California Real Estate Salesperson — All Questions

An agent's fiduciary duties to a principal are often summarized by the acronym OLD CAR. The 'C' most directly stands for:

• a.Compensation
• b.Confidentiality✓
• c.Compliance
• d.Consideration

The fiduciary duties commonly memorized as OLD CAR are Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable care. A real estate agent must keep the principal's confidences even after the transaction closes. These duties flow from the agency relationship established under California law.CA Civil Code

The California Transfer Disclosure Statement (TDS) is generally required in the sale of:

• a.One-to-four residential units✓
• b.All commercial buildings
• c.Vacant industrial land
• d.Newly constructed high-rises only

The TDS is mandated for transfers of residential property of one to four units, requiring the seller to disclose known material facts about the property's condition. Certain transfers, such as those between spouses or by court order, are exempt. The buyer receives a statutory right to cancel for a period after late delivery.CA Civil Code

California's agency disclosure law requires an agent in a residential one-to-four unit transaction to provide the 'Disclosure Regarding Real Estate Agency Relationships' and to confirm whom the agent represents. This confirmation must occur:

• a.Only at the close of escrow
• b.After the seller accepts the offer
• c.Only if the buyer requests it
• d.As soon as practicable, before the buyer signs the offer✓

The agency disclosure form must be provided and the agency relationship elected and confirmed before the principal signs the purchase agreement, as soon as practicable. This ensures buyers and sellers understand whether an agent represents the seller, the buyer, or both. Failure to disclose can expose the agent to discipline and liability.CA Civil Code

Which of the following is a protected class under the federal Fair Housing Act?

• a.Source of income
• b.Marital status
• c.Occupation
• d.Familial status✓

The federal Fair Housing Act protects race, color, religion, sex, national origin, disability, and familial status. Familial status protects households with children under 18 and pregnant persons. California's own fair housing laws add further protected categories such as marital status and source of income.Fair Housing Act

In California, real estate licenses are issued and regulated by the:

• a.Department of Real Estate✓
• b.Bureau of Consumer Financial Protection
• c.Federal Housing Administration
• d.National Association of Realtors

The California Department of Real Estate (DRE) licenses and regulates real estate salespersons and brokers under the Real Estate Law in the Business and Professions Code. The DRE is headed by the Real Estate Commissioner. The National Association of Realtors is a private trade association, not a licensing body.CA Business & Professions Code

The Unruh Civil Rights Act primarily prohibits discrimination by:

• a.Business establishments, including real estate licensees✓
• b.Only the federal government
• c.Private homeowners selling their own homes
• d.Lenders exclusively

The Unruh Civil Rights Act bars business establishments in California from discriminating against customers based on protected characteristics. Because real estate brokers operate businesses, they are covered. The Act broadly protects against arbitrary discrimination in the provision of goods and services.CA Civil Code

California's Rumford Fair Housing Act, also called the Holden Act's companion, chiefly prohibits discrimination in:

• a.Employment hiring only
• b.Automobile financing
• c.The sale and rental of housing✓
• d.Public school admissions

The Rumford Fair Housing Act prohibits discrimination in the sale, rental, and financing of housing based on protected characteristics. The related Holden Act specifically targets discriminatory mortgage lending, or redlining, by financial institutions. Together they strengthen California's fair housing protections beyond federal law.CA Government Code

When a single broker represents both the buyer and the seller in the same transaction, the arrangement is called:

• a.Single agency
• b.Dual agency✓
• c.Subagency
• d.Designated agency

Dual agency occurs when one broker represents both parties in the same transaction. In California it is legal only with the informed, written consent of both principals, and the agent owes limited fiduciary duties to each. The dual agent may not disclose one party's confidential price limits to the other.CA Civil Code

An agent who secretly buys the principal's property through a straw buyer to resell at a profit has most clearly breached the fiduciary duty of:

• a.Obedience
• b.Accounting
• c.Reasonable care
• d.Loyalty✓

The duty of loyalty requires the agent to place the principal's interests above the agent's own and to avoid undisclosed self-dealing. Secretly acquiring the principal's property for personal profit is a classic breach of loyalty. Such conduct can also lead to license discipline and rescission of the transaction.CA Civil Code

