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CA Branch 2 practice questions

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Question 1Laws and Regulations

Under California law, a real estate broker's license is generally required for a person who, for compensation, does which of the following?

  1. Prepares a residential lease for a tenant
  2. Manages a commercial property for its owner
  3. Appraises a single-family home
  4. Negotiates the sale of a business opportunity Correct answer.

Explanation

California requires a real estate license for persons who, for compensation, negotiate sales of businesses and business opportunities, along with listed real property activities. Preparing leases, appraising, and property management are separate activities with their own licensing frameworks.

Question 2Laws and Regulations

To qualify for a California real estate salesperson license, an applicant must complete how many hours of statutory pre-licensing education?

  1. 180 hours
  2. 45 hours
  3. 135 hours Correct answer.
  4. 90 hours

Explanation

California requires 135 hours of approved pre-licensing education for a salesperson applicant, consisting of three college-level courses. Broker applicants must complete 360 hours.

Question 3Laws and Regulations

A salesperson licensee wishes to represent a buyer in a transaction. Under California agency law, the salesperson must do which of the following?

  1. Post a surety bond with the Department of Real Estate
  2. Obtain a separate salesperson's license in the buyer's county
  3. Form a corporation to hold the commission
  4. Work under the supervision of a licensed broker Correct answer.

Explanation

A salesperson may only act under the supervision of a responsible licensed broker. Salespersons cannot contract directly with clients or collect commissions independently.

Question 4Laws and Regulations

Which of the following is required to obtain a California real estate broker license?

  1. Two years of full-time licensed experience within the preceding five years Correct answer.
  2. Ownership of real property in California
  3. A bachelor's degree in any field
  4. Membership in the local association of REALTORS

Explanation

Broker applicants must show at least two years of full-time experience as a licensed salesperson or equivalent within the five years preceding application, plus 360 hours of education and an exam. A degree, association membership, and property ownership are not requirements.

Question 5Laws and Regulations

A licensee who collects an advance fee from a client for a loan modification service must do which of the following?

  1. Report the fee only on the annual tax return
  2. Return the fee if the client requests within 30 days
  3. Obtain a separate mortgage loan originator endorsement
  4. Deposit the fee into a client trust account and file a notice with the DRE Correct answer.

Explanation

Advance fees must be placed in a trust account and the licensee must submit an advance fee notice to the DRE before collecting. This protects consumers from unearned fees.

Question 6Laws and Regulations

A broker receives a $5,000 earnest money deposit on a sale. Under California trust fund rules, the broker must do which of the following?

  1. Convert it to the broker's commission upon mutual acceptance
  2. Hold it in the broker's personal savings account
  3. Deposit it in the broker's general business operating account
  4. Place it in a trust account and maintain records of the deposit Correct answer.

Explanation

Earnest money held by a broker is trust funds and must be placed in a properly designated trust account with accurate records. Commingling with business or personal funds is prohibited.

Question 7Laws and Regulations

A licensee who is convicted of a felony must report the conviction to the Department of Real Estate within what period?

  1. 30 days Correct answer.
  2. 10 days
  3. 90 days
  4. 60 days

Explanation

A licensee must notify the DRE in writing within 30 days of being convicted of a felony or of a crime involving moral turpitude. Failure to report can itself be grounds for discipline.

Question 8Laws and Regulations

Which of the following best describes a fiduciary duty a broker owes to a principal?

  1. Duty to guarantee a sale price
  2. Duty to advertise the property in all media
  3. Duty to pay for inspections
  4. Duty of loyalty and confidentiality Correct answer.

Explanation

Brokers owe fiduciary duties including loyalty, confidentiality, disclosure, and accounting to their principals. They do not guarantee outcomes or fund inspections absent agreement.

Question 9Laws and Regulations

A seller's agent learns that the seller is selling due to an impending foreclosure that could affect value. The agent must do which of the following?

  1. Disclose the material fact to the buyer Correct answer.
  2. Disclose it only if the buyer asks
  3. Report it to the DRE
  4. Keep it confidential from the buyer to protect the seller

Explanation

Licensees must disclose material facts that affect the value or desirability of the property to all parties. Confidentiality does not permit concealment of material facts from a buyer.

Question 10Laws and Regulations

Under California law, an agency relationship between a broker and a principal is generally created by which of the following?

  1. The mere act of showing a property
  2. Payment of a commission
  3. Verbal authorization alone
  4. A written agreement signed by both parties Correct answer.

Explanation

Agency relationships for real property transactions must be created in writing and signed by the principal, typically through a listing or buyer representation agreement. Verbal or implied agency is insufficient.

