CA Real Estate Practice Workbook

California Real Estate Practice
Workbook
Fourth Edition
Ted Highland, Contributing Editor
CA_RE_Practice_workbook.indb 1 4/12/2019 9:41:39 AM

DREE
This publication is designed to provide accurate and authoritative information in regard to the subject
matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal,
accounting, or other professional advice. If legal advice or other expert assistance is required, the
services of a competent professional should be sought.
President: Dr. Andrew Temte

Executive Director, Real Estate Education: Toby Schifsky
Development Editor: Jody Manderfeld
CALIFORNIA REAL ESTATE PRACTICE WORKBOOK FOURTH EDITION

©2019 Kaplan, Inc.
Published by DF Institute, Inc., d/b/a Kaplan Real Estate Education
332 Front St. S., Suite 501
La Crosse, WI 54601
All rights reserved. The text of this publication, or any part thereof, may not be reproduced in any
manner whatsoever without written permission from the publisher.
Printed in the United States of America
ISBN: 978-1-4754-8846-3
CA_RE_Practice_workbook_Copyright.indd 2 4/16/2019 9:42:13 AM

CONTENTS
UNIT 1
Trust Account Management and Disclosures 1
Learning Objectives 1
Trust Funds 1
Recordkeeping 3
Disclosures 3
Unit 1 Glossary Review 6
Unit 1 Review Quiz 7
UNIT 2
Fair Housing and Advertising 9
Fair Housing 9
Servicing Diverse Populations 11
Truth in Advertising 14
Technology 16
UNIT 3
Agency Supervision and CalDRE Jurisdiction and Disciplinary Actions 21
Agency Supervision 21
Permitted Activities of Unlicensed Sales Associates 24
General Ethics 25
CalDRE Jurisdiction and Disciplinary Actions 26
UNIT 4
Property Management and Specialty Areas 31
Property Management 31
Leases 33
Specialty Areas 34
Taxation 34
Answer Key 38
iii

UNIT
1
Trust Account Management
and Disclosures
LEARNING OBJECTIVES
When you have completed this unit, you will be able to
ff identify trust fund concepts and recordkeeping requirements;
ff summarize California mandated disclosures;
ff explain the need for inspections and obtaining and verifying information; and
ff describe reports that are commonly utilized in real estate transactions.
I. TRUST FUNDS
A. Trust fund concepts
1. Purpose: to keep clients’ funds separate from the broker’s personal funds
a) Trust funds belong to the broker.
b) For broker-owners of rental property, monies received on the broker-owner’s own property are not trust
funds and be placed in the brokerage trust account.
c) Brokers may maintain trust fund account for collections from their property
management business and deposits on real estate sales transactions.
d) is the illegal mixing of personal funds with money held in trust on

behalf of a client.
(1) However, brokers may keep up to of their own personal funds in the trust fund
account to cover service fees and other bank charges.
(2) Commissions, fees, and other income earned by a broker and collectible from trust funds may remain
in the trust account for a period not to exceed 25 days.
1

2 Unit 1 Trust Account Management and Disclosures
(3) Income earned by brokers must not be taken from trust funds received before depositing such funds
into the trust bank account.
(4) Under no circumstances may the broker pay personal obligations from the trust fund bank account
even if such payments are a draw against commissions or other income. Brokers must issue a trust
account check to themselves for the total amount of the income earned, adequately documenting
such payment, and then pay personal obligations from the proceeds of that check.
(5) Money received by brokers on their own property is received as if they were a principal, not as an
agent. As such, these are not trust funds and should not be placed in the trust account.
(6) Brokers should not return funds deposited into the trust account to a buyer until he or they are
certain that the buyer’s check has cleared.
e) The opposite of commingling is funds into separate accounts.
f ) is the unlawful appropriation of another’s property by a broker for

personal use.
g) If a seller does not give a broker authorization to hold deposit money, then the broker accepts the deposit
as an agent for the .
2. Trust fund requirements
a) Brokers’ trust fund records must be reconciled with the bank statement and a
separate beneficiary or transaction record.
b) The at any one time for a trust account