An agent tells a buyer, 'This is the best house on the block.' This statement is generally considered:

• a.A material fact requiring disclosure
• b.Illegal steering
• c.Non-actionable puffing✓
• d.Actionable misrepresentation

Puffing is a statement of opinion or exaggerated sales talk that a reasonable buyer would not treat as fact, so it is generally not actionable. Misrepresentation, by contrast, involves false statements of material fact. Agents should avoid stating opinions as verifiable facts to prevent liability.CA Civil Code

Directing prospective buyers toward or away from certain neighborhoods based on their race is the illegal practice of:

• a.Puffing
• b.Redlining
• c.Steering✓
• d.Blockbusting

Steering is guiding buyers toward or away from particular areas based on a protected characteristic such as race, limiting their housing choices. It violates the Fair Housing Act. Steering can be subtle, such as showing minority buyers homes only in certain neighborhoods.Fair Housing Act

Inducing homeowners to sell by warning that members of a protected class are moving into the neighborhood is the illegal practice of:

• a.Dual agency
• b.Redlining
• c.Steering
• d.Blockbusting✓

Blockbusting, also called panic selling, involves scaring owners into selling by suggesting that the entry of a protected group will lower values. It is prohibited under fair housing law. The practice exploits prejudice to generate listings and commissions.Fair Housing Act

A lender's refusal to make loans in certain geographic areas regardless of an applicant's qualifications is known as:

• a.Blockbusting
• b.Steering
• c.Redlining✓
• d.Novation

Redlining is the discriminatory denial of loans or insurance in specific neighborhoods, often based on the racial composition of the area. California's Holden Act specifically prohibits this practice by financial institutions. It illegally restricts access to credit and housing.CA Government Code

An agency relationship in real estate is most commonly created by:

• a.An express agreement such as a listing contract✓
• b.Estoppel only
• c.A recorded deed
• d.Adverse possession

Agency is usually created by an express agreement, such as a written listing or buyer-representation agreement, in which the principal authorizes the agent to act. It can also arise by implication, ratification, or estoppel. A written listing is required to enforce a claim for commission in California.CA Civil Code

A seller's agent who learns of a serious foundation defect must:

• a.Disclose the material fact to the buyer✓
• b.Ignore it because it favors the seller
• c.Keep it confidential for the seller
• d.Disclose it only to the seller

Even while representing the seller, an agent must disclose known material facts that affect the property's value or desirability to the buyer. Physical defects such as foundation problems are material and cannot be concealed. Concealing them can lead to liability and license discipline.CA Civil Code

A buyer's agent owes fiduciary duties primarily to the:

• a.Listing broker
• b.Seller
• c.Buyer✓
• d.Escrow company

A buyer's agent represents the buyer and owes that buyer the full fiduciary duties of loyalty, disclosure, confidentiality, and care. The agent must still deal honestly and fairly with the seller but does not owe the seller fiduciary loyalty. Agency confirmation forms make these relationships explicit.CA Civil Code

A fact that would affect a reasonable buyer's decision to purchase or the price they would pay is called a:

• a.Latent puff
• b.Fiduciary term
• c.Confidential fact
• d.Material fact✓

A material fact is any information that could influence a reasonable buyer's decision or the price offered. Agents and sellers must disclose known material facts affecting value or desirability. Failure to disclose material facts is a common basis for lawsuits and DRE discipline.CA Civil Code

Under California law, a death on the property that occurred more than three years before the offer generally:

• a.Voids the sale
• b.Need not be voluntarily disclosed based solely on the passage of time✓
• c.Must always be disclosed
• d.Requires a price reduction

California law provides that a death on real property occurring more than three years prior to an offer need not be disclosed based solely on that occurrence. However, an agent may not intentionally misrepresent the fact if directly and honestly asked. Deaths within three years are generally disclosable.CA Civil Code

A seller of residential property located in a state-designated flood or fire zone must provide the buyer a:

• a.Preliminary title report
• b.Mechanic's lien release
• c.Loan estimate
• d.Natural Hazard Disclosure Statement✓

