California Real Estate Salesperson — All Questions

Under an exclusive right to sell listing, the broker earns a commission if the property sells during the listing term:

• a.Only if the owner personally sells it
• b.No matter who procures the buyer, including the owner✓
• c.Only if the listing broker finds the buyer
• d.Only if another broker finds the buyer

An exclusive right to sell listing entitles the broker to a commission if the property sells during the term regardless of who finds the buyer, even the owner. It offers the broker the greatest protection and is the most common listing type. This differs from an exclusive agency, where an owner-procured sale earns no commission.CA Civil Code

An open listing given to several brokers at once means that:

• a.All listed brokers split any commission
• b.Only the broker who procures the buyer earns a commission✓
• c.Only one broker may show the property
• d.The seller cannot sell it personally

In an open listing, a seller may engage multiple brokers and only the one who actually procures the buyer earns a commission. The seller may also sell the property personally without owing any commission. This nonexclusive arrangement offers brokers the least protection.CA Civil Code

In a net listing, the broker's commission is:

• a.Paid by the buyer
• b.A fixed percentage set by the Department of Real Estate's published commission schedule
• c.Any amount received above the seller's stated net price✓
• d.Always 6% of the sale price

In a net listing the seller sets a minimum net amount, and the broker keeps anything received above that figure as commission. Because it invites conflicts of interest, the broker must disclose the exact selling price and commission, and some states ban net listings. California permits them only with full disclosure.CA Business & Professions Code

For a real estate purchase agreement to be enforceable in California, it generally must be:

• a.Approved by the DRE
• b.In writing and signed by the parties✓
• c.Notarized
• d.Recorded

Under the statute of frauds, contracts for the sale of real property must be in writing and signed by the party to be charged to be enforceable. Oral real estate purchase agreements are generally unenforceable. The writing must contain the essential terms of the deal.CA Civil Code

A home sells for $500,000 at a 6% total commission. If the listing and selling brokers split it equally, each brokerage receives:

• a.$30,000
• b.$7,500
• c.$18,000
• d.$15,000✓

The total commission is 6 percent of $500,000, which is $30,000, and an equal split gives each brokerage $15,000. Commission is calculated on the final sale price. The split between listing and selling sides is set by agreement.

A sale closes on the first day of a 30-day month. Annual property taxes are $3,600, paid in arrears. Using a 360-day year, the daily tax proration amount is:

• a.$5
• b.$30
• c.$10✓
• d.$12

Annual taxes of $3,600 divided by 360 days equals $10 per day. Proration divides shared expenses like taxes between buyer and seller based on the closing date. A 360-day banker's year is often used to simplify the math.

A rectangular parcel measures 220 feet by 198 feet. Given that one acre equals 43,560 square feet, the parcel contains:

• a.1 acre✓
• b.2 acres
• c.0.5 acre
• d.0.75 acre

The area is 220 times 198, which equals 43,560 square feet, and dividing by 43,560 square feet per acre gives exactly 1 acre. Area of a rectangle is length times width. Memorizing 43,560 square feet per acre is essential for real estate math.

An investor buys a property for $250,000 and sells it for $300,000. The percentage of profit based on cost is:

• a.16.7%
• b.20%✓
• c.10%
• d.15%

Profit is $300,000 minus $250,000, or $50,000, and $50,000 divided by the $250,000 cost equals 0.20, or 20 percent. Profit percentage is typically figured on the original cost or basis. This measures return relative to the amount invested.

A salesperson receives 60% of the 3% commission their brokerage earns on a $400,000 sale. The salesperson's share is:

• a.$7,200✓
• b.$6,000
• c.$12,000
• d.$4,800

The brokerage earns 3 percent of $400,000, which is $12,000, and 60 percent of that is $7,200. Commission first goes to the broker, who then pays the salesperson their agreed share. Salespersons are always paid through their employing broker.

