California Real Estate Salesperson — All Questions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• a.$5
• b.$30
• c.$10✓
• d.$12

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

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

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

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

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

• a.16.7%
• b.20%✓
• c.10%
• d.15%

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

An option contract in real estate gives the optionee the:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Under an exclusive agency listing, the seller owes no commission if the property is sold by:

• a.A subagent of the listing broker
• b.The owner personally, without any broker's involvement✓
• c.Any cooperating broker in the MLS
• d.The listing broker during the term

An exclusive agency listing lets the seller reserve the right to sell the property personally with no commission owed, but any broker-procured sale during the term earns the listing broker a commission. It differs from an exclusive right to sell, where even an owner sale earns commission. It gives the seller one escape from the fee.CA Civil Code

A listing agreement is best characterized as:

• a.A security instrument for a loan
• b.A conveyance of title to the broker
• c.An employment contract between the seller and the broker✓
• d.A lease of the property to the broker

A listing is an employment or agency contract in which the seller hires the broker to find a ready, willing, and able buyer. It does not transfer any interest in the property. An exclusive listing in California must be in writing with a definite termination date.CA Civil Code

Under California law, an exclusive listing must contain:

• a.A notarized seller signature
• b.An automatic renewal clause
• c.A commission rate fixed by the DRE
• d.A definite, specified termination date✓

California requires exclusive listings to state a definite termination date; a listing with an open-ended automatic extension can subject the broker to discipline. The fixed end date protects the seller. Commission rates themselves remain fully negotiable.CA Business & Professions Code

The broker who sets in motion an uninterrupted chain of events leading to a sale is entitled to the commission as the:

• a.Procuring cause of the sale✓
• b.Subagent of the buyer
• c.Designated dual agent
• d.Neutral escrow officer

Procuring cause is the broker whose efforts primarily bring about the ready, willing, and able buyer, entitling that broker to the commission. Disputes over procuring cause are common in open listings. The broker must be the effective, uninterrupted cause of the sale.

A broker generally earns the commission when they produce a buyer who is:

• a.Unable to qualify for financing
• b.Interested but not yet committed
• c.Ready, willing, and able to buy on the seller's terms✓
• d.Merely curious about the property

The broker classically earns the commission by producing a buyer ready, willing, and able to purchase on the terms stated in the listing, even if the seller then backs out. 'Able' means financially capable of completing the purchase. Many contracts, however, tie the fee to actual closing.

The Multiple Listing Service (MLS) primarily functions to:

• a.Set the commission rates that member brokers must charge sellers throughout the state
• b.Let member brokers share listings and offers of cooperation and compensation✓
• c.License and discipline real estate agents
• d.Appraise properties for mortgage lenders

The MLS is a cooperative database where member brokers share listing information and offer compensation to cooperating brokers who bring buyers. It broadens exposure for sellers and inventory for buyers. It is a private service, not a government body, and does not set fees.

A property management agreement between an owner and a broker should:

• a.Remain oral to preserve flexibility
• b.Be recorded with the county recorder against the property's title before rent is collected
• c.Transfer ownership of the property to the manager
• d.Be in writing and define the manager's authority, duties, and compensation✓

A property management agreement should be written, spelling out the manager's authority, responsibilities, reporting, and fees, and it creates an agency relationship. The manager owes the owner fiduciary duties. Collecting rent and leasing for others requires a real estate license.CA Business & Professions Code

A property manager collecting tenant rents for an owner must place those funds in:

• a.A trust account, kept separate from the broker's own funds✓
• b.A general business operating account
• c.The broker's personal checking account
• d.Cash held in the office safe indefinitely

Rents collected for an owner are trust funds that must be held in a trust account, separate from the broker's money, to avoid commingling. The manager accounts to the owner regularly. Mishandling trust funds is a serious DRE violation.CA Business & Professions Code

California generally requires a resident manager on the premises of an apartment building with:

• a.16 or more dwelling units✓
• b.8 or more dwelling units
• c.4 or more dwelling units
• d.50 or more dwelling units

California requires a resident manager for apartment complexes of 16 or more units so someone is available for tenant needs. Smaller buildings do not require an on-site manager. A resident manager of the building where they live is exempt from the real estate licensing requirement.