The Natural Hazard Disclosure Statement informs buyers whether a property lies within designated hazard zones such as flood, fire, earthquake fault, or seismic areas. It is required in most residential one-to-four unit sales. This allows buyers to assess natural risks before completing the purchase.CA Civil Code

California's Megan's Law disclosure in a residential lease or purchase informs the party that:

• a.The property has lead paint
• b.Flood insurance is required
• c.A public database of registered sex offenders is available✓
• d.The seller has filed bankruptcy

Contracts for the sale or lease of one-to-four residential units must contain a statutory Megan's Law notice advising that information about registered sex offenders is available on a public website. The agent is not required to research or provide individual offender information. The notice simply directs parties to the public database.CA Civil Code

Federal law requires disclosure of known lead-based paint hazards for residential dwellings built before:

• a.1992
• b.1970
• c.1988
• d.1978✓

The federal Residential Lead-Based Paint Hazard Reduction Act requires sellers and landlords of housing built before 1978 to disclose known lead-based paint and provide an EPA pamphlet. Buyers generally receive a 10-day period to inspect for lead. The rule applies because lead paint was banned for residential use in 1978.CA Civil Code

To obtain a California real estate salesperson license, an applicant must, among other requirements, be at least:

• a.16 years old
• b.21 years old
• c.25 years old
• d.18 years old✓

An applicant for a California real estate salesperson license must be at least 18 years old, complete the required college-level courses, and pass the state exam. Applicants must also submit fingerprints for a background check. A salesperson must work under a licensed broker.CA Business & Professions Code

The primary legal distinction between a real estate salesperson and a broker in California is that a salesperson must:

• a.Be a member of a trade association
• b.Work under the supervision of a licensed broker✓
• c.Hold a college degree
• d.Carry errors and omissions insurance

A California salesperson may only conduct licensed real estate activity under the supervision and employment of a responsible broker. A broker may operate independently and supervise salespersons. Brokers face additional education and experience requirements to qualify for their license.CA Business & Professions Code

The California Real Estate Commissioner has the authority to:

• a.Issue building permits
• b.Suspend or revoke a real estate license✓
• c.Set property tax rates
• d.Approve local zoning

The Real Estate Commissioner enforces the Real Estate Law and may investigate complaints and suspend or revoke licenses for violations. The Commissioner also issues regulations and public reports. These powers protect the public from dishonest or incompetent licensees.CA Business & Professions Code

A broker who receives a buyer's earnest money deposit and, instead of depositing it, uses it for office expenses is guilty of:

• a.A permissible loan
• b.Lawful use of a commission advance
• c.Proper trust accounting
• d.Commingling and conversion of trust funds✓

Trust funds such as earnest money must be placed in a neutral escrow, a trust account, or delivered to the principal, and never mixed with the broker's own funds. Using client funds for personal or business expenses is commingling and conversion, a serious violation. The DRE strictly regulates trust fund handling.CA Business & Professions Code

Several competing brokerages agree to charge all clients the same commission rate. This agreement most likely violates:

• a.Antitrust law prohibiting price fixing✓
• b.Fair housing law
• c.RESPA disclosure rules
• d.The statute of frauds

Agreements among competitors to fix commission rates are illegal price fixing under antitrust law. Commission rates must be set independently and are always negotiable between broker and client. Violations can result in severe civil and criminal penalties.CA Business & Professions Code

The case of Easton v. Strassburger established that a listing agent has a duty to:

• a.Represent both parties
• b.Guarantee the roof
• c.Conduct a reasonably competent visual inspection of accessible areas✓
• d.Order a professional appraisal

Easton v. Strassburger held that a broker owes buyers a duty to conduct a reasonably competent and diligent visual inspection of accessible areas and disclose material defects found. California later codified this duty for residential one-to-four unit sales. The duty does not extend to inaccessible or hidden areas.CA Civil Code

An agency relationship can be terminated by all of the following EXCEPT:

• a.Death of the principal
• b.A buyer viewing the property✓
• c.Mutual agreement of the parties
• d.Expiration of the listing term

Agency terminates by completion of the purpose, expiration of the term, mutual agreement, revocation, renunciation, or death or incapacity of a party. A buyer merely viewing a property does not end an existing agency relationship. Termination rules protect both principals and agents.CA Civil Code

