Clinical Research Essentials (CRE) – Exam Preparation Study
Guide
Option to Purchase - correct answer ✔✔ An option is a privilege or right that the owner of
property (the "optionor") gives to another person (the "optionee") to buy certain property at a
fixed price within a certain period.
The option is a mere offer that binds the optionor to sell, but does not obligate the optionee to
do anything. Because the optionee is not bound until the option is exercised, the granting of an
option constitutes neither a sale of the property nor an agreement to sell. However, during the
option term the optionor usually cannot revoke or withdraw the option without the optionee's
consent.
Right of First Refusal - correct answer ✔✔ A right of first refusal obligates the property owner to
offer the property to the holder upon the same terms as the owner proposes to sell to a third
party. A right of first refusal gives the owner more control over the transaction than an option
because the holder cannot force the sale at will. Rather, the holder must wait until the owner
decides to sell the property.
A right of first refusal becomes an option once the owner decides to sell the property, because
the holder is still not obligated to exercise the right. If the holder rejects the right, the owner is
free to sell to the third party upon the terms offered to the holder. Otherwise, the owner must
sell to the holder on those terms.
Referral fees between brokers - correct answer ✔✔ Referral fees between brokers are
legitimate and acceptable provided the broker receiving the fee is not also collecting other
monies for services rendered in the same transaction. Hidden fees, secret profits and duplicate
fees are never proper.
Collateralized loan - correct answer ✔✔ Collateralized loan is one secured by another loan,
rather than a property
,The promissory note and mortgage are signed by:
a. the mortgagee.
b. the lender.
c. the trustee.
d. the mortgagor. - correct answer ✔✔ d. Real estate mortgages are secured by property. Thus,
the property owner (mortgagor) signs the promissory note and mortgage.)
Changes in mortgage financing terms will affect the:
a. price and value of the property.
b. price only.
c. value only.
d. use of the property. - correct answer ✔✔ b. Changes in mortgage financing terms affect real
estate prices. Value is a matter of worth and perception, and is therefore not affected by
financing costs. The use of a property is also unaffected.
Under the market comparison approach, if a comparable property lacks a feature that is present
in the subject property, the value that feature will contribute is:
a. ignored since it has no effect on the sales price.
b. identified in the appraisal report for comparison purposes.
c. added to the sales price of the comparable property.
d. subtracted from the sales price of the subject property. - correct answer ✔✔ c. added to the
sales price of the comparable property. (An appraiser adjusts the value of the comparable
property, not the subject property. The value is adjusted in the direction of the subject. Since
the subject property has an added feature, the value of the feature in the marketplace will be
added to the comparable property to make the two more similar.)
Which of the following does not describe excess land?
a. Land which does not add to the total value of the property.
,b. Land in excess of that used by comparable properties.
c. Land that is not sufficiently utilized by the improvements on it.
d. Land that is used to store unused property fixtures. - correct answer ✔✔ d. (All of the answer
selections correctly describe the condition of excess land except answer selection D, as the land
is being used for a practical purpose, i.e., storage.)
In a general plan, what is the method of enforcement used by the planning commission?
a. Escheat.
b. Prescriptive easement.
c. Eminent domain.
d. Zoning. - correct answer ✔✔ d. Enforcement of the general plan by the planning commission
is accomplished through zoning laws.)
subdivision - correct answer ✔✔ A subdivision consists of five or more units, with the exception
of timeshares which are twelve or more.
A soil pipe is a(n):
a. drainage pipe.
b. sewer pipe.
c. electrical conduit. - correct answer ✔✔ b. A soil pipe is a sewer pipe. Of the alternative
answer choices, only C. electrical conduit is easy to eliminate since the question refers to a pipe,
while electrical wires use a conduit. Answer selection A. drainage pipe may be eliminated on the
basis that drainage isn't usually dispersed in the soil, but rather sent to a waterway. Answer
choice D may be the most difficult to eliminate if the answer is unknown since clay or adobe
may sound similar to soil; however, this is not material used in modern piping.
ostensible agency - correct answer ✔✔ An ostensible agency occurs when both principals
believe the agent represents them, but the relationship has not been formally disclosed.