A broker who holds client trust funds must generally deposit them into a neutral escrow depository or a trust account no later than:

• a.Only when the deal falls through
• b.Within 30 days
• c.Three business days after receipt✓
• d.At close of escrow

California requires a broker to place trust funds into a neutral escrow, a trust account, or into the principal's hands not later than three business days after receipt. Prompt handling prevents commingling and protects clients. The DRE audits trust fund records closely.CA Business & Professions Code

A property manager who collects rents and leases units for owners in California generally must:

• a.Be licensed as a certified residential appraiser by the Bureau of Real Estate Appraisers
• b.Hold a real estate license or work under a licensed broker✓
• c.Register with the IRS only
• d.Hold a contractor's license

Leasing property and collecting rents for others for compensation are licensed real estate activities in California, so a property manager generally must be a licensee or work under a broker. Resident managers of apartment buildings are a limited exception. Property management agreements should be in writing.CA Business & Professions Code

A licensee who tells prospective buyers false information about a competing listing to steer them to their own listing has most likely committed:

• a.A fiduciary duty to the buyer
• b.Lawful advertising
• c.An unethical and possibly fraudulent act✓
• d.Permissible puffing

Deliberately making false statements about another listing to divert buyers is dishonest dealing that violates professional ethics and California license law. It can constitute fraud or misrepresentation subject to discipline. Licensees must deal honestly with all parties.CA Business & Professions Code

Which of the following is an essential element of a valid contract?

• a.A real estate license
• b.Notarization
• c.Lawful object and mutual consent✓
• d.Recording

A valid contract requires capable parties, mutual consent, lawful object, and sufficient consideration. Notarization and recording are not required for a contract's validity. A purchase agreement missing an essential element may be void or voidable.CA Civil Code

An option contract in real estate gives the optionee the:

• a.Right to occupy without paying
• b.Right, but not the obligation, to buy within a set time and price✓
• c.Immediate equitable ownership of the property from the moment the option is signed
• d.Obligation to buy the property

An option grants the optionee the exclusive right, but not the obligation, to purchase the property at a set price within a stated period, in exchange for option consideration. The optionor must sell if the optionee exercises the option. If the option lapses unexercised, the consideration is typically forfeited.CA Civil Code

When a seller responds to a buyer's offer by changing the price, the seller has made a:

• a.Novation
• b.Ratification
• c.Counteroffer that rejects the original offer✓
• d.Binding acceptance, because price is not treated as a material term of the offer

Changing any material term of an offer creates a counteroffer, which legally rejects the original offer and creates a new offer the other party may accept or reject. The original offer can no longer be accepted once countered. Acceptance must mirror the offer exactly to form a contract.CA Civil Code

Escrow closes on the last day of a 30-day month. The seller has already paid the full month's $900 of homeowner association dues. Using a 30-day month, the buyer owes the seller for how many days?

• a.1 day✓
• b.15 days
• c.10 days
• d.30 days

If the seller is responsible through the closing date and closing is the final day, the buyer owns only that last day, owing 1 day of the prepaid dues, which is $900 divided by 30, or $30. Proration allocates prepaid expenses between the parties. The exact day counted depends on the escrow instructions.

A house has a rectangular footprint of 40 feet by 50 feet. Its ground-floor area is:

• a.1,600 square feet
• b.900 square feet
• c.2,000 square feet✓
• d.2,400 square feet

Area equals length times width, so 40 feet times 50 feet equals 2,000 square feet. Square footage calculations are used for pricing, appraisal, and construction estimates. Always confirm which areas are included in the measurement.

An owner sells a property for $360,000, which represents a 20% loss from what she originally paid. What did she originally pay?

• a.$400,000
• b.$450,000✓
• c.$300,000
• d.$432,000

If $360,000 is 80 percent of the original cost after a 20 percent loss, then the original price equals $360,000 divided by 0.80, which is $450,000. Loss percentages are figured on the original cost. Set the sale price equal to the cost times one minus the loss rate and solve.