with multiple beneficiaries is equal to the total positive balances due to all beneficiaries of the account at
the time.
c) Written consent of every principal who is an owner of the funds in the account must be obtained by a real
estate broker prior to each disbursement if such a disbursement will reduce the balance of the funds in the
account to an amount less than the existing aggregate trust fund liability of the broker to all owners of the
funds.
d) Property management funds usually involve multiple receipts of funds and several monthly
disbursements. It is suggested that separate trust fund accounts be maintained for property management
funds and earnest money deposits. However, all trust funds can be placed in the same trust fund account
as long as separate records for each trust fund deposit and disbursement are maintained properly and the
account is not an interest-bearing account.
e) Unless given written instructions to the contrary within three days of receipt trust funds are required to
either be deposited in a neutral escrow, broker’s trust account, or given to the principal.
f ) A broker can place trust funds in an interest bearing account if requested by a principal but cannot receive
any interest on the money deposited.
g) is a court proceeding by the holder of deposit money to determine who

is legally entitled to the money.
h) A licensed salesperson who is authorized by the broker or an unlicensed employee who is bonded may be
given written permission by the broker to withdraw money from the trust account.

Unit 1 Trust Account Management and Disclosures 3
3. Advance fees
a) Advance fees are fees paid to real estate professionals in advance of any services rendered.
b) Advance fees are required to be deposited into a trust fund account until they are disbursed, typically after
Unit 1
services are rendered.
c) Advance fee agreements are required to be submitted to the CalDRE no less than
before being used.
d) Withdrawals of advance fees from a trust account may be made only if the funds are used for the
principal’s benefit.
II. RECORDKEEPING
A. Recordkeeping
1. Licensed real estate brokers copies of all listings,

deposit receipts, canceled checks, trust records, and other documents they execute or obtain in connection
with any transaction for which a real estate broker license is required.
2. An offer signed by a buyer and rejected by a seller is required to be kept for three years, like a contract.
3. Alternatively, brokers may use storage technology to store records as

long as certain requirements are met.
4. Either manually-produced or computerized accounting records are acceptable to track trust funds.
5. When the licensee obtains the signature of any person to any contract pertaining to such services or
transaction, the licensee must deliver a copy of the agreement to the person signing it at the time the signature
is obtained.
6. If a buyer delivers deposit money directly to an escrow, a broker who has not been in possession of the deposit
is not required to note it in the record of trust funds.
III. DISCLOSURES
A. Transfer Disclosure Statement (TDS)
1. The transfer disclosure statement is required to be delivered by the seller or agent in property transactions
involving -residential dwelling units.
2. Real estate professionals are responsible for delivering it to the buyer as soon as is practical.
3. If it is delivered to the buyer after execution of the offer to purchase, the buyer has the right to cancel
within of delivery.
4. Seller disclosure exemptions include the following:
a) Sale pursuant to court order (e.g., probate)
b)
c) Sale from one co-owner to another
d) Transfers to a spouse

5. Even if the form is not required in a particular transaction, the real estate professional still has a legal
obligation to make a full disclosure of all facts materially affecting the value and desirability of the residential
property.
6. The seller’s transfer disclosure statement form includes a provision for the brokers to indicate what the results
of their reasonably competent and diligent visual inspection revealed.
7. A licensee should fill out the seller’s portion of the transfer disclosure statement.
8. The seller is required to deliver a transfer disclosure statement whether or not the seller is represented by an
agent.
9. Sellers are required to disclose to the buyer, on the transfer disclosure statement form, any knowledge they
possess of the existence of a Mello-Roos lien on the property.
B. Natural Hazards Disclosure Statement
1. Special flood hazard areas
2. Very high fire hazard zones
3. Wildland areas that may contain substantial fire risks
4. as indicated on maps
5. Seismic hazard zones
6. Sellers, not agents, required to comply with this law
C. Lead-Based Paint Hazards
1. Duties apply to sellers or lessors.
a) Sellers or lessors of must

deliver an EPA booklet, Protect Your Family from Lead in Your Home, to prospective buyers and lessees.
b) The buyer has the opportunity to have the home tested for lead-based paint.
D. Smoke Detector and Water Heater Bracing Statement of Compliance
1. Seller typically pays for the installation of smoke detectors, carbon monoxide detectors, and water heater
bracing where required by law.
2. Unless exempt, seller, prior to close of escrow provides the buyer with a written statement of compliance.
E. Disclosure of Ordnance Location
1. Areas that were once used for military training and which may contain live ammunition, within
of a residential property that is being sold, requires the seller to give the buyer a
written notice as soon as practical before transfer of title.