, Without a liquidated damages provision in the purchase agreement, the seller is entitled to
recover:
a. only 3% of their money losses caused by the buyer's breach.
b. only 10% of their money losses caused by the buyer's breach.
c. the entire amount of their money losses caused by the buyer's breach.
d. none of their money losses caused by the buyer's breach. - correct answer ✔✔ c. the entire
amount of their money losses caused by the buyer's breach. (A liquidated damages clause in a
purchase agreement sets the maximum dollar amount a seller may recover from the buyer on
the buyer's breach. It is limited by statute to 3% of the purchase price. Without the clause, the
buyer may be liable for the entire amount of financial loss suffered by the seller due to the
buyer's breach.)
A broker under an exclusive listing also holds an option to purchase the property. If the broker
intends to exercise the option, the broker:
a. has a conflict of interest which needs to be disclosed.
b. needs to obtain the seller's approval of the broker's exercise of the purchase option in
writing.
c. needs to obtain the approval of the California Bureau of Real Estate (CalBRE).
d. needs to avoid receiving other offers before exercising the option. - correct answer ✔✔ b.
needs to obtain the seller's approval of the broker's exercise of the purchase option in writing.
(An exclusive listing with an option to purchase may cause potential conflict of interest issues.
Answer choices C and D can be easily eliminated as the CalBRE is not directly involved and the
broker would breach their fiduciary duty if they avoid receiving offers. The difference between
choices A and B is a matter of recognizing that choice A is possible, but not necessarily true.
Alternatively, choice B is always the best course of action.)
A preprinted disclaimer contained in the statutory Transfer Disclosure Statement (TDS) states
the disclosures made by the seller on the form:
a. may be relied on by a buyer as a warranty of the actual condition of the property.
b. are not part of the terms of the purchase agreement.
c. Both a. and b.
Guide
Option to Purchase - correct answer ✔✔ An option is a privilege or right that the owner of
property (the "optionor") gives to another person (the "optionee") to buy certain property at a
fixed price within a certain period.
The option is a mere offer that binds the optionor to sell, but does not obligate the optionee to
do anything. Because the optionee is not bound until the option is exercised, the granting of an
option constitutes neither a sale of the property nor an agreement to sell. However, during the
option term the optionor usually cannot revoke or withdraw the option without the optionee's
consent.
Right of First Refusal - correct answer ✔✔ A right of first refusal obligates the property owner to
offer the property to the holder upon the same terms as the owner proposes to sell to a third
party. A right of first refusal gives the owner more control over the transaction than an option
because the holder cannot force the sale at will. Rather, the holder must wait until the owner
decides to sell the property.
A right of first refusal becomes an option once the owner decides to sell the property, because
the holder is still not obligated to exercise the right. If the holder rejects the right, the owner is
free to sell to the third party upon the terms offered to the holder. Otherwise, the owner must
sell to the holder on those terms.
Referral fees between brokers - correct answer ✔✔ Referral fees between brokers are
legitimate and acceptable provided the broker receiving the fee is not also collecting other
monies for services rendered in the same transaction. Hidden fees, secret profits and duplicate
fees are never proper.
Collateralized loan - correct answer ✔✔ Collateralized loan is one secured by another loan,
rather than a property
,The promissory note and mortgage are signed by:
a. the mortgagee.
b. the lender.
c. the trustee.
d. the mortgagor. - correct answer ✔✔ d. Real estate mortgages are secured by property. Thus,
the property owner (mortgagor) signs the promissory note and mortgage.)
Changes in mortgage financing terms will affect the:
a. price and value of the property.
b. price only.
c. value only.
d. use of the property. - correct answer ✔✔ b. Changes in mortgage financing terms affect real
estate prices. Value is a matter of worth and perception, and is therefore not affected by
financing costs. The use of a property is also unaffected.