A brokerage charges a 5% commission on a $520,000 sale. The listing side keeps 40% and the selling side gets 60%. How much does the selling side receive?

• a.$10,400
• b.$15,600✓
• c.$13,000
• d.$26,000

The total commission is 5 percent of $520,000, which is $26,000, and the selling side's 60 percent share equals $15,600. Commission splits are negotiated between the brokerages involved. The listing side would receive the remaining $10,400.

For an unfurnished residential rental in California, the security deposit a landlord may collect is limited by statute. A landlord may NOT:

• a.Charge first month's rent
• b.Collect a cleaning fee at move-out for actual cleaning
• c.Charge a nonrefundable security deposit✓
• d.Require a written lease

California prohibits nonrefundable security deposits; all deposits must be refundable, subject to lawful deductions for unpaid rent and damages beyond normal wear. Statutory limits cap the total deposit amount. The landlord must return the deposit or an itemized accounting within a set period after move-out.CA Civil Code

How often must a California real estate licensee renew the license and complete continuing education?

• a.Every four years, with 45 hours of approved continuing education✓
• b.Every five years, with 60 hours of continuing education plus a new criminal background check
• c.Every two years, after finishing 30 classroom hours of continuing education approved by the Realtor association
• d.Every year, by retaking the state licensing examination

California salesperson and broker licenses run four years and require 45 clock hours of DRE-approved continuing education each renewal cycle. First renewals include specified mandatory subjects. The license is renewed through the DRE, not a trade association.

To qualify for a California broker license, an applicant relying on sales experience must generally have worked as a licensed salesperson for at least:

• a.Two years within the prior five years✓
• b.Five years continuously
• c.Three years within the previous ten years under at least two different brokers
• d.One year, plus membership in a local real estate trade association

A broker applicant must show at least two years of full-time licensed salesperson experience within the last five years, or qualifying equivalent experience or a degree with a real estate major. Applicants must also complete eight statutory college-level courses. The requirement ensures brokers have practical experience before supervising others.

A California real estate salesperson may lawfully perform licensed activities only while:

• a.Working for any brokerage chosen
• b.Employed by and under a licensed broker✓
• c.Holding a corporate broker license issued in the salesperson's own name
• d.Registered as an independent contractor directly with the Department of Real Estate

A salesperson's license authorizes real estate activity only under the employment and supervision of a responsible licensed broker. The broker and salesperson must have a written agreement. A salesperson may not accept compensation directly from anyone but the employing broker.

Under the Real Estate Law, a broker must retain copies of listings, deposit receipts, and trust records for at least:

• a.Three years✓
• b.One year
• c.Seven years, matching the federal income tax record retention period
• d.Five years from the end of the current license renewal cycle

Brokers must keep transaction and trust fund records for three years, and the DRE may inspect or audit them. The retention period generally runs from the closing or listing date. Failure to maintain records is grounds for discipline.

The California Consumer Recovery Account exists to:

• a.Guarantee a minimum commission to brokers whose clients cancel escrow
• b.Fund the Department of Real Estate's advertising and public outreach campaigns
• c.Pay certain victims of licensee fraud who cannot collect a judgment✓
• d.Reimburse licensees for their continuing education tuition and examination fees

The Consumer Recovery Account compensates members of the public who obtain a final judgment against a licensee for fraud or conversion of trust funds but cannot collect. Payouts are capped per transaction and per licensee, and the licensee's license is suspended until repayment. It is funded from a portion of license fees.

Before a real estate license is issued, every California applicant must submit:

• a.Fingerprints for a criminal background check✓
• b.A notarized statement of the applicant's net worth and financial condition
• c.Proof of errors and omissions insurance covering at least one million dollars
• d.Three broker letters of recommendation

All license applicants must submit fingerprints, usually through Live Scan, so the DRE can obtain a criminal history report. A record of certain crimes or prior discipline can bar licensure. This screening helps protect the public.