As of California's current security deposit law effective in 2024, a landlord may generally collect a security deposit of no more than:

• a.Two months' rent for unfurnished units
• b.Any amount agreed to in the lease
• c.Three months' rent for furnished units
• d.One month's rent for most landlords✓

California law (AB 12, effective July 1, 2024) generally caps security deposits at one month's rent, whether the unit is furnished or unfurnished. A limited exception lets certain small landlords collect up to two months. This replaced the older two-month unfurnished and three-month furnished limits.CA Civil Code

After a residential tenant moves out in California, the landlord must return the deposit or provide an itemized statement of deductions within:

• a.30 calendar days
• b.60 calendar days
• c.21 calendar days✓
• d.10 business days

California requires the landlord to return the security deposit, or an itemized accounting of lawful deductions, within 21 calendar days after the tenant vacates. Deductions are allowed for unpaid rent, cleaning, and damage beyond ordinary wear. Failure can expose the landlord to penalties.CA Civil Code

A California landlord seeking to evict a tenant for nonpayment of rent generally must first serve a:

• a.30-day no-cause notice
• b.60-day termination notice
• c.Immediate lockout notice
• d.3-day notice to pay rent or quit✓

For nonpayment, the landlord serves a 3-day notice to pay rent or quit before filing an unlawful detainer. If the tenant pays within the period, the tenancy continues. Self-help lockouts are illegal; eviction must go through the court.CA Code of Civil Procedure

To end a month-to-month tenancy in California when the tenant has lived there over one year, the landlord (absent just-cause rules) must generally give:

• a.No advance notice at all
• b.3 days' written notice
• c.60 days' written notice✓
• d.30 days' written notice

For a tenant of one year or more, California generally requires 60 days' notice to terminate a month-to-month tenancy; a tenant of less than a year gets 30 days. Statewide just-cause rules may impose additional requirements. A tenant who is terminating generally gives 30 days.CA Civil Code

The California court action a landlord uses to legally regain possession from a holdover tenant is called:

• a.An unlawful detainer✓
• b.A judicial foreclosure
• c.A partition suit
• d.A quiet title action

Unlawful detainer is the summary court proceeding to evict a tenant who fails to pay rent or holds over after proper notice. It is a relatively fast process focused only on possession. Landlords may not use self-help such as changing locks or removing belongings.CA Code of Civil Procedure

A California residential landlord's duty to keep the unit fit to live in, with working plumbing, heat, and a weatherproof structure, is the:

• a.Tenant's right of first refusal
• b.Covenant of quiet enjoyment
• c.Warranty of marketable title
• d.Implied warranty of habitability✓

The implied warranty of habitability requires landlords to maintain rental units in a livable condition, including working plumbing, heating, and a safe, weatherproof structure. Tenants may have remedies such as repair-and-deduct if the landlord fails. It cannot be waived in a residential lease.CA Civil Code

The covenant of quiet enjoyment in a lease guarantees the tenant:

• a.An automatic reduction in rent for each year in which the landlord's operating expenses decline
• b.The right to possess and use the premises without wrongful interference by the landlord✓
• c.Free utilities for the lease term
• d.A completely soundproof unit

The covenant of quiet enjoyment assures the tenant the right to use and enjoy the property without unlawful disturbance from the landlord or those claiming under the landlord. It does not relate to literal noise. A serious breach can amount to constructive eviction.CA Civil Code

Before entering a tenant's unit for non-emergency repairs, a California landlord must generally give the tenant:

• a.At least 24 hours' notice✓
• b.At least 72 hours' notice
• c.No advance notice
• d.At least 7 days' notice

California requires reasonable notice, presumed to be 24 hours, before a landlord enters for non-emergency reasons such as repairs or showings. Entry must be during normal business hours absent agreement. Genuine emergencies allow entry without prior notice.CA Civil Code

A common environmental hazard found in older building insulation and floor tiles, dangerous when its fibers become airborne, is:

• a.Radon
• b.Carbon monoxide
• c.Formaldehyde
• d.Asbestos✓

Asbestos was widely used in insulation, floor and ceiling tiles, and pipe wrap before the late 1970s, and it poses a health risk when fibers are disturbed and inhaled. Removal or encapsulation should be done by trained professionals. Sellers must disclose known asbestos hazards.

A naturally occurring radioactive gas that can seep from soil into homes and is a leading cause of lung cancer is:

• a.Formaldehyde
• b.Radon✓
• c.Asbestos
• d.Methane

Radon is an odorless, colorless radioactive gas produced by the breakdown of uranium in soil that can accumulate in enclosed spaces. Testing and mitigation systems can reduce indoor levels. Known radon problems are a material fact requiring disclosure.

Visible mold growth from chronic moisture in a home is significant because it:

• a.Need not be disclosed once the visible growth has been cleaned and painted over by the seller
• b.Is never the seller's responsibility
• c.Improves the home's indoor air quality
• d.Is a material fact affecting health and value that must be disclosed if known✓

Mold from water intrusion can affect health and property value, making known mold a material fact the seller and agent must disclose. Buyers may investigate the source of moisture. Remediation involves fixing the water problem and removing affected materials.CA Civil Code

The federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) can hold a current property owner responsible for:

• a.Covering the buyer's closing costs
• b.Reimbursing the prior owner for the cost of any environmental cleanup completed before the sale
• c.Paying the current tenants' rent
• d.Cleanup of hazardous-substance contamination, even if a prior owner caused it✓

CERCLA, or Superfund, imposes strict and often joint and several liability for cleaning up hazardous contamination, which can reach current owners even if a previous owner caused the problem. An innocent-landowner defense requires due diligence before purchase. This is why environmental site assessments matter in commercial deals.