An advertisement stating 'perfect for a mature Christian couple, no children' most likely violates fair housing law because it:

• a.Omits the square footage
• b.Fails to state the price
• c.Expresses a preference based on protected classes✓
• d.Does not name the broker

Fair housing law prohibits advertising that indicates a preference, limitation, or discrimination based on protected classes such as religion and familial status. Referencing religion and excluding children signals illegal discrimination. Advertising must describe the property, not the desired occupants' protected traits.Fair Housing Act

Under California and federal law, a landlord must generally allow a tenant with a disability to:

• a.Occupy without a lease
• b.Skip paying rent
• c.Break the lease at any time
• d.Make reasonable modifications and keep a service animal despite a no-pets policy✓

Fair housing law requires landlords to permit reasonable accommodations and modifications for tenants with disabilities, including allowing service or assistance animals despite a no-pets rule. The tenant may be responsible for the cost of certain modifications. These protections ensure equal access to housing.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 administered by the Department of Real Estate

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 immediately before applying for the broker examination
• 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 of the salesperson's choosing without a written agreement
• 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 from the date the transaction fully closes escrow
• 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 letters of recommendation from currently licensed California brokers

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.Employing broker's personal home address and cellular phone number
• 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.Managing an apartment building as its salaried resident on-site 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.Automatically increase only the licensee's continuing education 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.Only at the end of each four-year license renewal period
• 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.Escrow officer who holds the parties' funds and documents

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 the relationship after the close of escrow is completed
• 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.Agency coupled with an interest that cannot be revoked
• 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.Gratuitous agent who acts without any expectation of compensation
• 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 transferring the principal's rights to the agent
• 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 property for more than ten years before deciding to list it
• 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.Likely to reduce the commission the agent expects to earn
• 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 regarding the principal's negotiating position
• 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.

An agent's duty of confidentiality toward a former principal generally:

• a.Yields to a new client's request for the former client's information
• b.Ends the moment escrow officially closes and funds are disbursed
• c.Continues after the transaction closes✓
• d.Applies only while the listing agreement remains in effect

Confidential information, such as a client's financial condition or motivation, must be protected even after the agency relationship ends. This duty survives the closing. Disclosing a former principal's confidences can create liability.

Which duty does a listing agent owe to the buyer, who is a third party to the agency?

• a.Full fiduciary loyalty equal to that owed to the seller
• b.Honesty and fair dealing✓
• c.Confidentiality about the seller's lowest acceptable price
• d.Obedience to the buyer's lawful negotiating instructions

Even without a fiduciary relationship, an agent owes third parties honesty, fair dealing, and disclosure of known material facts. The listing agent's fiduciary loyalty runs to the seller. This baseline duty prevents fraud and concealment toward buyers.

Which characteristic is protected under California's Fair Employment and Housing Act but NOT expressly named in the federal Fair Housing Act?

• a.Disability, which both the federal and the state statutes clearly protect
• b.National origin, a category the federal statute already expressly protects
• c.Source of income✓
• d.Race, which is covered by both the state and the federal fair housing laws

California's fair housing law protects additional classes beyond the federal seven, including source of income, sexual orientation, gender identity, marital status, ancestry, and immigration status. Source of income covers lawful, verifiable income such as housing vouchers. State law is broader than federal here.

Refusing to rent solely because an applicant will pay with a Section 8 housing voucher most likely violates California law as discrimination based on:

• a.Disability, a protected category under both state and federal law
• b.Source of income✓
• c.National origin, which the federal voucher program is tied to
• d.Familial status, because the household happens to include minor children

California prohibits housing discrimination based on source of income, which includes federal housing vouchers such as Section 8. A landlord generally may not refuse an applicant merely for using a voucher. This protection exists under state, not federal, fair housing law.

Housing that qualifies as 'housing for older persons' may lawfully:

• a.Refuse to rent to applicants based on their race or religion
• b.Exclude families with minor children✓
• c.Charge higher rent to tenants because of a physical disability
• d.Ignore fair housing advertising rules in all of its marketing

Qualified senior housing, such as 55-and-older communities meeting statutory criteria, is exempt from the familial status protection and may exclude minor children. It must still comply with all other protected class rules. The exemption is narrow and fact-specific.

