CALIFORNIA REAL ESTATE BROKER
EXAM HIGH SCORE KIT
Smashwords Edition
Prepared by Michael Lustig
Contributing Editor: Denise Iona
Copyright © 2011-1978 by Michael Lustig
Smashwords Edition
2550 Questions with Fully Explained Answers, with Topics Cross-Referenced to the Appropriate Pages of the D.R.E. Reference Book.
Includes Over 80 Tips on How to Pass Your Real Estate Broker Exam
Distributed
by:
Real Estate License Services
5059 Newport Avenue, #209
San
Diego, CA 92107
Telephone: (800) 877-5445
For
Online California Real Estate Exam Questions + Explained
Answers
http://www.ExamPrepCentral.com
Pay
only for the questions you study!
Select
timed exams or questions by topic!
All
answers fully explained!
For
iPhone, iPad and Android Real Estate Study Apps
Visit
http://relstone.com/mobile.html
Also for the lowest prices on the Real Estate Principles course, Real Estate Practice course, or for any other pre-license real estate courses or continuing education courses, go to http://www.rels.com or call 1-800-877-5445.
Copyright © 2011-1978 by Michael Lustig. Copyright registered. All contents protected by laws of copyright. No portion of this book and no portion of the Real Estate Broker Exam High Score Kit may be reprinted, reproduced, transmitted, stored in a retrieval system, placed in a computer or on the Internet, or otherwise utilized, in any form or by any means electronic or mechanical, including photocopying or recording, now existing or hereinafter invented, nor may any part of this course be used for teaching without the prior written consent of Michael Lustig.
TIPS ON HOW TO PASS YOUR REAL ESTATE LICENSE EXAM
REAL ESTATE LICENSE EXAM PREPARATION QUESTIONS
Before you take your state exam, be prepared! The questions found in this book have been carefully selected to help you pass your state’s real estate license examination in the following areas:
Property Ownership and Land Use Controls and Regulations
Laws of Agency
Valuation and Market Analysis
Financing
Transfer of Property
Practice of Real Estate and Mandated Disclosures
Contracts
You will find questions on key terms and phrases. The material found inside these pages is a very effective way to prepare for your license exam. Read each question carefully, select the answer you believe to be most accurate, then compare your answer with the correct answer. Read the explanation provided to help you with any questions you may have answered incorrectly.
Good luck!
TIPS ON HOW TO PASS YOUR REAL ESTATE LICENSE EXAM
1. THE NEED FOR STUDY: Though it may seem obvious, the most important tip is this: There is simply no substitute for your own study. A wide range of material is available to help you prepare for your real estate exam, but in the end the results are produced by the efforts put forth in studying. In fact, it is a good idea to study a minimum six hours a day starting at least a week before your exam.
Use sample exam-style questions as a guide for your study, and when you answer a question incorrectly, look up the answer in your study material (whatever you are using) to make sure you have an accurate understanding of the subject matter. As with anything else, what you take from your study will be proportional to the effort you put into it. The real key to passing your exam, of course, is to know the material well enough to answer a high enough percentage of questions correctly to pass the exam.
2. HOW TO STUDY: Another question often asked is: "What is the best way to study?" The best way is the way that works for you. The method of study is a matter of personal preference, and only you can say which techniques will serve you best. Some like to study slowly and steadily over many weeks, while others prefer to cram during the last few days. Some like to rest the day or two before the exam and not even think about the subject of the exam. Others study up until the moment they step inside the examination room. You should use whatever method you personally find to be the most effective.
3. WHAT TO TAKE INTO THE EXAM: You will not be permitted to take any study material into the examination room. However, you may have a calculator, provided that it is electronic, operates silently (producing no beeps, chimes, bells, or other noises), and has no paper printout capability. You should, in fact, take a calculator because you will save a lot of time in answering the math questions. And make sure your calculator has a fresh battery!
