California Real Estate Practice Final Exam Questions and
Answers with Explanations.
When performing a CMA, what unit of comparison is used?
A. Size of living area
B. Entire property
C. Annual net income
D. Economic basis - Correct Answer B
Explanation: In performing a competitive market analysis, an agent compares the sales
prices of entire comparable properties.
A salesperson accepts a listing that does not explicitly authorize her to accept a deposit
from an offeror. Will the salesperson be able to accept a prospective buyer's deposit?
A. The salesperson may not accept any deposit
B. The salesperson may accept the deposit, as that is within her implied actual authority
C. The salesperson may accept the deposit, but in relation to the deposit she will be acting
as the buyer's agent
D. None of the above - Correct Answer C
Explanation: A listing agent who has not been authorized to accept a buyer's deposit but
who does so anyway becomes the buyer's agent, but only in regard
The broker most likely to qualify for a commission is the one who:
A. communicated acceptance to the buyer
B. communicated the offer to the seller
C. obtained an offer
D. obtained an offer with a deposit - Correct Answer A
Explanation: When a broker communicates the seller's acceptance to the buyer, that is
the moment of the formation of the contract. There may still be contingencies that have to
be satisfied, but this is the most important step in creating a contract.
A broker who is not licensed as an escrow agent may handle an escrow for a real estate
transaction:
,A. under no circumstances
B. as long as he charges an escrow fee
C. as long as he does not charge an escrow fee
D. if he is acting as broker in the transaction - Correct Answer D
Explanation: A broker that is not licensed as an escrow agent can handle the escrow for
his own transactions.
What is the best way to estimate the value of a relatively new, single-family, owner-
occupied residential property?
A. Determining the cost of replacing the property, including all improvements
B. Comparing the property with similar homes that have sold recently
C. Using a recent appraisal report prepared for one comparable property
D. Any of the above - Correct Answer B
Explanation: A competitive market analysis is adapted from the sales comparison
approach to appraisal, which estimates a property's value by comparing it to similar
properties that have sold recently
A broker received a $50,000 deposit on a selling price of $400,000. However, the buyer
breached the contract, and the seller claimed that the buyer had forfeited the deposit. In
this situation:
A. the seller may not retain any of the deposit
B. the seller may retain no more than 3% of the purchase price as liquidated damages
C. the seller could deduct any actual damages caused by the breach from the deposit
D. the seller may retain the entire deposit - Correct Answer B
Explanation: Assuming that the buyer and seller signed a liquidated damages provision in
the deposit receipt, the buyer's breach of contract entitles the seller to keep no more than
3% of a residential property's sale price as liquidated damages.
Which of the following statements concerning commissions is correct?
A. Any agreement between cooperating brokers to divide a commission must be in writing
B. A broker may never collect a commission if a sale occurs after the listing period has
expired
, C. A seller under an exclusive agency listing may sell the property without being liable for
a commission
D. Net listings are strictly illegal in California - Correct Answer C
Explanation: Under an exclusive agency listing, no commission is owed if the seller sells
the property by himself. While listings need to be in writing, commission sharing
agreements do not. A broker may receive a commission after the expiration of a listing
period if the listing contained a safety or protection clause. Net listings are legal in
California if the broker discloses the amount of his profit before the transaction closes.
Which of the following is not a requirement that must be met for the parties to treat the
good faith deposit as liquidated damages?
A. The good faith deposit must be at least 5% of the purchase price
B. The good faith deposit may not exceed 3% of the purchase price
C. The liquidated damages clause must be in either 10-point bold type or 8-point red type
D. The liquidated damages clause of the deposit receipt must be separately signed or
initialed by the parties - Correct Answer A
Explanation: A good faith deposit may not exceed 3% of the purchase price for it to be
treated as liquidated damages.
A buyer is required in the deposit receipt to place in escrow four months' prorated shares
of property taxes and hazard insurance. The applicable tax rate is $1.50 per $100 of
assessed value; the assessed value of the property is $400,000. The premium for a three-
year hazard insurance policy is $1,800. How much must the buyer place in escrow?
A. $1,650
B. $1,750
C. $2,150
D. $2,200 - Correct Answer D
Explanation: First, calculate the annual property tax payment ($400,000 ÷ 100= $4,000)
($4,000 X 1.5 = $6,000). Find the monthly share of the annual taxes ($6,000 ÷ 12 = $500)
and multiply by the number of months ($500 X 4 = $2,000). Now calculate the monthly
share of the three-year insurance policy ($1,800 ÷ 36 = $50) and multiply the monthly
share by the number of months ($50 X 4 = $200). Add the tax and insurance payments
together for the total amount placed in escrow ($2,000 + $200 = $2,200).