A tenant using a wheelchair asks to install grab bars at the tenant's own expense. Under fair housing law the landlord must:

• a.Require the tenant to relocate to a designated accessible building
• b.Deny the request to preserve the uniform appearance of the units
• c.Pay for the grab bars and any related structural changes requested
• d.Allow the reasonable modification✓

Fair housing law requires landlords to permit reasonable modifications for tenants with disabilities, typically at the tenant's expense, and may require restoration on move-out for interior changes. A reasonable accommodation to rules or services, by contrast, is usually at the landlord's expense. Both ensure equal access.

A reasonable accommodation under fair housing law differs from a reasonable modification because an accommodation is a:

• a.Waiver of the tenant's obligation to pay the monthly rent
• b.Change in rules, policies, or services✓
• c.Physical alteration to the structure paid for by the tenant
• d.One-time cash payment made directly to the disabled tenant

A reasonable accommodation is a change in rules, policies, practices, or services, such as waiving a no-pets policy for a service animal. A modification is a physical change to the unit. Housing providers must grant both when reasonable and necessary for equal use.

A fair housing complaint filed with HUD must generally be submitted within how long after the discriminatory act?

• a.Six months after the aggrieved tenant vacates the property
• b.Three years, matching the general written contract statute
• c.One year✓
• d.Ninety days from the date the rental lease was signed

An administrative fair housing complaint with HUD must be filed within one year of the alleged discrimination, while a federal lawsuit generally has a two-year limit. California's Civil Rights Department enforces state fair housing law. Prompt filing preserves the complainant's rights.

The state agency that enforces California's fair housing law is the:

• a.United States Department of Housing and Urban Development
• b.Department of Real Estate's enforcement and audit division
• c.Civil Rights Department✓
• d.Bureau of Real Estate Appraisers within the state government

California's fair housing laws are enforced by the Civil Rights Department, formerly the Department of Fair Employment and Housing. It investigates complaints and can pursue remedies. HUD enforces the federal Fair Housing Act.

A neutral landlord policy that disproportionately excludes a protected group and lacks a business justification may be illegal under the theory of:

• a.Disparate impact✓
• b.Steering, which channels buyers toward particular neighborhoods
• c.Puffing, which involves exaggerated statements of opinion
• d.Novation, which substitutes one contracting party for another

Disparate impact liability arises when a neutral policy disproportionately harms a protected class without a legitimate, necessary justification. Intent to discriminate is not required. Fair housing law reaches both intentional discrimination and unjustified disparate impacts.

The federal Fair Housing Act's design and construction accessibility requirements apply to covered multifamily housing first occupied after:

• a.March 13, 1991✓
• b.The effective date of California's Proposition 13 in 1978
• c.The lead-based paint disclosure cutoff year of 1978
• d.The passage of the original Civil Rights Act in 1866

Covered multifamily housing with four or more units designed and built for first occupancy after March 13, 1991 must meet federal accessibility design requirements, including accessible common areas and usable routes. The rule improves access for persons with disabilities.

Telling a prospective minority buyer that homes are 'probably not available' in a certain area while showing them to others is:

• a.An acceptable way to save the buyer time and unnecessary effort
• b.Illegal steering✓
• c.A lawful exercise of the agent's professional judgment and discretion
• d.Permissible puffing about the general desirability of the area

Steering means channeling buyers toward or away from areas based on a protected characteristic, and it violates fair housing law even when framed as helpful advice. Agents must show clients all homes meeting their stated criteria. The buyer, not the agent, chooses neighborhoods.

The Civil Rights Act of 1866 is significant in fair housing because it:

• a.Was repealed and replaced entirely by the 1968 Fair Housing Act
• b.Bars all racial discrimination in property with no exemptions✓
• c.Applies only to federally financed public housing developments
• d.Created the Department of Housing and Urban Development to enforce it

The Civil Rights Act of 1866 prohibits any racial discrimination in the sale or rental of property and, as confirmed in Jones v. Mayer, contains no exemptions. It supplements the 1968 Fair Housing Act, which allows some limited exemptions. Together they broadly outlaw racial discrimination in housing.