Unit 1 Trust Account Management and Disclosures 5
F. Disclosure of Material Facts Affecting Property Value
1. Agents representing a seller of residential property consisting of one- to four-dwelling units and cooperating
agents have a duty to conduct a
inspection of the property offered for sale and to disclose to prospective purchasers all material facts affecting
Unit 1
the value and desirability of the property.
2. The extent of a reasonably competent and diligent visual inspection is limited to the accessible areas of the
property.
3. If the property is a dwelling unit in a condominium, planned development, or cooperative property the visual
inspection only includes the unit involved and not the common areas.
4. The agent’s visual inspection and disclosure is required even if the transaction is one that exempts the seller
from delivering a transfer disclosure statement to the buyer.
5. Agents are not required to disclose
a) deaths that have occurred on a property, or
b) whether a previous occupant has been afflicted with AIDS.
G. Agency Disclosure
1. Required in one- to four-unit residential transactions
a) various agency relationships in statutory agency disclosure form.
b) who the agent represents in the specific transaction.
c) the election in purchase contract or separate document.
H. Reports
1. A contract may specify if the buyer or seller will request and who will pay for various inspections or reports
such as pest control, septic systems, wells and natural hazard zone disclosures.
2. Real estate licensees have a duty to deliver copies of any reports they have in their possession.
3. Pest control reports are filed with the .
4. When structural pest control reports are a condition of the contract or required by the lender, they are
required to be delivered to the .
5. Pest control reports are filed with the Structural Pest Control Board.
6. Federal rules require creditors to provide to applicants free copies of all appraisals for a federally-backed loan.
7. Disclosure is required if a former military munitions site is located within of

property being sold or leased.

UNIT 1 GLOSSARY REVIEW
a. 1978 1. ___ is a court proceeding by a holder

b. advance fee of deposit money to determine who is legally entitled to the
money.
c. commingling
2. ___ agreements are required to be
d. conversion
submitted to CalDRE no less than 10 days before being used.
e. foreclosures
3. ___ Sellers are exempt from providing transfer disclosure statements to
f. interpleader buyers on sales including .
g. natural hazards 4. ___ Sellers of residential properties built before
disclosure statement are required to deliver an EPA booklet, Protect Your Family from
h. Structural Pest Lead in Your Home, to prospective buyers and lessees.
Control Board
5. ___ Pest control reports are filed with the California
i. transfer disclosure .
statement
6. ___ is the unlawful appropriation of
j. trust fund another’s property for the broker’s personal use.
7. ___ The illegal mixing of personal funds with money held in trust on
behalf of a client is called .
8. ___ records must be reconciled monthly.
9. ___ A must
be delivered to a buyer on a sale of residential real property with
up to four dwelling units.
10. ___ Earthquake fault zones are covered in the
.

UNIT 1 REVIEW QUIZ
1. Trust funds 7. If a Transfer Disclosure Statement is delivered to
A. are always the property of the broker. the buyer after execution of an offer, the buyer
B. become the property of the seller after the has a right to cancel
close of escrow. A. within 10 days after delivery.
C. are never the property of the broker. B. at any time prior to close of escrow.
D. belong to the buyer unless delivered to the C. only if there is a non-disclosure of a material
seller. fact.
D. within three days after delivery.
2. Trust fund records must be reconciled
A. daily. 8. The party that typically pays for the installation of
B. weekly. smoke detectors and water heater bracing is the
C. monthly. A. buyer.
D. annually. B. broker.
C. government.
3. If a seller does not give a broker authorization to D. seller.
hold deposit money, then the broker accepts the
deposit as 9. If a property is a dwelling unit in a condomini-
A. an agent for the buyer. um, the agent’s visual inspection includes
B. an agent for the seller. A. only the common areas.
C. a dual agent. B. both the unit involved and the common
D. a neutral escrow. areas.
C. only the unit involved and not common
4. Advance fees are money paid to real estate licens- areas.
ees D. neither the unit involved nor the common
A. advances paid on commissions. areas.
B. in advance of the licensee performing
services. 10. A real estate licensee has a duty to deliver copies
C. as a bonus. of any structural pest control reports
D. for performing extra services that don’t A. that exist.
require a license. B. she has in her possession.
C. that are on file with the Structural Pest
5. Licensees are required to keep copies of docu- Control Board.
ments involving transactions for which a license is D. that she personally ordered.
required for
A. 3 years.
B. 4 years.
C. 5 years.
D. 10 years.
6. Acceptable methods of maintaining accounting

records to track trust funds are
A. only manually produced records.
B. only computerized records.
C. either manually produced or computerized
records.
D. only records on CalDRE approved forms.

