California Real Estate Salesperson — All Questions

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
• 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
• 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
• 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
• 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.90 days

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.DRE's 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
• 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.July 1, 1988
• 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.Good practice
• 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.Lawful
• 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.A low credit score
• 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.Mixed with personal funds

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.Negotiating fees

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
• 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.

An estate that gives possession and use but not ownership, such as a lease, is classified as a:

• a.Fee simple estate subject to a condition subsequent
• b.Freehold estate of potentially indefinite duration
• c.Defeasible fee that can be lost upon a stated event
• d.Less-than-freehold estate✓

Leasehold interests are less-than-freehold (nonfreehold) estates, giving the tenant a right to possess for a term while the landlord keeps ownership. Freehold estates such as fee simple and life estates involve ownership of indefinite duration. The distinction turns on ownership versus mere possession.

A deed conveying land 'so long as it is used for a school' creates a:

• a.Leasehold estate for a fixed term of years
• b.Tenancy in common among the school's trustees
• c.Fee simple determinable✓
• d.Life estate measured by the life of the grantor

A fee simple determinable automatically ends and reverts to the grantor if the stated condition ('so long as') is violated. The grantor retains a possibility of reverter. It is a type of defeasible fee, distinct from a fee simple subject to a condition subsequent.

When a life estate ends and the property returns to the original grantor, that returning interest is a:

• a.Possibility of reverter following a determinable fee
• b.Remainder interest held by a named third party
• c.Reversion✓
• d.Merger

If a life estate is created and the future interest is kept by the grantor, that interest is a reversion. If the future interest is given to a third party instead, it is a remainder. Both take effect when the measuring life ends.

A tenant who remains in possession after the lease ends, without the landlord's consent, holds an:

• a.Periodic tenancy that renews from month to month
• b.Estate at will terminable by either party at any time
• c.Estate for years with an automatic statutory renewal
• d.Estate at sufferance✓

An estate at sufferance arises when a tenant wrongfully holds over after the lease expires without permission. The landlord may treat the holdover as a trespasser or, by accepting rent, create a periodic tenancy. It is the lowest form of possessory interest.

For a month-to-month tenant who has lived in a California unit less than one year, a landlord must generally give termination notice of:

• a.3 days
• b.Ninety days in every case regardless of the tenancy's length
• c.30 days✓
• d.Fifteen days when the rent is paid on a weekly basis

For a month-to-month tenancy, a landlord generally must give 30 days' notice to a tenant who has lived there less than a year, and 60 days if a year or more. Tenants generally give 30 days' notice. Local rent-control ordinances may add just-cause requirements.

A life estate measured by the life of someone other than the life tenant is called an estate:

• a.In severalty
• b.At sufferance held by a wrongful holdover occupant
• c.Pur autre vie✓
• d.For years lasting a fixed and definite term

An estate pur autre vie is a life estate measured by the life of a third person rather than the tenant. When that measuring person dies, the estate ends. It is still a freehold estate of uncertain duration.

A life tenant who lets the property fall into serious disrepair, harming the remainderman, may be liable for:

• a.Encroachment
• b.Waste✓
• c.Fraud
• d.Trespass

A life tenant must not commit waste, meaning conduct that permanently damages the property and injures the remainderman's or reversioner's interest. The life tenant may use the property but must preserve it. The future interest holder can act to prevent or recover for waste.

A leasehold estate that continues for successive periods until proper notice is given is a:

• a.Fee simple estate of potentially unlimited duration
• b.Holdover estate
• c.Estate for years ending automatically on a fixed date
• d.Periodic tenancy✓

A periodic tenancy, such as month-to-month, automatically renews for successive periods until either party gives the required notice. Unlike an estate for years, it has no fixed end date. Notice periods are set by statute or the lease.

The complete set of legal rights an owner has in real property is often called the:

• a.Bundle of rights✓
• b.Habendum clause
• c.Chain of title tracing the successive recorded owners
• d.Metes-and-bounds description of the parcel's borders

The bundle of rights includes the rights to possess, use, enjoy, exclude, encumber, and dispose of property. Different estates and encumbrances allocate parts of this bundle. Understanding it clarifies what an owner actually holds.

If one joint tenant sells their interest to a stranger, the new owner holds with the remaining owners as a:

• a.Tenant in common as to the sold share✓
• b.Joint tenant with an unbroken right of survivorship
• c.Community property owner under the state's marital law
• d.Sole owner in severalty free of any co-ownership

Selling one joint tenant's interest breaks the unities of time and title as to that share, so the buyer becomes a tenant in common with the others, who remain joint tenants among themselves. Survivorship no longer applies to the transferred share. This is a common way joint tenancy is severed.

