CSLB General Building (B) — 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.All commercial buildings
• b.Vacant industrial land
• c.One-to-four residential units✓
• 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.As soon as practicable, before the buyer signs the offer✓
• b.Only at the close of escrow
• c.After the seller accepts the offer
• d.Only if the buyer requests it

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.Marital status
• b.Occupation
• c.Source of income
• 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.Federal Housing Administration
• b.Department of Real Estate✓
• c.Bureau of Consumer Financial Protection
• 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.Only the federal government
• b.Private homeowners selling their own homes
• c.Business establishments, including real estate licensees✓
• 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.The sale and rental of housing✓
• b.Employment hiring only
• c.Public school admissions
• d.Automobile financing

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.Subagency
• c.Designated agency
• d.Dual 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.Loyalty✓
• b.Accounting
• c.Reasonable care
• d.Obedience

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

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

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

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.Keep it confidential for the seller
• b.Disclose it only to the seller
• c.Disclose the material fact to the buyer✓
• d.Ignore it because it favors 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.Seller
• b.Listing broker
• c.Escrow company
• d.Buyer✓

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

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.Must always be disclosed
• b.Need not be voluntarily disclosed based solely on the passage of time✓
• c.Voids the sale
• 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.Loan estimate
• c.Natural Hazard Disclosure Statement✓
• d.Mechanic's lien release

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.The seller has filed bankruptcy
• d.A public database of registered sex offenders is available✓

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.1978✓
• b.1988
• c.1970
• d.1992

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.18 years old✓
• c.21 years old
• d.25 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.Hold a college degree
• b.Carry errors and omissions insurance
• c.Work under the supervision of a licensed broker✓
• d.Be a member of a trade association

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

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

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

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

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.Expresses a preference based on protected classes✓
• b.Fails to state the price
• c.Omits the square footage
• 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.Skip paying rent
• b.Make reasonable modifications and keep a service animal despite a no-pets policy✓
• c.Break the lease at any time
• d.Occupy without a lease

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