Free California Real Estate Practice Exam

Q1.A California residential purchase contract includes a liquidated damages clause that has been separately initialed by both the buyer and seller. The buyer defaults after depositing 3% of the purchase price. Under California Civil Code Section 1675, what is the MOST likely outcome regarding the deposit?

• A.The seller automatically retains the entire deposit as liquidated damages with no further action required
• B.The seller is entitled to retain the deposit as liquidated damages, and it is presumed reasonable for residential purchases of 1–4 units when the deposit does not exceed 3% of the purchase price
• C.The seller must sue for actual damages in court before retaining any portion of the deposit
• D.The buyer is entitled to a full refund of the deposit because liquidated damages clauses are unenforceable in California

Q2.In states where attorneys are required to conduct real estate closings, what is the primary reason for this requirement?

• A.To ensure compliance with federal lending regulations
• B.To provide legal protection through the unauthorized practice of law statutes
• C.To guarantee title insurance coverage
• D.To meet federal settlement requirements under RESPA

Q3.In California, which of the three traditional approaches to value is most commonly relied upon by appraisers when estimating the value of a single-family residential property in a neighborhood with many recent, comparable sales?

• A.Cost approach
• B.Income approach
• C.Sales comparison approach
• D.Gross rent multiplier approach

Q4.A broker is the designated agent for a buyer purchasing a commercial property that was formerly a dry-cleaning operation. An environmental site assessment reveals the presence of perchloroethylene (PCE) contamination in the soil. The seller has not yet listed the site on any CERCLA National Priorities List. Under CERCLA's strict liability framework, which party or parties could ultimately bear cleanup liability if the buyer proceeds to closing?

• A.Only the former dry-cleaning operator who generated the hazardous substances, because CERCLA liability follows the party who caused the contamination.
• B.Only the current seller, because transferring a contaminated property to a new owner through a disclosed sale extinguishes the seller's CERCLA liability.
• C.The buyer, the seller, and potentially any prior owners who arranged for disposal, because CERCLA imposes strict, joint and several liability on current owners, past owners at the time of disposal, arrangers, and transporters.
• D.The buyer is fully protected from CERCLA liability because the broker disclosed the contamination prior to closing, satisfying the innocent landowner defense requirements.

Q5.A California buyer's agent enters into a Buyer Representation Agreement with a client. Before the agreement is signed, which of the following disclosure forms is the salesperson's broker required to provide to the buyer under California law?

• A.The Transfer Disclosure Statement (TDS)
• B.The Agency Relationship Disclosure (AD) form
• C.The Natural Hazard Disclosure Statement (NHD)
• D.The Real Estate Purchase Contract (REPC)

Q6.Under the California Mortgage Loan Disclosure Statement requirements for loans arranged by real estate brokers, when must the borrower receive the disclosure statement?

• A.Within three business days after the loan closes.
• B.At least three business days before the borrower is obligated to complete the loan transaction.
• C.At the time the borrower signs the promissory note.
• D.No later than five calendar days after the loan application is submitted.

Q7.A property sold for $350,000 and generates annual net operating income of $28,000. What is the capitalization rate?

• A.6.5%
• B.8.0%
• C.7.2%
• D.8.5%

Q8.A California listing salesperson's client, the seller, asks whether the salesperson can also represent the buyer in the same transaction. The salesperson agrees to do so. Under California law, which of the following statements is CORRECT regarding this arrangement?

• A.Dual agency is prohibited in California and the salesperson must decline
• B.The salesperson may represent both parties only if both the seller and buyer give written informed consent to dual agency
• C.The salesperson may represent both parties with only verbal consent from both parties
• D.Dual agency is permitted without any special disclosure because the salesperson works for one broker

Q9.Under California Commissioner's Regulations, which of the following is TRUE regarding a broker's trust account records?

• A.The broker must keep trust account records for at least three years and make them available to the DRE upon demand
• B.Trust account records must be retained for at least one year after the close of each transaction
• C.Only the salesperson who received the funds is required to maintain trust account records
• D.Trust account records must be sent to the DRE quarterly for auditing

Q10.Under the Truth-in-Lending Act (TILA), if a lender fails to provide the required loan estimate within three business days of receiving a complete loan application, what remedy is available to the borrower?

• A.The borrower can cancel the contract without penalty
• B.The lender must pay statutory damages to the borrower
• C.The loan application is automatically approved
• D.The interest rate must be reduced by 1%

Q11.What is the fundamental legal relationship that exists between a real estate agent and their client?

• A.Fiduciary relationship
• B.Independent contractor relationship
• C.Employer-employee relationship
• D.Vendor-customer relationship

Q12.A landlord may charge a tenant with an assistance animal:

• A.Damages the animal actually causes to the unit, but no pet fees, pet deposits, or pet rent
• B.A monthly pet rent up to $50
• C.A non-refundable pet deposit
• D.Nothing — landlords must absorb all costs

Q13.A California homeowner defaults on a purchase-money deed of trust that was used to buy a single-family, owner-occupied residence. The lender forecloses nonjudicially and the sale proceeds are less than the outstanding loan balance. Under California's anti-deficiency statutes, which of the following is most accurate?

• A.The lender may sue the borrower for the deficiency within 90 days of the trustee's sale.
• B.The lender is barred from obtaining a deficiency judgment because the loan is a purchase-money loan on owner-occupied residential property foreclosed nonjudicially.
• C.The lender may obtain a deficiency judgment only if the property had fewer than two units.
• D.The anti-deficiency protections apply only to FHA-insured loans in California.

Q14.A California seller signs an exclusive right-to-sell listing agreement with a broker. Three weeks later, the seller finds his own buyer and closes the sale without the broker's involvement. Under California law, which statement is CORRECT regarding the broker's commission?

• A.The broker is not entitled to a commission because the seller found the buyer without the broker's assistance
• B.The broker is entitled to a commission because an exclusive right-to-sell agreement guarantees commission regardless of who procures the buyer
• C.The broker is only entitled to a commission if the listing agreement has been recorded with the county
• D.The broker may only recover costs, not a full commission, because the seller acted in good faith

Q15.RESPA requires lenders to provide borrowers with a Loan Estimate within how many business days of receiving a complete loan application?

• A.1 business day
• B.3 business days
• C.5 business days
• D.7 business days