Before the sale or transfer of most California homes, the seller must certify that the property has:

• a.Working smoke detectors and a properly braced (strapped) water heater✓
• b.A brand-new roof
• c.Rooftop solar panels sized to offset at least half of the home's annual electricity use
• d.A monitored burglar alarm

California requires that homes have operable smoke detectors and that water heaters be braced, anchored, or strapped to resist earthquake movement, and the seller certifies compliance at transfer. These are inexpensive safety measures. Carbon monoxide detectors are also required in units with fuel-burning appliances or attached garages.CA Health and Safety Code

If a home lies within a FEMA-designated special flood hazard area, a federally regulated lender will generally require the borrower to carry:

• a.No additional coverage
• b.Only a lender's title policy
• c.Flood insurance✓
• d.Earthquake insurance

Federally regulated or insured lenders require flood insurance for homes in FEMA special flood hazard areas as a condition of the loan. Standard hazard policies exclude flood damage. The property's flood status is also disclosed on the Natural Hazard Disclosure Statement.

A cooperating broker who works with the buyer but represents the seller through the listing broker acts as a:

• a.Dual agent for both parties
• b.Subagent of the seller✓
• c.Exclusive buyer's agent
• d.Designated agent for the buyer

Under traditional subagency, a cooperating broker helps the buyer but legally represents the seller by extension of the listing broker, owing fiduciary duties to the seller. This arrangement has faded as buyer representation has grown. The buyer should understand whom the agent actually represents.CA Civil Code

California's agency disclosure form requires each agent to identify whether they represent:

• a.The seller alone, the buyer alone, or both parties as a dual agent✓
• b.The mortgage lender
• c.The appraiser of record
• d.The neutral escrow company that will hold the parties' funds and documents through closing

The agency confirmation portion requires each agent to state whether they represent the seller alone, the buyer alone, or both as a dual agent. This must be confirmed before the principal signs the purchase contract. Clear disclosure prevents undisclosed dual agency, which is prohibited.CA Civil Code

A licensee who receives an undisclosed rebate from a termite company for referring the seller's inspection has engaged in:

• a.Taking an undisclosed secret profit, a breach of fiduciary duty✓
• b.A lawful and routine referral, because the rebate was paid by a third party and not the seller
• c.Permissible dual compensation
• d.An ordinary business courtesy

Accepting an undisclosed rebate or referral fee is a secret profit that breaches the agent's duty to disclose and account to the principal, and it may violate RESPA. All compensation and rebates must be disclosed and consented to. Hidden profits can lead to discipline and forfeiture of the fee.CA Business & Professions Code

To renew a California real estate license, a licensee must generally complete:

• a.45 hours of approved continuing education every four years✓
• b.No continuing education at all
• c.200 hours of education every two years
• d.12 hours of education every year

California requires 45 clock hours of approved continuing education for each four-year license renewal, including mandated topics such as ethics, agency, fair housing, trust fund handling, and risk management. This keeps licensees current on law and practice. Requirements differ slightly for a first renewal.CA Business & Professions Code

A California broker must generally retain copies of listings, deposit receipts, and other transaction documents for at least:

• a.Ten years
• b.Six months
• c.Three years✓
• d.One year

California requires brokers to keep transaction records, including listings and trust fund records, for at least three years, and the DRE may inspect them. Proper recordkeeping supports audits and dispute resolution. The retention period runs from the closing or listing date.CA Business & Professions Code

A 'blind ad' that violates California license law is one that:

• a.Names only the general neighborhood instead of the property's exact street address
• b.Fails to disclose that the advertiser is a real estate licensee✓
• c.States the property's asking price
• d.Includes a photo of the home

A blind ad conceals that a licensee is behind the advertisement, misleading the public into thinking it is a private-party sale. California requires licensees to identify themselves as agents or brokers in their advertising. Team and DBA names must also be properly disclosed.CA Business & Professions Code

An 'as-is' clause in a California residential purchase contract:

• a.Eliminates all of the seller's disclosure duties
• b.Automatically waives the buyer's right to inspect and to cancel during the contingency period
• c.Voids the required transfer disclosure statement
• d.Does not relieve the seller and agent of the duty to disclose known material defects✓

Selling 'as-is' means the buyer accepts the property's current condition, but it does not excuse the seller or agent from disclosing known material defects. Required disclosures like the TDS still apply. The buyer retains the right to inspect.CA Civil Code