Question 11Laws and Regulations

A buyer's agent who also represents the seller in the same transaction is acting as which of the following?

  1. A transaction coordinator
  2. A dual agent Correct answer.
  3. A finder
  4. A subagent of the buyer

Explanation

When one broker represents both buyer and seller with their informed written consent, the broker is a dual agent. Dual agency requires full disclosure and consent from both parties.

Question 12Laws and Regulations

Which of the following is prohibited under California fair housing law?

  1. Advertising a property's price and features
  2. Asking all buyers for proof of funds
  3. Requiring a credit check of all applicants
  4. Refusing to show a home based on the buyer's source of income Correct answer.

Explanation

California fair housing law prohibits discrimination based on protected characteristics, including source of income such as housing vouchers. Uniform screening applied to all applicants is permissible.

Question 13Laws and Regulations

A property manager who holds tenant security deposits must handle those funds in which way?

  1. Use them to pay routine maintenance
  2. Deposit them in the broker's business account
  3. Combine them with the owner's operating funds
  4. Keep them in a trust account separate from personal funds Correct answer.

Explanation

Security deposits are trust funds and must be maintained in a separate trust account, not commingled with personal or operating funds. Misuse can result in discipline.

Question 14Laws and Regulations

A licensee who acts as a mortgage loan originator in California must also hold which of the following?

  1. A notary commission
  2. A contractor's license
  3. A securities license
  4. An MLO endorsement on the real estate license Correct answer.

Explanation

A real estate licensee who originates mortgage loans must obtain a mortgage loan originator endorsement and meet federal SAFE Act requirements. Other licenses do not substitute.

Question 15Laws and Regulations

Under the California Subdivided Lands Act, a developer offering subdivided land for sale must do which of the following before sales?

  1. Record a lien on each lot
  2. Obtain a building permit for each lot
  3. Post a performance bond with the county
  4. Obtain a public report from the DRE Correct answer.

Explanation

The Subdivided Lands Act requires a public report issued by the DRE before subdivided interests may be offered for sale. The report discloses material facts to prospective buyers.

Question 16Laws and Regulations

A broker's license is subject to discipline for which of the following?

  1. Declining a listing below market
  2. Charging a commission set by agreement
  3. Refusing to work weekends
  4. Failing to maintain trust fund records Correct answer.

Explanation

Failure to keep proper trust fund records is a violation that can lead to license discipline. Personal business choices and negotiated commissions are not grounds for discipline.

Question 17Laws and Regulations

Which of the following describes the required handling of a broker's commission when it is disputed between cooperating brokers?

  1. The listing broker may keep the full amount
  2. The disputed funds should be held in trust until the dispute is resolved Correct answer.
  3. The buyer decides who receives the funds
  4. The funds must be sent to the DRE immediately

Explanation

When entitlement to a commission is disputed, the broker should retain the disputed funds in trust until the parties resolve the dispute or a court determines entitlement.

Question 18Laws and Regulations

A licensee advertises a property without identifying the broker's name. This practice is best described as which of the following?

  1. A violation only if the price is wrong
  2. Permissible if the salesperson pays for the ad
  3. Permissible if the ad runs online only
  4. A violation because advertising must include the broker's name Correct answer.

Explanation

California requires that licensee advertising identify the responsible broker's name. Blind advertising that omits the broker's identity is a violation regardless of medium.

Question 19Laws and Regulations

Which of the following is true regarding the retention period for a broker's transaction records under California law?

  1. Records must be kept for three years Correct answer.
  2. Records must be kept for one year
  3. Records may be discarded after closing
  4. Records must be kept for five years

Explanation

Brokers must retain transaction and trust records for three years from the date of the transaction or the close of the trust account. This supports audit and investigation.

Question 20Laws and Regulations

An unlicensed assistant may perform which of the following tasks for a licensee?

  1. Sign a listing agreement on the broker's behalf
  2. Negotiate the terms of a sale
  3. Answer the phone and schedule appointments Correct answer.
  4. Discuss price with a prospective buyer

Explanation

Unlicensed assistants may perform clerical and administrative tasks such as answering phones and scheduling. They may not negotiate, discuss price, or sign contracts.

Question 21Laws and Regulations

Under California law, which of the following best describes the duty of a broker regarding a client's funds received in a transaction?

  1. The broker may invest the funds for the client
  2. The broker may use the funds for office expenses
  3. The broker must account for and safeguard the funds Correct answer.
  4. The broker may lend the funds to another client

Explanation

Brokers must safeguard and account for client funds, keeping them in trust and providing an accounting. Using client funds for other purposes is prohibited.