Once in the exam room, you will be given everything you will need to take your exam: pencil, answer sheet, and scratch paper. Listen carefully to the oral instructions and thoroughly read the instructions in your test booklet. Anyone caught cheating runs the risk of prosecution and being permanently barred from taking the exam or holding a real estate license.
4. STRATEGY - HOW TO PACE YOURSELF AND AVOID PANIC: When you begin the exam, don't panic. Naturally, some of the questions will be difficult, and there will be some questions to which you may not know the answers.
Remember to pace yourself and spend no more than about one minute on each question. The best thing to do is to list the numbers of the most difficult questions in one corner of your scratch paper as you come across them and then go on to other less difficult questions. When you have finished answering all the relatively easy questions, go back and tackle the difficult ones. In this way, you will not waste your time on questions you cannot answer and risk running out of time on the others.
When you return to your list of difficult questions, be sure to cross them off the list as you are able to answer them. Again, do not spend too much time on questions you cannot answer. Time permitting, go through the list a third time and try to answer the questions again.
If you run out of time, take the last couple of minutes of the exam to make wild guesses at the questions you have not answered. You have a one in four chance of gues sing correctly with each question, and there is no penalty for a wrong answer.
5. EXAM MATH: Make sure you check your math carefully. Generally, about 12 to 30 questions on the exam involve math. Even if you are not especially good at arithmetic, don't worry because you can miss every arithmetic question and still pass the exam (if you do well on the remainder of your exam). Nevertheless, it is a good idea to aim high and attempt to answer every question correctly, whether it involves math or not.
Be sure to read each question carefully and completely, and be sure to read all the possible answers before marking your answer. Sometimes, in their enthusiasm, exam takers will read a question, see that the answer "a" is correct, and they mark it correct. They do not read answers "b," "c," and "d." The only problem is that answers "b" and "c" may also be correct, and answer "d" is the choice that should have been marked correct because it read, "all of the above."
6. TRICKS TO REMEMBER AND TRICK QUESTIONS: Watch out for questions that say "except for," as in:
All of the following are types of easements except for:
a. easement by
prescription
b. easement in gross
c. easement appurtenant
d.
easement by adverse prescription
("d" is the answer.)
If you are careless and do not read the question carefully, you will get this type of question wrong. Often, there are several "except for" or "which one is not" types of questions on the exam.
Sometimes, the exam will contain a "trick" question such as:
The color yellow:
a. is a warm
color
b. makes a room larger
c. both "a" and "b"
d.
neither"a"nor"b"
("a" is the answer.)
Why is "a" the answer? Because yellow is a warm color, it does make a room appear larger, but it does not make the room larger.
7. HOW TO READ LENGTHY QUESTIONS: Watch out for questions that are long and complicated. Sometimes 90% of the question has nothing to do with what is being asked, and the information essential to
answer the question correctly could have been asked in a few words. The complicated, extraneous portion of the question is designed to throw you off the track of the correct answer.
8. NAMES OF GOVERNMENT AGENCIES: Watch out for questions that ask for the proper name of state or federal agencies. For instance, the VA is the Veterans Administration (not Veteran's Affairs). Also, FHA is the Federal Housing Administration (not Association).
9. DISCRIMINATION QUESTIONS: When asked a question about discrimination, remember any discrimination based on race, creed, color, religion, national origin, sex, or physical handicap is not permitted by a licensee in any act for which the license is required. This is an absolute rule. Remember that under state law, discrimination in business is outlawed under the Unruh Act ($1,000 minimum fine for violation), and in housing under the Fair Employment and Housing Act (previously known as the Rumford Act). Under federal law, it is outlawed under both the court decision Jones vs. Mayer and under Title VIII of the Civil Rights Act of 1968.
10. NEVER FORGET WHO IS GRADING YOUR EXAM: When you are asked a question about the regulating power of government agencies, or the value of government agencies, remember it is government bureaucrats who make up and grade the exam. They look favorably upon themselves and their work, and you should take the same view on the exam.