The federal Fair Housing Act's protection of 'familial status' primarily protects:

• a.Married couples buying their first primary residence together
• b.Extended families who wish to live together in one large household
• c.Adult children who financially support their elderly parents
• d.Households with children under 18 and pregnant persons✓

Familial status protects families with one or more children under 18, pregnant individuals, and those securing custody of a minor. It prevents refusing housing to families with children, outside qualified senior housing. It was added to federal law in 1988.

A lender's refusal to make loans in a neighborhood based on its racial makeup is prohibited in California as:

• a.An acceptable practice as long as the interest rate is disclosed
• b.Redlining✓
• c.Standard risk management applied uniformly to all loan applicants
• d.A permissible underwriting decision based on the individual applicant

Redlining, the refusal to lend in certain areas based on racial or ethnic composition, is prohibited under the Holden Act and fair lending laws. Legitimate underwriting based on an individual's qualifications is permitted. The Holden Act specifically targets discriminatory mortgage practices.

An agent advertises a listing at a price the seller has not authorized in order to attract calls. This is:

• a.Permitted puffing about the general value of the property
• b.A prohibited misrepresentation✓
• c.Acceptable, because list prices are only suggestions to buyers
• d.Required in order to comply with fair housing advertising rules

Advertising a price or terms the seller has not authorized is false advertising and a misrepresentation subject to discipline. All advertising must be truthful and authorized by the principal. The DRE disciplines licensees for deceptive advertising.

A licensee posting a listing on social media must ensure the advertisement:

• a.Identifies the responsible broker and license number✓
• b.States the seller's reason for selling and lowest acceptable price
• c.Includes a professional photograph of every room in the home
• d.Guarantees the property will appreciate in value after the purchase

Online and social media advertising is subject to the same rules as print: it must not be a blind ad and must identify the license number and, on first contact, the responsible broker. Truthful, non-deceptive content is required. Team names must reference the broker.

An advertisement guaranteeing a home 'will double in value in five years' is problematic because it is:

• a.Protected commercial speech fully exempt from license regulation
• b.A misleading statement of a fact that cannot be assured✓
• c.Acceptable puffing that no reasonable buyer would ever believe
• d.Required disclosure of the property's future investment potential

Promising specific future appreciation states a fact that cannot be guaranteed and can mislead consumers, exposing the licensee to liability and discipline. Opinions clearly framed as such may be puffing, but guarantees of future value are deceptive. Advertising must be truthful.

The Unruh Civil Rights Act, applied to real estate businesses, prohibits arbitrary discrimination including on the basis of:

• a.The applicant's credit score as reported by a credit bureau
• b.The applicant's total number of years of formal education
• c.A tenant's documented prior history of late rental payments
• d.Age, in most housing rentals✓

The Unruh Act bars business establishments from arbitrary discrimination, and its protections have been read broadly to include categories such as age, outside qualified senior housing. Legitimate, individualized screening based on creditworthiness is generally allowed. Unruh complements the fair housing law.

Rents that a licensed property manager collects for owners in California must generally be:

• a.Deposited into a trust account✓
• b.Sent immediately to the Department of Real Estate for safekeeping
• c.Held in cash in the office until the owner requests them in writing
• d.Combined with the property manager's personal savings account

Rents collected for owners are trust funds and must be placed in a trust account, delivered to the owner, or handled per instructions. The manager must keep accurate records and reconcile monthly. Mishandling these funds is commingling or conversion.

A licensee who accepts a referral fee from a pest control company for referring the seller must:

• a.Disclose the fee to the principal✓
• b.Report the fee only to the local Realtor association's ethics board
• c.Split the fee equally with the buyer at the close of escrow
• d.Keep the fee confidential to protect the referral arrangement

Any compensation or referral benefit received in connection with a transaction must be disclosed to the principal; undisclosed profits breach fiduciary duty. In loan transactions, RESPA also bars unearned referral fees. Transparency about compensation is required.

A salesperson who has earned compensation on a closed sale must be paid:

• a.By the employing broker✓
• b.Directly by the seller at the close of the escrow
• c.By the buyer's mortgage lender out of the loan proceeds
• d.By the escrow company acting as a neutral third party

A salesperson may only be compensated by the responsible broker under whom the salesperson is licensed, not directly by clients or other parties. This channels accountability through the broker. Accepting compensation from anyone else violates license law.