A licensee's advertising and solicitation materials that are the first point of contact with the public must include the:

• a.Broker's home address
• b.Name and license number of every other salesperson in the office
• c.License identification number✓
• d.Total dollar volume of transactions the licensee closed last year

California requires a licensee's license number on first-point-of-contact solicitation materials such as business cards and advertisements, so consumers can verify the license. So-called blind ads that hide the licensee's status are prohibited. Team advertising must also identify the responsible broker.

A 'blind advertisement' that violates California law is one that:

• a.Lists a property without stating the exact asking price and square footage
• b.Advertises the same property in more than one newspaper on the same day
• c.Fails to reveal that the advertiser is a licensed agent or broker✓
• d.Omits the property's natural hazard zone information from the listing text

A blind ad conceals that the person placing it is a real estate licensee, making it look like a for-sale-by-owner. California prohibits blind ads; advertising must disclose the licensee's status and license number. The rule prevents deception of the public.

A broker who collects an advance fee to market a client's property must, before using the materials:

• a.Obtain written approval from the local association of Realtors' ethics panel
• b.Submit the advance fee agreement and materials to the DRE✓
• c.Deposit the entire advance fee into the broker's general business operating account
• d.Record the advance fee agreement with the county recorder where the office is located

Advance fee arrangements, such as those to advertise property or a business opportunity, must be submitted to the DRE before use, and the funds are trust funds. This guards against advance-fee fraud. The broker must also account to the principal for the funds.

A restricted real estate license issued by the Commissioner is typically:

• a.Issued to out-of-state applicants who have not yet passed the California exam
• b.Granted with conditions after a disciplinary action✓
• c.A broker license limited to commercial and industrial property transactions
• d.A temporary license valid only during the ninety-day escrow of a single sale

A restricted license may be issued to a person whose license was revoked, suspended, or denied, allowing limited practice under conditions such as bonding or reporting. It can be suspended without a hearing if conditions are violated. It reflects the Commissioner's discretion to protect the public while permitting supervised activity.

Which activity, performed for others for compensation, requires a California real estate broker license?

• a.Appraising a single-family residence for a federally related mortgage loan
• b.Selling a manufactured home that is registered with the Department of Motor Vehicles
• c.Negotiating the sale of real property✓
• d.Working as a resident manager

Acts such as selling, soliciting, or negotiating the sale, lease, or exchange of real property for others for compensation require a license under Business and Professions Code section 10131. Resident apartment managers and appraisers are separately exempt or licensed. Knowing the licensed acts defines the scope of practice.

A broker who operates under a name other than the broker's own must:

• a.Register the name as a federal trademark before beginning any advertising
• b.File the trade name only with the Secretary of State's corporate division
• c.Obtain DRE approval to use the fictitious business name✓
• d.Use the name for at least one year before applying for a license endorsement

A broker using a fictitious business name must have it approved by the DRE and typically file a fictitious business name statement with the county. Salespersons may advertise under the broker's approved name. This lets the public trace advertising back to a responsible licensee.

A California corporation engaging in real estate brokerage must have at least one:

• a.Officer who is a licensed broker (the designated officer)✓
• b.Shareholder who passed the salesperson examination within the past year
• c.Employee who holds an active mortgage loan originator endorsement
• d.Board member who is a licensed appraiser certified by the state

A corporation acting as a real estate broker must designate a licensed broker officer responsible for its real estate activities and supervision. The corporation holds a broker license through this designated officer. That person is accountable for the licensed conduct of the firm.

The eight statutory college-level courses required for a California broker license are intended to:

• a.Substitute entirely for passing the state broker licensing examination
• b.Satisfy the continuing education requirement for the first two renewal cycles
• c.Replace the two years of practical experience the applicant would otherwise need
• d.Provide advanced education beyond the salesperson level✓

Broker applicants must complete eight statutory college-level courses covering subjects such as real estate practice, finance, appraisal, and legal aspects. These are in addition to, not a substitute for, experience and the state exam. The coursework prepares brokers for independent practice and supervision.