11. ETHICS QUESTIONS: When you are asked a question relating to the morality, ethics, or legality of licensee activity, remember that only the highest ethics are to be followed. Be harsh on real estate licensees if harshness is one of the choices in a question. The exam is being given by the agency that regulates licensees and the Department of Real Estate attempts to weed out people with loose business ethics in connection with such questions.
The remainder of these tips describe the content of certain types of questions that are usually on every exam. These questions can trip you up if you are not careful!
12. For instance, remember that "in severalty" means "alone" or "individual," and not "several." Thus, property held in severalty is property held by one person alone, not by several people together. Remember "severalty" as meaning "severed" or "separate." Also remember: a corporation can be owned in severalty and can, in turn, own property in severalty.
13. The real estate law says that brokers and salespersons must give copies of documents and agreements to the persons signing them at the time of their signing. This applies not only to listings and deposit receipts, but to any document pertaining to any act for which a license is required. This is called the "law of copy." There may be questions on the exam about this.
14. As an agent you are not allowed to give legal advice unless you are an attorney. To do so is to practice law illegally. Thus, you cannot advise buyers on how to vest title.
15. All employees of the Department of Real Estate, from the Commissioner down to the file clerks, are prohibited from having any conflict of interest.
16. A key to high ethical and legal behavior as a licensee is full disclosure. All material facts concerning a sale must be disclosed fully to the parties involved, even if you lose a sale as a result. The exam is certain to ask you various questions relating to full disclosure.
17. As an agent you are permitted dual agency, but only if there is full disclosure to all parties to the dual agency.
18. In any deal involving a new deed of trust, a broker must, within one week of closing, record the trust deed, instruct the beneficiary to record it, or deliver it to an escrow holder.
19. The broker who first produces an offeror, ready, willing, and able to buy in accordance with the terms of an open listing, is the procuring cause and is entitled to the commission.
20. The broker has earned the commission when, within the life of the contract, he or she has brought the buyer and seller together and enabled them to enter into a binding contract.
21. The weakest type of listing, from the broker's standpoint, is the open listing, while the strongest is the exclusive right to sell.
22. All listing agreements must have a termination date.
23. All records must be retained by a broker for at least three years, some for four.
24. All money received by a broker as an agent, handled in trust for others, must be kept in a trust fund. The broker can neither mix (commingle) trust funds with his or her own funds nor use (convert) such funds for his or her own benefit. To do so is to violate Section 10176(e) of the real estate law of the Business & Professions Code. Of the two acts (commingling and conversion), conversion is the most serious offense. A broker is allowed to keep up to $200 of his own funds in his trust account to cover bank charges.
25. Regarding property tax exemptions, each residential unit that is owner-occupied on March 1 can have a $7,000 homeowner's exemption from the full value. This includes single-family residences and units in duplexes, condominiums, and other multi-unit structures
26. With regard to income tax, remember that you must own property for one year or longer before selling in order for the profit from the sale to qualify as long-term capital gain.
27. Regarding construction, remember that redwood is the best wood against termites, dry rot, and weathering. It is the only wood that naturally resists all three problems. Redwood is also widely viewed as the most attractive wood for construction. Its disadvantage is that it is a relatively soft wood.
28. With regard to banks and other lending institutions, remember that national banks and federally chartered savings and loans are governed by federal statute. State banks and state licensed savings and loans are governed by state laws.
29. Institutional lenders are: state banks, federally chartered savings and loan associations, state-licensed savings and loans, and life insurance companies. Non-institutional lenders include mortgage companies, pension funds, university endowment funds, and individual lenders.
30. Most interim financing, such as construction loans, is made by commercial banks. Commercial banks are generally in the business of making relatively short-term loans.
31. A take-out loan is the long-term financing that replaces interim financing once a project is completed. The take- out loan is usually made by an institutional lender. Institutional lenders are generally in the business of making relatively long-term loans, such as real estate loans.