Under the market comparison approach, if a comparable property lacks a feature that is present
in the subject property, the value that feature will contribute is:
a. ignored since it has no effect on the sales price.
b. identified in the appraisal report for comparison purposes.
c. added to the sales price of the comparable property.
d. subtracted from the sales price of the subject property. - correct answer ✔✔ c. added to the
sales price of the comparable property. (An appraiser adjusts the value of the comparable
property, not the subject property. The value is adjusted in the direction of the subject. Since
the subject property has an added feature, the value of the feature in the marketplace will be
added to the comparable property to make the two more similar.)
Which of the following does not describe excess land?
a. Land which does not add to the total value of the property.
,b. Land in excess of that used by comparable properties.
c. Land that is not sufficiently utilized by the improvements on it.
d. Land that is used to store unused property fixtures. - correct answer ✔✔ d. (All of the answer
selections correctly describe the condition of excess land except answer selection D, as the land
is being used for a practical purpose, i.e., storage.)
In a general plan, what is the method of enforcement used by the planning commission?
a. Escheat.
b. Prescriptive easement.
c. Eminent domain.
d. Zoning. - correct answer ✔✔ d. Enforcement of the general plan by the planning commission
is accomplished through zoning laws.)
subdivision - correct answer ✔✔ A subdivision consists of five or more units, with the exception
of timeshares which are twelve or more.
A soil pipe is a(n):
a. drainage pipe.
b. sewer pipe.
c. electrical conduit. - correct answer ✔✔ b. A soil pipe is a sewer pipe. Of the alternative
answer choices, only C. electrical conduit is easy to eliminate since the question refers to a pipe,
while electrical wires use a conduit. Answer selection A. drainage pipe may be eliminated on the
basis that drainage isn't usually dispersed in the soil, but rather sent to a waterway. Answer
choice D may be the most difficult to eliminate if the answer is unknown since clay or adobe
may sound similar to soil; however, this is not material used in modern piping.
ostensible agency - correct answer ✔✔ An ostensible agency occurs when both principals
believe the agent represents them, but the relationship has not been formally disclosed.
, Without a liquidated damages provision in the purchase agreement, the seller is entitled to
recover:
a. only 3% of their money losses caused by the buyer's breach.
b. only 10% of their money losses caused by the buyer's breach.
c. the entire amount of their money losses caused by the buyer's breach.
d. none of their money losses caused by the buyer's breach. - correct answer ✔✔ c. the entire
amount of their money losses caused by the buyer's breach. (A liquidated damages clause in a
purchase agreement sets the maximum dollar amount a seller may recover from the buyer on
the buyer's breach. It is limited by statute to 3% of the purchase price. Without the clause, the
buyer may be liable for the entire amount of financial loss suffered by the seller due to the
buyer's breach.)
A broker under an exclusive listing also holds an option to purchase the property. If the broker
intends to exercise the option, the broker:
a. has a conflict of interest which needs to be disclosed.
b. needs to obtain the seller's approval of the broker's exercise of the purchase option in
writing.
c. needs to obtain the approval of the California Bureau of Real Estate (CalBRE).
d. needs to avoid receiving other offers before exercising the option. - correct answer ✔✔ b.
needs to obtain the seller's approval of the broker's exercise of the purchase option in writing.
(An exclusive listing with an option to purchase may cause potential conflict of interest issues.
Answer choices C and D can be easily eliminated as the CalBRE is not directly involved and the
broker would breach their fiduciary duty if they avoid receiving offers. The difference between
choices A and B is a matter of recognizing that choice A is possible, but not necessarily true.
Alternatively, choice B is always the best course of action.)
A preprinted disclaimer contained in the statutory Transfer Disclosure Statement (TDS) states
the disclosures made by the seller on the form:
a. may be relied on by a buyer as a warranty of the actual condition of the property.
b. are not part of the terms of the purchase agreement.
c. Both a. and b.