When a listing agreement reaches its stated end date without a sale, the agency relationship:

• a.Continues until the seller formally records a cancellation notice
• b.Converts into an exclusive-agency listing with the same broker
• c.Automatically renews for another equal listing period by operation of law
• d.Terminates by expiration of its term✓

A listing that reaches its stated expiration date ends by lapse of time unless the parties agree to extend it. A safety or protection clause may still entitle the broker to a commission for previously introduced buyers. Agency can also end by mutual agreement or revocation.

A broker who fails to supervise salespersons, allowing repeated trust fund violations, may be disciplined for:

• a.Choosing not to join the local multiple listing service operated by Realtors
• b.Failure to supervise✓
• c.Declining to act as a dual agent in a residential transaction
• d.Exercising the negotiable right to set the office's commission levels

Brokers have a statutory duty to reasonably supervise the licensed activities of their salespersons, and failing to do so is independent grounds for discipline. Establishing policies and reviewing transactions helps meet this duty. Supervisory failures that harm the public are taken seriously by the DRE.

A licensee's use of the term 'Realtor' is proper only when the licensee is:

• a.A member of the National Association of Realtors✓
• b.Certified as an appraiser by the state appraisal bureau
• c.Licensed as a broker rather than as a salesperson in the state
• d.Employed by a brokerage that operates in multiple states

Realtor is a trademark of the National Association of Realtors and may be used only by its members. A license alone does not entitle someone to the term. Not all licensees are Realtors, and the distinction is about association membership.

A seller instructs the listing agent to hide a known roof leak from buyers. The agent should:

• a.Refuse and disclose the material defect✓
• b.Disclose it only if a buyer specifically asks about the roof's condition
• c.Follow the seller's instruction under the agent's duty of obedience
• d.Quietly reduce the price to offset the value of the undisclosed defect

The duty of obedience does not extend to unlawful instructions; concealing a known material defect is fraud. The agent must disclose material facts affecting value or desirability to the buyer. An agent who conceals defects shares liability with the seller.

A listing agreement's safety (protection) clause generally protects the broker's commission when:

• a.The property fails to sell at any time during the listing period
• b.A buyer the broker introduced buys shortly after expiration✓
• c.The seller relists the property with a completely different brokerage firm
• d.The buyer's mortgage loan application is denied by the lender

A safety or protection clause entitles the broker to a commission if, within a stated period after expiration, the seller sells to a prospect the broker procured during the listing. It prevents sellers from waiting out the listing to avoid the fee. The broker usually must provide a list of protected prospects.

A buyer instructs that an earnest money check be held uncashed until the offer is accepted. The broker must:

• a.Deposit the check into the broker's personal operating account temporarily
• b.Hold it undeposited until acceptance, as instructed✓
• c.Endorse the check over to the seller before presenting the offer
• d.Cash the check immediately upon receipt regardless of the instruction

A buyer may instruct that a deposit check be held uncashed until the offer is accepted; the broker must honor this and disclose it to the seller. Once accepted, trust fund rules apply, generally requiring deposit within three business days. The instruction should be documented.

A licensee who buys or sells property for their own account must:

• a.Refrain from using any professional knowledge in the transaction
• b.Pay a double documentary transfer tax on the entire transaction
• c.Obtain the Commissioner's written approval before making any offer
• d.Disclose their licensed status to the other party✓

A licensee acting as a principal must disclose that they hold a real estate license, since their expertise could affect the transaction. This prevents any appearance of taking unfair advantage. The disclosure is required whether buying or selling for one's own account.

A listing broker who receives several written offers before the property closes must generally:

• a.Choose the strongest offer and reject the others without telling the seller
• b.Present all offers to the seller✓
• c.Present only the highest-priced offer received to the seller
• d.Present only offers from buyers who are already preapproved

A broker generally must promptly present all written offers to the seller so the principal, not the agent, decides which to accept. Withholding offers breaches the duty of disclosure and can be grounds for discipline. The seller controls the decision after being fully informed.