32. An all-inclusive deed of trust is also called a "wrap-around mortgage."
33. "Fannie Mae" is the Federal National Mortgage Association (FNMA), a quasi-governmental, quasi public organization in the secondary mortgage market, where trust deeds or mortgages are bought and sold. The function of Fannie Mae is to provide a secondary mortgage market for VA or FHA insured loans from private lending institutions.
34. "Ginnie Mae" is the Government National Mortgage Association (GNMA). It is designed to guarantee payment on securities sold by FNMA (Fannie Mae) or by private lenders where such securities are backed by FHA or VA loans.
35. FHA does not make loans; it insures them.
36. A "CRV" is a Certificate of Reasonable Value. It is based on an appraisal and it sets the maximum loan amount a veteran can secure on a VA loan. To circumvent the law requiring a CRV on a VA loan is a violation of federal law.
37. The Truth-in-Lending Law is a federal law, also called Regulation Z. Under Regulation Z, any real estate ad that contains credit information must use the words "Annual Percentage Rate" (APR) and "Finance Charge."
38. There are four types of non-freehold tenancies or estates. They are:
A. Estate for Years: A lease for a set period of time, e.g. 2 years. It can be for less than a year, such as a lease for one week, for one day, or even for one hour of one day.
B. Periodic Tenancy: Tenancy for successive periods of the same length, such as day-to-day, week-to-week, or month-to-month. Proper notice by either party terminates the tenancy. Notice must be given at least as many days in advance as the tenancy (e.g. seven days notice on a week-to-week tenancy), but in any event, it need not be more than 30 days in advance.
C. Tenancy at Sufferance: The resulting tenancy where a tenant has retained possession of a property after expiration of a lease without the consent of the landowner.
D. Tenancy at Will: The possession of premises by a tenant with permission of the owner, but without agreement for a fixed term. This arrangement may be terminated immediately upon notice by either party.
39. "Leverage"refers to using no cash or a small amount of cash to control a large amount of property value.
40. On the sale of a personal residence, if you are 55 or older, have lived in your home for three of the last five years, and your gain is less than $125,000, you may qualify for a one-time exclusion of the gain.
41. In an exchange, the exchange must be of like properties, and the "boot" is taxable.
42. An unlicensed person performing any act requiring a real estate license is guilty of a misdemeanor. Such person, upon conviction, can be fined $10,000 and/or imprisoned for up to six months. If a corporation, the maximum fine is $50,000. Anyone paying a commission to a non-licensed person for anything requiring a real estate license can be fined $100 for each offense.
43. "Soft" money is a purchase money loan. The money advanced in the loan is on paper, not in the form of actual cash. Hard" money is money loaned by a third party, such as a mortgage company. It is actual cash advanced on the property, and it usually costs more than a soft money loan.
44. A syndicate is an organization of investors who pool their money in order to purchase as a group a relatively expensive property that would be too expensive for most small investors to purchase individually. The handling of real estate syndicates and syndicate interests is under the jurisdiction of the Department of Corporations, not the Department of Real Estate.
45. In a limited partnership, there must be at least one general partner and a written agreement with each limited partner.
46. In a limited partnership, a limited partner's liability for debts of the partnership is limited only to the amount of his or her investment in the partnership. This is what makes up a limited partnership.
47. Limited partners cannot participate in running the business. Although they can remove the general partner(s) by a 51% majority vote, they cannot run the day-to-day affairs of the partnership business.
48. A Real Estate Investment Trust (REIT) is a large-scale organization of investors (100 or more) in which the investors own shares of the REIT. Though not a corporation, a REIT is treated like a corporation by the Internal Revenue Service.
49. Regarding easements, there are three basic types:
A. Easement Appurtenant: It runs with the land and is conveyed when the land is conveyed.
B. Easement in Gross: It benefits a person or company (usually a utility company) and not a parcel.
C. Easement by Prescription: It results from continuous and open use of the land for five years or more (not to be confused with adverse possession).