A co-owner who wants to force the division or sale of jointly owned property may bring an action for:

• a.Partition✓
• b.Reformation to correct a mistaken or defective deed
• c.Quiet title to remove a cloud from the record
• d.Eviction

A partition action lets a co-owner compel the physical division of the property or, more commonly, its sale and division of proceeds. It is available to joint tenants and tenants in common. Courts order a sale when physical division is impractical.

In California, real property a spouse owned before marriage is presumed to be that spouse's:

• a.Tenancy in partnership property belonging to the marriage
• b.Joint tenancy
• c.Separate property✓
• d.Community property owned equally by both of the spouses

Property owned before marriage, or acquired during marriage by gift, inheritance, or with separate funds, is separate property. Property acquired during marriage by either spouse's efforts is presumed community property. Keeping separate property distinct requires avoiding commingling.

Under California law, transferring or encumbering community real property generally requires:

• a.Only one spouse's signature
• b.Approval from the county assessor before the deed is recorded
• c.A court order confirming that the transaction is fair to both
• d.The signatures of both spouses✓

Both spouses must generally join in any transfer, lease exceeding one year, or encumbrance of community real property. This protects each spouse's equal interest. A conveyance by only one spouse may be voidable by the other.

Changing the character of marital property from community to separate by written agreement of the spouses is called:

• a.Severance
• b.Transmutation✓
• c.Novation substituting a new party into a contract
• d.Accretion caused by the gradual deposit of soil

Transmutation is a change in the character of marital property, such as from community to separate, and in California it generally must be in writing and expressly declared. It affects ownership and inheritance rights. Casual statements are insufficient to transmute property.

Compared with ordinary joint tenancy, community property with right of survivorship gives a married couple the added benefit of:

• a.A full basis step-up on both halves at the first death✓
• b.A complete exemption from paying the documentary transfer tax
• c.Freedom from having both spouses sign to sell the property
• d.Automatic protection from all of the couple's creditors

Community property with right of survivorship combines survivorship with the community property tax advantage of a double step-up in basis when the first spouse dies. Ordinary joint tenancy provides survivorship but only a step-up on the decedent's half. California created this form to give couples both benefits.

A group of investors that forms a limited liability company to hold title takes ownership as:

• a.Joint tenants
• b.Tenants in common in proportion to their capital contributions
• c.Community property shared equally regardless of each investment
• d.A single legal entity✓

When an LLC, corporation, or partnership holds title, the entity owns the property in severalty as one legal person, and the members own interests in the entity rather than the land directly. This affects liability and transfer. The entity's governing documents control internal ownership.

Title held in a revocable living trust is legally vested in the:

• a.County recorder until the trust eventually terminates
• b.Probate court supervising the settlor's estate during life
• c.Beneficiaries directly as tenants in common among themselves
• d.Trustee for the benefit of the beneficiaries✓

In a living trust, legal title is held by the trustee, who manages the property for the beneficiaries under the trust terms. A revocable living trust is commonly used to avoid probate. The settlor often serves as trustee during their lifetime.

A key consequence of holding title as tenants in common rather than joint tenants is that a deceased owner's share:

• a.Passes to the owner's heirs or by will✓
• b.Escheats to the state after a ninety-day waiting period
• c.Automatically transfers to the surviving co-owners
• d.Reverts to the original grantor of the property

Tenants in common have no right of survivorship, so a deceased co-owner's share passes through the estate to heirs or devisees. Joint tenancy, by contrast, transfers the share to surviving joint tenants. This difference drives estate-planning choices.

A lien that attaches only to a specific parcel, such as a mortgage or mechanic's lien, is a:

• a.Specific lien✓
• b.Non-monetary encumbrance such as an easement or restriction
• c.Voluntary encumbrance that can be created only by a court
• d.General lien

A specific lien affects only an identified property, while a general lien such as a judgment lien can attach to all of the debtor's property in a county. Mortgages, deeds of trust, mechanic's liens, and property tax liens are specific liens. Classifying liens helps determine what property is at risk.

A deed of trust is best classified as a lien that is:

• a.Involuntary
• b.Voluntary and specific✓
• c.Statutory and imposed without the property owner's consent
• d.Non-monetary and unrelated to the payment of any debt

A deed of trust is a voluntary lien the owner willingly creates to secure a loan, and it is specific because it attaches only to the described property. Involuntary liens, such as tax or judgment liens, arise without the owner's consent. This classification affects priority and enforcement.