Grounds for discipline under Business and Professions Code section 10176 or 10177 include:

• a.Declining to join the local multiple listing service operated by Realtors
• b.Charging a commission higher than the local market average for the area
• c.Refusing to represent both the buyer and the seller in the same transaction
• d.Making a material misrepresentation to a client✓

The Real Estate Law authorizes discipline for dishonest dealing, misrepresentation, fraud, commingling, and other enumerated violations. Commission rates are negotiable, and refusing dual agency is not a violation. Sections 10176 and 10177 list many grounds for discipline.

If a licensee is convicted of a crime substantially related to the duties of a licensee, the DRE may:

• a.Raise the CE requirement
• b.Suspend or revoke the license✓
• c.Do nothing, because criminal matters are outside the DRE's authority
• d.Transfer the license to the licensee's employing broker for safekeeping

A conviction for a crime substantially related to the qualifications, functions, or duties of a licensee is grounds for suspension or revocation. The DRE weighs the nature of the crime and evidence of rehabilitation. This protects consumers from dishonest practitioners.

A broker must reconcile the trust account record of all beneficiary balances against the control record:

• a.Every four years
• b.Once every quarter, unless the account holds more than one million dollars
• c.At least once a month✓
• d.Only when a client specifically requests a written accounting

California brokers must reconcile trust fund records at least monthly, comparing the total of all beneficiary balances to the control record and bank balance. This detects shortages or errors early. The DRE examines these reconciliations during audits.

A broker may keep a limited amount of the broker's own funds in a trust account only to:

• a.Hold a cushion equal to ten percent of the largest deposit expected
• b.Earn interest for the broker on the average monthly account balance
• c.Provide a reserve to advance commissions to salespersons early
• d.Cover bank service charges, up to $200✓

A broker may keep up to $200 of personal funds in a trust account solely to pay service charges; more is unlawful commingling. Client funds and broker funds must otherwise be strictly separated. Exceeding the limit is a disciplinable offense.

Commingling occurs when a broker:

• a.Deposits a client's earnest money into a neutral escrow depository
• b.Delivers the buyer's deposit directly to the seller as instructed in writing
• c.Mixes client trust funds with the broker's own funds✓
• d.Keeps separate ledger cards for each beneficiary of the trust account

Commingling is improperly mixing client trust funds with the broker's personal or business funds, and it is prohibited even if no client loses money. Conversion, a further step, is using those funds for the broker's own purposes. Both are serious violations.

Interest earned on a client's trust funds held by a broker generally belongs to:

• a.The escrow company that processes the closing of the transaction
• b.The client, unless otherwise lawfully agreed✓
• c.The broker, as compensation for administering the trust account
• d.The Department of Real Estate's Consumer Recovery Account by default

Interest on trust funds belongs to the client or beneficiary of the funds, not the broker, unless the parties lawfully agree otherwise. A broker may not profit from client money. Special rules govern interest-bearing trust accounts set up for a principal's benefit.

California's statutory agency disclosure form describes the duties owed by a seller's agent, a buyer's agent, and a:

• a.Referral agent who only recommends a brokerage for a fee
• b.Dual agent✓
• c.Transaction coordinator who processes the closing paperwork
• d.Notary

The 'Disclosure Regarding Real Estate Agency Relationships' explains the duties of a seller's agent, a buyer's agent, and an agent representing both, the dual agent. It must be provided in one-to-four residential unit transactions. Understanding these roles helps clients know whom the agent represents.

The three steps of California's agency disclosure process are commonly summarized as disclose, elect, and:

• a.Ratify
• b.Confirm✓
• c.Record the elected agency relationship with the county recorder
• d.Notarize the agency relationship before the offer is presented

The process is Disclose (provide the agency disclosure form), Elect (choose the agency relationship), and Confirm (state the relationship in or with the contract). Each step has statutory timing. This structure ensures the parties understand representation before and during the transaction.