50. "Real property" is defined as land and anything attached to or appurtenant to (belonging with) the land (such as easements appurtenant). Real property is property which is immovable.
"Personal property" is defined as anything that is not real property. Personal property is moveable property. Remember that trust deeds, grant deeds, mortgages, and other pieces of paper are personal property, although their content (that is, what they describe in words) relates to real property.
51. An item of personal property attached to real property becomes real property and is called a "fixture."
52. In case there is any doubt about whether or not a particular item qualifies as a fixture, there are five tests of a fixture: 1) method of attachment; 2) adaptability of the item; 3) intent of the parties; 4) relationship of the parties; and 5) agreement between the parties.
53. The "recovery" feature of the Recovery Fund is designed to underwrite payment of otherwise uncollectible court judgments obtained against licensees on the basis of fraud, misrepresentation, deceit, or conversion of trust funds in a transaction in which the judgment debtor participated as a licensee. The maximum amounts that can be paid from the Recovery Fund for losses incurred after January 1, 1980 is $20,000 per transaction and $100,000 per licensee (where there may be more than one transaction and one claim regarding the same licensee).
54. Your exam will ask several questions regarding the content of a deed. Remember that to be valid, a deed must be in writing and contain the grantor's signature, an adequate description of the property, a granting clause, and the name of the grantee.
A deed does not have to be dated, signed by the grantee, acknowledged, or recorded in order to be valid, although most deeds are dated and recorded as standard procedure. Also, a deed need not mention any consideration, since the deed is not a contract but rather an instrument of conveyance.
55. A party making a deed must have capacity. That is, he or she cannot be a minor or incompetent. Minors and incompetents can receive property but cannot convey without a guardian or permission of the court.
56. To convey title, a deed must be valid, it must be delivered by the grantor during the grantor's lifetime, and it must be accepted by the grantee.
57. Probate Court is a part of Superior Court, having jurisdiction over the estates of deceased, minor, and incompetent persons.
58. For a contract to be valid and enforceable it must contain:
A. Consideration: Something given, though not necessarily money; it can be, for example, a promise of love and affection.
B. Mutual Consent: The agreement between the parties or "meeting of the minds."
C. Capacity: The parties must be capable of contracting and may not be minors or incompetents.
D. Legal Purpose: The contract may not be for any illegal aim or intent.
59. A contract that is "void" is one that had no legal effect from the beginning.
60. A contract that is "voidable" is capable of being made void, but the only party who renders a "voidable" contract void is the innocent party - the party who was wronged in the transaction. For instance, someone who is defrauded in a land deal can make the contract void; but if the victim wants to enforce the contract, it is enforceable. In any event, the choice is out of the hands of the one who perpetrated the fraud.
61. A "chattel real" is a lease.
62. The suffix "-or" (as in grantor) refers to someone's giving something. A grantor gives a deed; a trustor gives money month after month; a lessor gives the possessory interest in the property to the tenant. The suffix "-ee" refers to someone's receiving something. A grantee receives a deed; a mortgagee receives money month after month from a borrower; a lessee receives the possessory interest in the property from the owner.
63. "Riparian rights"are the rights of a landowner to the reasonable use of water on, under, or adjacent to his or her land.
64. If a river is navigable, the property line is on the low water mark and the state owns the river bed. If a river or stream is non-navigable, the landowner's property line is to the middle of the river or stream.
65. A property owner's boundary along the ocean is the mean high tide line. Between the high tide line and the low tide line are the tidelands, and these belong to the state.
66. "Accession" is the addition of property by either natural means or unnatural means (such as improvements).
"Accretion" is a type of accession. It is the gradual addition to the shore or bank of a waterway. Usually such land becomes the property of the owner of the shore or bank. "Alluvium" is the land that is formed as a result of accretion. "Avulsion" is the sudden and violent tearing away of land, as in a flood. The land belongs to the original owner, and that owner usually has a year to reclaim his land, if he can locate it.