Question 22Laws and Regulations

A licensee who wishes to change the status of a license from salesperson to broker must do which of the following?

  1. Submit a new application and meet broker requirements Correct answer.
  2. Simply notify the local association
  3. Pay a small transfer fee only
  4. Wait for automatic upgrade after five years

Explanation

Moving from salesperson to broker requires a new application, meeting the broker education and experience requirements, and passing the broker exam. No automatic upgrade exists.

Question 23Laws and Regulations

Which California statute primarily governs the licensing and conduct of real estate brokers and salespersons?

  1. The Health and Safety Code
  2. The Corporations Code
  3. The Civil Code
  4. The Real Estate Law (Business and Professions Code) Correct answer.

Explanation

The Real Estate Law, found in the Business and Professions Code, establishes licensing and conduct rules enforced by the DRE. Other codes address different subject areas.

Question 24Laws and Regulations

A broker discovers that a client intends to use a property for an illegal purpose. The broker should do which of the following?

  1. Proceed with the transaction to earn the commission
  2. Refuse to participate and may terminate the representation Correct answer.
  3. Ignore the issue as outside the broker's duties
  4. Report the client to the buyer only

Explanation

A licensee may not knowingly assist or participate in an illegal activity. The broker should decline involvement and may terminate the agency relationship.

Question 25Laws and Regulations

Under California law, a real estate broker acting as an agent in a residential sale must provide the buyer with which of the following?

  1. A copy of the seller's loan documents
  2. A property tax bill
  3. A home warranty policy
  4. A seller's transfer disclosure statement Correct answer.

Explanation

Sellers, through their agents, must provide a transfer disclosure statement disclosing known material facts about the property. Tax bills, loan documents, and warranties are not required disclosures.

Question 26Laws and Regulations

Under California law, a real estate salesperson's license is issued under the authority of which entity?

  1. The California Department of Real Estate Correct answer.
  2. The local county recorder
  3. The California Bureau of Real Estate Appraisers
  4. The Real Estate Commissioner's advisory board

Explanation

The Department of Real Estate (DRE) is the state agency that issues and regulates real estate licenses, headed by the Real Estate Commissioner. Appraisers fall under a separate bureau, and county recorders handle recording, not licensing.

Question 27Laws and Regulations

How long is an initial California real estate salesperson license valid before it must be renewed?

  1. Four years Correct answer.
  2. Two years
  3. One year
  4. Six years

Explanation

California real estate licenses are issued for a four-year term and must be renewed before expiration. Renewal requires completing the required continuing education.

Question 28Laws and Regulations

A person applying for a California real estate broker license must meet which minimum experience requirement?

  1. One year of any real estate employment
  2. Two years of full-time licensed salesperson experience within the preceding five years Correct answer.
  3. Five years of property management experience
  4. No experience is required if the applicant passes the exam

Explanation

Broker applicants generally must show at least two years of full-time licensed real estate experience within the five years before applying. Passing the exam alone does not qualify a candidate without the experience requirement.

Question 29Laws and Regulations

Which course of study is specifically required for a California real estate broker license but not for a salesperson license?

  1. Legal aspects of real estate
  2. Real estate practice
  3. Real estate finance
  4. Real estate appraisal Correct answer.

Explanation

Broker applicants must complete additional statutory courses beyond the salesperson core, including appraisal, and may choose from other advanced subjects. Real estate practice is a salesperson requirement, and finance and legal aspects are among elective options.

Question 30Laws and Regulations

A salesperson wants to work for a different broker. What must the salesperson do to make the change effective?

  1. Obtain a new salesperson license from the Department of Real Estate
  2. Wait until the current license expires and reapply
  3. Notify the former broker in writing and begin work immediately
  4. Submit a change of employing broker notification to the Department of Real Estate Correct answer.

Explanation

A salesperson license is held under a specific employing broker, so a change requires notifying the Department of Real Estate of the new employer. The salesperson cannot lawfully act for the new broker until that change is processed.

Question 31Laws and Regulations

Which of the following individuals is exempt from California real estate licensing requirements when selling property?

  1. A person who charges a fee to negotiate leases
  2. A person who regularly sells homes for others
  3. A person who manages rental property for an owner for compensation
  4. A person selling their own home Correct answer.

Explanation

An owner selling or leasing their own property is not acting as a broker and does not need a license. Licensing is triggered by acting for another person for compensation.

Question 32Laws and Regulations

A licensee fails to complete the required continuing education before the license expiration date. What is the most likely consequence?