An agency created when a principal's conduct leads a third party to reasonably believe an agency exists is an:

• a.Actual agency
• b.Express agency created by a signed written listing agreement
• c.Universal agency granting authority over all of the principal's affairs
• d.Ostensible agency✓

Ostensible (apparent) agency arises when a principal, by words or conduct, causes a third party to reasonably believe someone is the principal's agent. It contrasts with actual agency created by express or implied agreement. A principal can be bound by the acts of an ostensible agent.

A real estate broker retained to sell one specific property is best classified as a:

• a.Dual agent
• b.General agent with authority over all of the owner's business dealings
• c.Special agent✓
• d.Universal agent empowered to act in any lawful matter for the owner

A real estate broker is typically a special agent, hired to perform a specific task such as finding a buyer for one property, with limited authority. A property manager, by contrast, is often a general agent. The scope of authority defines the agent's power to bind the principal.

In a residential sale, the selling agent must deliver the agency disclosure form to the seller:

• a.Only if the selling agent also represents the seller as a dual agent
• b.Within three business days after the close of escrow occurs
• c.Only after the seller has accepted the buyer's written offer
• d.As soon as practicable before presenting the offer✓

The selling agent (who may represent the buyer) must provide the agency disclosure to the seller as soon as practicable before the offer is presented. The listing agent provides it to the seller when the listing is taken. Timely disclosure lets each party understand representation before committing.

An agent's previously unauthorized act that the principal later approves and adopts is made binding through:

• a.Subrogation
• b.Novation substituting a new party into the original contract
• c.Ratification✓
• d.Estoppel arising from a third party's detrimental reliance

Ratification occurs when a principal accepts the benefits of, or otherwise approves, an agent's previously unauthorized act, thereby adopting it. The approval relates back as if authority existed from the start. It is one way a particular act becomes binding on the principal.

A dual agent in California may NOT, without permission, disclose to the buyer that the seller:

• a.Has owned the home for over ten years
• b.Is required to provide a Natural Hazard Disclosure Statement to the buyer
• c.Will accept less than the listing price✓
• d.Must complete a Transfer Disclosure Statement about the property's condition

A dual agent owes confidentiality about each party's negotiating position, so it may not reveal that the seller will take less, or that the buyer will pay more, without consent. Material facts about the property must still be disclosed. Balancing these duties is the core challenge of dual agency.

An agent's duty of obedience requires following the principal's instructions except when the instruction is:

• a.Unlawful or unethical✓
• b.Costly to the agent
• c.Inconvenient for the agent's personal schedule and workload
• d.Different from what a competing brokerage would typically advise

An agent must obey the principal's lawful instructions but must not follow directions that are illegal or unethical, such as concealing a known defect or discriminating. Obedience is bounded by law and the duties owed to third parties. An agent who follows an unlawful order shares liability.

An agent who accepts an undisclosed bonus from a service provider for steering clients to it has breached the duties of:

• a.Reasonable care in conducting a visual inspection of the property
• b.Obedience to the principal's lawful written instructions and directives
• c.Confidentiality
• d.Disclosure and loyalty✓

Accepting an undisclosed fee or secret profit from a third party violates the agent's duties of loyalty and full disclosure to the principal. All compensation and referral benefits must be disclosed. Undisclosed kickbacks can also violate RESPA in loan transactions.

The fiduciary duty of accounting requires an agent to:

• a.Prepare the principal's annual income tax return for the property
• b.Guarantee the accuracy of the property's future appreciation forecast
• c.Personally audit the escrow company's internal financial statements
• d.Report and safeguard the principal's money and documents✓

The duty of accounting obligates the agent to keep and report an accurate record of all funds, documents, and property entrusted by the principal, and never to commingle them. Trust funds must be handled properly. This duty protects the principal's money and papers.