Answers with Explanations.
When performing a CMA, what unit of comparison is used?
A. Size of living area
B. Entire property
C. Annual net income
D. Economic basis - Correct Answer B
Explanation: In performing a competitive market analysis, an agent compares the sales
prices of entire comparable properties.
A salesperson accepts a listing that does not explicitly authorize her to accept a deposit
from an offeror. Will the salesperson be able to accept a prospective buyer's deposit?
A. The salesperson may not accept any deposit
B. The salesperson may accept the deposit, as that is within her implied actual authority
C. The salesperson may accept the deposit, but in relation to the deposit she will be acting
as the buyer's agent
D. None of the above - Correct Answer C
Explanation: A listing agent who has not been authorized to accept a buyer's deposit but
who does so anyway becomes the buyer's agent, but only in regard
The broker most likely to qualify for a commission is the one who:
A. communicated acceptance to the buyer
B. communicated the offer to the seller
C. obtained an offer
D. obtained an offer with a deposit - Correct Answer A
Explanation: When a broker communicates the seller's acceptance to the buyer, that is
the moment of the formation of the contract. There may still be contingencies that have to
be satisfied, but this is the most important step in creating a contract.
A broker who is not licensed as an escrow agent may handle an escrow for a real estate
transaction:
,A. under no circumstances
B. as long as he charges an escrow fee
C. as long as he does not charge an escrow fee
D. if he is acting as broker in the transaction - Correct Answer D
Explanation: A broker that is not licensed as an escrow agent can handle the escrow for
his own transactions.
What is the best way to estimate the value of a relatively new, single-family, owner-
occupied residential property?
A. Determining the cost of replacing the property, including all improvements
B. Comparing the property with similar homes that have sold recently
C. Using a recent appraisal report prepared for one comparable property
D. Any of the above - Correct Answer B
Explanation: A competitive market analysis is adapted from the sales comparison
approach to appraisal, which estimates a property's value by comparing it to similar
properties that have sold recently
A broker received a $50,000 deposit on a selling price of $400,000. However, the buyer
breached the contract, and the seller claimed that the buyer had forfeited the deposit. In
this situation:
A. the seller may not retain any of the deposit
B. the seller may retain no more than 3% of the purchase price as liquidated damages
C. the seller could deduct any actual damages caused by the breach from the deposit
D. the seller may retain the entire deposit - Correct Answer B
Explanation: Assuming that the buyer and seller signed a liquidated damages provision in
the deposit receipt, the buyer's breach of contract entitles the seller to keep no more than
3% of a residential property's sale price as liquidated damages.
Which of the following statements concerning commissions is correct?
A. Any agreement between cooperating brokers to divide a commission must be in writing
B. A broker may never collect a commission if a sale occurs after the listing period has
expired
, C. A seller under an exclusive agency listing may sell the property without being liable for
a commission
D. Net listings are strictly illegal in California - Correct Answer C
Explanation: Under an exclusive agency listing, no commission is owed if the seller sells
the property by himself. While listings need to be in writing, commission sharing
agreements do not. A broker may receive a commission after the expiration of a listing
period if the listing contained a safety or protection clause. Net listings are legal in
California if the broker discloses the amount of his profit before the transaction closes.
Which of the following is not a requirement that must be met for the parties to treat the
good faith deposit as liquidated damages?
A. The good faith deposit must be at least 5% of the purchase price
B. The good faith deposit may not exceed 3% of the purchase price
C. The liquidated damages clause must be in either 10-point bold type or 8-point red type
D. The liquidated damages clause of the deposit receipt must be separately signed or
initialed by the parties - Correct Answer A
Explanation: A good faith deposit may not exceed 3% of the purchase price for it to be
treated as liquidated damages.
A buyer is required in the deposit receipt to place in escrow four months' prorated shares
of property taxes and hazard insurance. The applicable tax rate is $1.50 per $100 of
assessed value; the assessed value of the property is $400,000. The premium for a three-
year hazard insurance policy is $1,800. How much must the buyer place in escrow?
A. $1,650
B. $1,750
C. $2,150
D. $2,200 - Correct Answer D
Explanation: First, calculate the annual property tax payment ($400,000 ÷ 100= $4,000)
($4,000 X 1.5 = $6,000). Find the monthly share of the annual taxes ($6,000 ÷ 12 = $500)
and multiply by the number of months ($500 X 4 = $2,000). Now calculate the monthly
share of the three-year insurance policy ($1,800 ÷ 36 = $50) and multiply the monthly
share by the number of months ($50 X 4 = $200). Add the tax and insurance payments
together for the total amount placed in escrow ($2,000 + $200 = $2,200).