  1. The licensee may continue working while completing the courses
  2. The license is automatically renewed with a late fee
  3. The licensee is permanently barred from renewal
  4. The license becomes inactive or is not renewed until the requirement is satisfied Correct answer.

Explanation

Renewal depends on satisfying continuing education requirements; if they are unmet, the license cannot be renewed and becomes inactive. The licensee may later reinstate upon compliance rather than being permanently barred.

Question 33Laws and Regulations

Which of the following activities requires a California real estate license?

  1. Appraising property for a lender as a certified appraiser
  2. Renting a single room in one's own home
  3. Preparing a deed for a family member without compensation
  4. Negotiating the sale of a business that includes real property for a commission Correct answer.

Explanation

Negotiating the sale of real property, including a business that includes real property, for compensation is licensed activity. Appraisal is regulated separately, and uncompensated help for family or renting one's own room does not require a license.

Question 34Laws and Regulations

A broker wants to operate under a business name that differs from the broker's legal name. The broker must do which of the following?

  1. Use the trade name only on business cards
  2. Nothing, because trade names are unregulated
  3. Obtain a separate broker license for the trade name
  4. Register the fictitious business name and report it to the Department of Real Estate Correct answer.

Explanation

A fictitious business name must be registered locally and disclosed to the Department of Real Estate so the public can connect the business to the licensed broker. Operating under an unreported name can lead to discipline.

Question 35Laws and Regulations

A licensee is disciplined by the Department of Real Estate. Which body ultimately hears an appeal of the Commissioner's decision?

  1. The California Real Estate Advisory Commission
  2. The Department of Consumer Affairs directly
  3. The local superior court acting as the licensing agency
  4. The Office of Administrative Hearings on behalf of the Commissioner Correct answer.

Explanation

Administrative disciplinary matters are heard through the Office of Administrative Hearings, which issues a proposed decision to the Commissioner. Judicial review may follow, but the administrative hearing is the first formal review step.

Question 36Laws and Regulations

A broker's license may be suspended or revoked when the broker does which of the following?

  1. Fails to disclose a known material defect to a buyer Correct answer.
  2. Makes a good-faith error in a listing price
  3. Refuses to work with a client due to a busy schedule
  4. Uses a standard state-approved purchase agreement

Explanation

Failing to disclose a known material fact is a breach of duty and grounds for discipline. Good-faith errors, scheduling choices, and using approved forms are not by themselves violations.

Question 37Laws and Regulations

Under California law, a real estate broker must retain records of a transaction for at least how long?

  1. Three years from the closing date Correct answer.
  2. One year from the closing date
  3. Five years from the closing date
  4. Ten years from the closing date

Explanation

Brokers must keep transaction records for a minimum of three years from the date of the transaction. Records must be available for inspection by the Department of Real Estate.

Question 38Laws and Regulations

A broker receives a commission check that is payable jointly to the broker and a cooperating broker. How should the broker handle the check?

  1. Return it to the escrow company for redistribution
  2. Deposit it into the broker's general operating account
  3. Hold it indefinitely until the cooperating broker requests it
  4. Endorse it and deliver it promptly to the cooperating broker Correct answer.

Explanation

A jointly payable commission check must be endorsed and promptly delivered to the other party entitled to it. Retaining or depositing the full amount would deprive the co-broker of funds owed.

Question 39Laws and Regulations

A broker holds a buyer's deposit in a trust account. Which practice complies with California trust fund rules?

  1. Lending the funds to another client short-term
  2. Mixing the funds with the broker's operating account for convenience
  3. Using the funds to cover the broker's office rent until closing
  4. Keeping the funds in a separate trust account and disbursing only as authorized Correct answer.

Explanation

Trust funds must be kept separate and disbursed only as the transaction or the parties authorize. Commingling with operating funds or using client money for the broker's expenses is prohibited.

Question 40Laws and Regulations

A property manager collects a security deposit from a tenant. Under California law, the deposit must be held in which manner?

  1. In the owner's general business account
  2. In a trust account separate from the manager's own funds Correct answer.
  3. In the manager's personal account
  4. In cash in a secure office safe

Explanation

Tenant security deposits are trust funds and must be maintained in a separate trust account, not commingled with the manager's or owner's operating funds. Cash handling without proper accounting does not satisfy the requirement.

Question 41Laws and Regulations

A broker's trust account is found to have a shortage caused by the broker's own use of the funds. This conduct is best characterized as which of the following?

