptance of rent by the landlord becomes a(n):
a. tenant at sufferance. c. tenant-in-foreclosure.
b. equity purchaser. d. bona fide purchaser.
122. A(n) reconveys the real estate to the landlord in exchange for cancellation of the
lease agreement.
a. notice of termination c. notice of change in rental terms
b. notice to vacate d. surrender
123. Broker Freddie takes an exclusive right to sell listing to sell a home on Monday evening. This
listing may be described as an:
a. implied, bilateral, executed, employment contract.
b. express, bilateral, executory, employment contract.
c. oral, unilateral, executory, employment contract.
d. express, unilateral, executed, employment contract.
124. Which of these documents provides the most protection to a property owner in default?
a. A first trust deed. c. A land sales contract.
b. A mortgage. d. A fixed-term lease with an option to buy.
125. What is meant by “unadjusted basis”?
a. The original cost of a property minus losses and depreciation.
b. The original cost of a property plus improvements minus depreciation.
c. The equity built up in a property due to amortization.
d. The original cost of a property.
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126. Seller Suzy provides carryback financing to Buyer Mel secured by a trust deed. Mel goes into
default. Which of the following statements is true?
a. Suzy can get a court order to force Mel to vacate the property.
b. Suzy can treat Mel as a tenant and define the deed as an invalid security device.
c. Suzy can sue Mel for possession.
d. Mel will have a period of time to redeem the property.
127. A published advertisement by a real estate broker needs to include:
a. their Department of Real Estate (DRE) license number.
b. the physical address of their office.
c. the fax number associated with the broker’s office.
d. reference to any negative actions taken against the broker’s license.
128. Unlike a lease, a license does not include:
a. rental payments. c. the right to exclude others from entry.
b. a termination date. d. All of the above.
129. When a lease is for a period greater than one year, all of the following is required in the
contract, except:
a. signatures of both the owner and tenant.
b. that the lease agreement be in writing.
c. a specific termination date.
d. a description of the rental and its location.
130. A property owner intending to sell their property wants to add specific instructions to the
listing specifying the property is not to be offered to anyone who is not a Caucasian. The
broker is to:
a. take the listing anyway and wait to see if anyone complains.
b. tell the owner it is unlikely that a minority member would want to move into the
neighborhood.
c. refuse to take the listing and explain to the owner that this discriminatory activity
violates both state and federal laws.
d. explain to the owner that a licensed broker cannot discriminate, but a private owner
can.
131. A Vietnamese couple walks into a real estate office. The salesperson:
a. has no obligation to show them homes in non-Asian neighborhoods.
b. needs to show them a minimum of three homes in a primarily white neighborhood.
c. does not need to provide any service to the prospects.
d. needs to treat them like everyone else.
132. A real estate salesperson tells their buyer, “If you buy this property then sell it in three years,
you will double your money.” Three years after the purchase, the value of the property has
not increased. In this situation, the:
a. buyer has no recourse.
b. salesperson is guilty of puffing which is not a crime.
c. salesperson’s broker is subject to discipline.
d. salesperson and their broker may be found guilty of fraud.
238 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

133. When an interest in property is acquired by prescription rather than adverse possession, the
interest may be described as:
a. the right to use land which belongs to someone else.
b. a private grant.
c. legal title.
d. a cloud on title to the benefiting property.
134. Frank leased a property to Chester. Chester gave Mark an easement over the property. At the
end of the lease term:
a. Frank regains the property subject to the rights of Mark.
b. the easement may not extend beyond the term of Chester’s lease.
c. Mark has an equitable right to use the land.
d. Frank regains control of the property since a tenant cannot grant an easement, only an
owner.
135. When a real estate broker fails to address all lawful instructions given by their principal, the
broker could:
a. face criminal charges.
b. have their driver’s license suspended.
c. be liable for the principal’s financial losses resulting from their actions.
d. be compelled to retake the state licensing exam.
136. The is a succinct restatement of existing agency codes and case law on agency
relationships in targeted real estate transactions.
a. Transfer Disclosure Statement (TDS)
b. Natural Hazard Disclosure (NHD)
c. Agency Law Disclosure
d. Fair Housing Law
137. Brokerage events triggering a listing agent’s preparation of a seller’s net sheet includes:
a. entering into a seller’s listing agreement.
b. submitting a buyer’s purchase agreement to a seller.
c. Both a. and b.
d. Neither a. nor b.
138. When is the usefulness of the appraisal cost approach the least appropriate?
a. When appraising homes in a new subdivision.
b. When appraising an old structure with many functional deficiencies.
c. When appraising raw land intended for future construction.
d. When appraising a mixed use property.
139. A property’s effective gross income is found by deducting which of the following from the
scheduled gross income?
a. Property management fees. c. Debt service.
b. Vacancies and credit losses. d. Depreciation.
 Simulated Exam #3 239

140. All of the following properties do NOT require the use of a lead-based paint disclosure, except:
a. Single family residences (SFRs) built in 1975.
b. Senior citizen housing built in 1986.
c. Homes for the disabled built after the passing of the Americans with Disability Act
(ADA).
d. Multi-family homes built after 1990.
141. A negative declaration issued for an environmental impact report (EIR):
a. indicates no negative influence of the development on the surrounding environment.
b. shows whether the developer had a previous record of poorly designed subdivisions.
c. is a positive statement made by the government in favor of the developer.
d. is typically issued by a governmental authority after an initial review period.
142. The Federal Fair Housing Act (FFHA) prohibits discrimination in the sale, rental and
advertisement of:
a. residential units. c. industrial properties.
b. commercial properties. d. land used for the grazing of livestock.
143. The preamble of the Federal Fair Housing Law states its purpose is to eliminate discrimination
in housing and to:
a. provide fair housing for everyone throughout the United States.
b. establish Fannie Mae.
c. provide low-cost housing for all.
d. create equal employment opportunities for all protected classes.
144. All of the following requirements made by a landlord are lawful, except:
a. Requiring a 600 or better FICO score.
b. Requiring cosigners for unmarried lessees.
c. Requiring each adult occupant to sign a tenant rules agreement.
d. Prohibiting the use of waterbeds in the property.
145. Based on the principle of leverage, an investor will:
a. use their own funds whenever possible.
b. use borrowed money only to the degree deemed safe and reasonable.
c. buy income property with a minimum down payment.
d. invest in rental properties with declining values.
146. One year after his real estate license expired, Claude renewed the license. Which of the
following is a true statement?
a. Claude can operate under a restricted license during his suspension.
b. Claude has to retake the license examination.
c. Until the license was renewed, Claude was not allowed to participate in anything that
required a license.
d. Claude is no longer eligible for a license.
240 Unlocking the DRE Salesperson and Broker Exam, Sixth Edition

147. If a lessee transfers all of their interests in a property, the transferee who receives the lessee’s
interest is classified as a(n):
a. assignee. c. vendee.
b. assignor. d. vendor.
148. When two brokers make a verbal agreement to split a commission, the agreement is:
a. void. c. unenforceable.
b. voidable. d. enforceable.
149. When the vendee under a land sales contract makes payments which include an impound
for taxes:
a. the vendor needs to hold the monies in a trust account.
b. the vendor can use the monies for other uses so long as they pay the taxes when due.
c. the vendor can keep the monies anywhere so long as they don’t convert the funds.
d. the vendor cannot hold the impounds unless they are licensed with the Department of
Real Estate (DRE).
150. A lease conveys a(n) in real estate to a tenant.
a. exclusive possessory interest c. nonexclusive possessory interest
b. personal privilege d. irrevocable privilege