"Reliction" is the increase in land resulting from the permanent withdrawing of a body of water. You will be asked one or more questions on the meaning of these terms.
67. Remember the three types of wills:
A. Formal Will (also called "witnessed will"): A will written and signed by the testator in front of at least two witnesses.
B. Holographic Will: A will entirely in the testator's own handwriting and dated and signed by the testator.
C. Nuncupative Will: An oral will, made in contemplation of death. It cannot pass on real property, only personal property.
68. Remember: A "testator" is one who makes a will; "intestate" means to die without a will; "devise" is real property passed on in a will; and "bequeath" means to pass personal property on in a will.
69. Title related documents include:
A. Chain of Title: A chronological listing of every conveyance of title back to the original conveyance from the government.
B. Abstract of Title: A listing of all records currently pertaining to a parcel (a current resume, not a chronological history).
C. Property Profile: A brief summary of a limited number of facts concerning a property (such as taxes, legal location, etc.), often at no charge by title insurance companies, although the Insurance Commissioner does not like it offered free of charge.
70. Conditions, Covenants, and Restrictions (CC&Rs) are placed in deeds and are sometimes referred to collectively as "restrictions." Of the three, conditions are the most powerful. If a condition is broken, the property reverts back to the grantor. If a covenant is broken, the grantee may be liable for dollar damages.
A restriction is a limitation put on the use of the property (e.g. a height limitation).
71. Restrictive covenants based on race are legally unenforceable, a result of the court case Shelley vs. Kramer in 1948.
72. Remember that the following documents must be recorded to be effective: abstract of judgment, notice of default, notice of nonresponsibility, notice of completion, mechanic's lien, declaration of homestead, attachment, deed of reconveyance, notice of sale, and subdivision map.
73. Three types of legal description are: U.S. Government Survey; metes and bounds description; and the book, tract, block, and lot description (which is a system based on a recorded map).
74. The United States Government Survey is based on the township system. In the 19th century, the United States was surveyed into thousands of townships. A standard township is six miles on a side (36 miles square; 24 miles in perimeter). A row of townships is called a "tier."
75. The boundaries of townships are formed by "baselines" (also called "township lines") which run east and west, and by "range lines" (also called "meridians"), which run north and south.
76. A township is made up of "sections." A standard section is one mile on a side (one square mile, or 4 miles in perimeter) and contains 640 acres.
77. Not all townships and not all sections are standard. Some townships are less than 36 square miles, and some sections are less than 640 acres. The maximum number of non-standard sections in a non-standard township is 11. The non-standard sections are along the north and west boundaries of the non-standard township.
78. A standard acre always contains 43,560 square feet. The measurement known as a "rod" is 16.5 feet. A "chain" is 66 feet (or four rods). There are 16 square rods in one square chain and 160 square rods (10 square chains) in an acre. A square rod is 272.25 square feet; a square chain is 4356 square feet. One linear mile has 320 rods.
79. A commercial acre is less than a standard acre. It is the remainder of an acre of newly subdivided land after deduction of the area for public use (sidewalks, streets, curbs, etc.).
80. A quarter section is 160 acres (1/2 mile on a side, or 2 miles in perimeter). A quarter of a quarter section is 40 acres (1/4 mile on a side, or 1 mile in perimeter).
81. "Usury" is charging interest beyond the legal limit. For individuals who loan money, this limit is 10% per year if the loan is not broker arranged and/or not secured or related to real estate.
82. Remember that a straight loan is one where the note is payable in one lump sum on a certain date, while with an amortized loan, the principal and interest are paid in installments.
83. A "balloon" note is one under which the final payment is at least twice as great as the note's smallest installment payment.
84. Remember "time is of the essence," a phrase found in offers to purchase and receipts for deposit in order to limit the time the seller has to accept the offer.