  1. Conversion of trust funds Correct answer.
  2. An escrow adjustment
  3. A permissible advance of commission
  4. A minor bookkeeping error

Explanation

Using client trust funds for the broker's own purposes is conversion, a serious violation that can lead to license discipline and criminal liability. It is not excused as a bookkeeping mistake or an advance.

Question 42Laws and Regulations

A licensee wants to advertise a property for sale. Which statement about advertising is correct under California law?

  1. Only print advertising requires disclosure
  2. The advertisement must include the licensee's name and license number Correct answer.
  3. The advertisement may omit the broker's name if the licensee's name appears
  4. Online listings are exempt from advertising rules

Explanation

California requires real estate advertising to disclose the licensee's name and license number so the public can identify who is responsible. This applies across media, including online listings.

Question 43Laws and Regulations

A licensee sends an unsolicited email advertisement to a consumer. Under California's anti-spam law, the message must generally include which element?

  1. A clear opt-out method and the sender's physical address Correct answer.
  2. The recipient's full name
  3. A notarized consent form
  4. A statement that the offer expires in 24 hours

Explanation

Commercial email must provide a functioning opt-out mechanism and identify the sender with a valid physical address. Failing to include these elements can expose the sender to liability.

Question 44Laws and Regulations

A seller tells a licensee that the roof leaks, but the licensee does not disclose this to the buyer. The licensee's conduct is best described as which of the following?

  1. Proper protection of the seller's confidences
  2. Permissible if the seller asked for confidentiality
  3. Acceptable because the buyer could have hired an inspector
  4. A breach of the duty to disclose material facts Correct answer.

Explanation

A licensee must disclose known material facts affecting value or desirability to all parties. Confidentiality to the seller does not permit concealment of a known material defect.

Question 45Laws and Regulations

Which of the following best describes the agency duty of loyalty owed by a broker to a principal?

  1. The broker must always accept a client's instructions without question
  2. The broker must guarantee a sale at the listing price
  3. The broker must act in the principal's best interest and avoid self-dealing Correct answer.
  4. The broker must share all client confidences with other parties

Explanation

Loyalty requires the broker to put the principal's interests first and avoid conflicts such as undisclosed self-dealing. It does not require blind obedience to unlawful instructions or guaranteeing outcomes.

Question 46Laws and Regulations

A broker represents a buyer and, without disclosure, also receives compensation from the seller. What issue does this raise?

  1. A violation only if the buyer objects later
  2. A permissible bonus that need not be disclosed
  3. An undisclosed dual compensation that requires disclosure and consent Correct answer.
  4. A standard practice that is always prohibited

Explanation

Receiving compensation from both sides creates a conflict that must be disclosed to and consented to by the parties. Undisclosed dual compensation breaches the duty of loyalty and disclosure.

Question 47Laws and Regulations

A buyer's broker learns confidential information about the buyer's finances. Which of the following is the broker permitted to do with that information?

  1. Post it in an online listing
  2. Share it with the seller to strengthen the offer
  3. Use it to benefit the broker's own investments
  4. Disclose it only as required by law or with the buyer's consent Correct answer.

Explanation

Confidential client information may be disclosed only with the client's consent or when legally required. Using it for personal gain or sharing it with the opposing party breaches confidentiality.

Question 48Laws and Regulations

A broker who is the agent of the seller receives an offer from a buyer. What is the broker's duty regarding that offer?

  1. Hold it until a better offer arrives
  2. Present it to the seller promptly and accurately Correct answer.
  3. Share its terms with other prospective buyers
  4. Reject it without informing the seller if it seems low

Explanation

The seller's agent must promptly and accurately communicate all offers to the seller, who decides whether to accept. The broker may not withhold offers or disclose their terms to competing buyers.

Question 49Laws and Regulations

Under California fair housing law, which action by a licensee is unlawful?

  1. Suggesting that a buyer review a lender's preapproval letter
  2. Providing a buyer with information about school districts
  3. Refusing to show a listing based on the buyer's national origin Correct answer.
  4. Asking a buyer about their preferred neighborhood

Explanation

Refusing service or housing based on a protected characteristic such as national origin violates fair housing law. Discussing neighborhood preferences, schools, or financing is not itself discriminatory.

Question 50Laws and Regulations

A licensee suspects that a client is using a property to operate an illegal business. What is the licensee's most appropriate course of action?

  1. Increase the commission to cover added risk
  2. Continue assisting because the licensee is not the operator
  3. Ignore the issue to protect client confidentiality
  4. Report the suspected illegal use and decline further assistance Correct answer.

Explanation

A licensee should not facilitate known illegal activity and should report suspected illegal use to the appropriate authority. Confidentiality does not extend to concealing criminal conduct.