REAL ESTATE LICENSE EXAM PREPARATION QUESTIONS
1. Apparent authority is perceived by
a.
the principal
b.
the agent
c.
third parties
d.
fiduciaries
Correct Answer: C
Explanation: Apparent authority is that authority which the agent appears to have from the perspective of third parties.
DRE Reference Book Page(s): 198.
==========
2. All of the following are means of creating an agency relationship except:
a.
agreement
b.
ratification
c.
estoppel
d.
inclination
Correct Answer: D
Explanation: Agency can also be created as the result of the conduct of the parties and the agent's inherent relationship with third parties. This is termed "ostensible" or "implied" agency.
DRE Reference Book Page(s): 185.
==========
3. Which of the following types of authority is specific?
a.
express
b.
apparent
c.
ostensible
d.
fiduciary
Correct Answer: A
Explanation: Express authority is very specific because it is actually bestowed by the principal to the agent. For example, real estate brokers are given specific authority within the scope of their activities connected with selling a house.
DRE Reference Book Page(s): 188.
==========
4. Which of the following types of authority may exist because it is necessary to accomplish the objectives of the agency?
a.
implied
b.
practical
c.
indirect
d.
functional
Correct Answer: A
Explanation: Implied authority exists because it is often impractical or even impossible for the principal to specifically delineate every aspect of the agent's authority.
DRE Reference Book Page(s): 188.
==========
5. Which of the following types of authority is bestowed by means of a formal agreement?
a.
apparent
b.
ostensible
c.
express
d.
authorized
Correct Answer: C
Explanation: Express authority is created by a contract that delineates the activities the agent is authorized to undertake.
DRE Reference Book Page(s): 188.
==========
6. Which of the following are the primary types of authority under the common law of agency?
a.
express, ostensible, apparent
b.
actual, agent, apparent
c.
apparent, actual, arbitrary
d.
arbitrary, actual, implied
Correct Answer: A
Explanation: Express authority is, in fact, bestowed. Ostensible, or implied, authority results from the conduct of the parties even though there may be no formal agreement in place. Apparent authority is perceived from the reasonable expectations of third parties.
DRE Reference Book Page(s): 185; 187; 189
==========
7. Agency may be created by which of the following?
a.
agreement
b.
preference
c.
succession
d.
affiliation
Correct Answer: A
Explanation: An agreement between the parties takes place when the principal gives express authorization to the agent.
DRE Reference Book Page(s): 185.
==========
8. All of the following are players in an agency relationship except:
a.
a real estate broker and agent
b.
an insurance company and an independent adjuster
c.
a homeowner and a cleaning service
d.
a teacher and her student
Correct Answer: D
Explanation: An agency relationship is created when one party (the agent) acts for the benefit of the other (the principal) under the principal’s direction. An agent is a fiduciary of the principal. A teacher and student do not hold the positions of principal and agent.
DRE Reference Book Page(s): 185.
==========
9. Which of the following is a correct statement about the term “agent?”
a.
This term is used only to designate a person who sells real
estate.
b.
An agent is a legal representative of his or her principal.
c.
The term carries no legal significance.
d.
Real estate personnel are not regarded as agents.
Correct Answer: B
Explanation: The term “agent” is used to mean the legal representative of a principal within an agency relationship.
DRE Reference Book Page(s): 185.
==========
10. Before dealing with the principal on his own account, an agent has as a duty, not only to make no misstatements of fact, but also to disclose to the principal all relevant facts fully and completely. A "relevant fact" is:
a.
one the agent chooses to share
b.
one that would likely affect the judgment of the principal
c.
one found in state statutes
d.
one which is unrelated to the subject of the agency
Correct Answer: B
Explanation: A fact is relevant if it is one which the agent should realize would be likely to affect the judgment of the principal in giving his consent to the agent to enter into the particular transaction on the specified terms.
DRE Reference Book Page(s): 211.
==========
11. May an agent act on his own account with respect to the purchase of property?
a.
no because it is illegal
b.
no because it is unethical
c.
yes with full disclosure
d.
yes without limitations