UNIT
2 Fair Housing and Advertising
LEARNING OBJECTIVES
ff recognize the protected classes and prohibited activities under fair housing laws;
ff explain the need for servicing diverse populations;
ff describe advertising laws and guidelines; and
ff identify the technological tools that help agents to be more efficient and effective.
I. FAIR HOUSING
A. Fair housing laws
1. In 1968, in the case of , the U.S. Supreme Court held that the Civil
Rights Act of 1866 applied to private properties, and barred racial discrimination. There are no exceptions
involving race under the 1866 Civil Rights Act.
2. The Civil Rights Act of 1968 prohibited discrimination in housing based on certain protected classes,
including the following:
a)
b) Race
c) Religion
d) Color
e) Sex

10 Unit 2 Fair Housing and Advertising
3. The purpose of federal fair housing law is to provide all persons in the United States with fair housing
opportunities.
a) The Civil Rights Act of 1968 and the Fair Housing Amendments Act of 1988 are enforced by the
Department of Housing and Urban Development .
4. The Fair Housing Amendments Act of 1988 added additional protected groups.
a) It prohibited discrimination based on race, color, religion, sex, sexual orientation, marital status, national
origin, ancestry, age, source of income, disability, or familial status, including
.
b) Prohibited discrimination against handicapped persons, including persons afflicted with

.
c) A violation of federal fair housing law is considered unlawful, illegal, and against public policy.
d) Statutory exemptions to the Fair Housing Act include the following:
(1) Religious property—that provides housing incidental to the purpose of the facility, such as a
, the organization is allowed to discriminate on the basis
of religion.
(2) Private clubs—can provide housing limited to their members but cannot limit membership for other
reasons (such as race, color, or national origin).
(3) Single-family residence—an owner may sell or rent without complying with the Fair Housing Act
provided that the owner does not have an interest in more than three single-family residences at one
time, and the exception only applies once in every two year period. The owner cannot engage in
discriminatory advertising and cannot use the services of a real estate licensee.
(4) Owner-occupied property involving two but not more than four units are exempt from the Fair
Housing Act. Real estate licensees must still comply.
(5) Housing for the elderly is exempt for persons 55 and older where the intention is to provide housing
for older persons and 80% of the units are occupied by at least one person who is 55 years of age or
older.
5. The Americans with Disabilities Act applies to , defined as a

commercial facility open to the public, and requires such buildings to be .
6. The is a California law that prohibits discrimination in the sale, rental, lease,
or financing of housing.
a) Responding to a question by a seller as to the race of a buyer would be a violation of the law.
b) Violations of the Rumford Act are reported to the Department of Fair Employment and Housing.
7. The Unruh Civil Rights Act provides for equal accommodations and services in all
in California regardless of age, sex, race, color, religion,
ancestry, national origin, or disability. (For all protected classes under Unruh, see www.dfeh.ca.gov/
Publications_Unruh.htm).
a) For a violation of the Unruh Act the penalty can be actual damages plus a civil penalty of $25,000, and if
a real estate licensee, potential revocation of license by CalDRE.

Unit 2 Fair Housing and Advertising 11
b) The Unruh Act defines a senior citizen as a person 62 years or older or one who is 55 years or older in a
senior citizen housing development, which is specifically designed to meet the physical and social needs of
senior citizens.
8. The Housing Financial Discrimination Act of 1977 (known as the Holden Act), which is part of the Health
and Safety Code, prohibits discriminatory loan practices on the part of financial institutions.
a) Discriminating on the basis of racial characteristics or trends in a geographic area is referred to as

and is illegal unless the particular case is necessary to avoid an unsafe
and unsound business practice.
b) This law applies to loans to purchase one-to-four unit owner-occupied residences and rehabilitation loans
on one-to-four units that are non-owner-occupied.
c) The law is administered by the California Department of Business Oversight.
Unit 2
9. The Fair Employment and Housing Act (Government Code) can require a
to sell the home, if it is still available, or to sell or rent a
like housing accommodation, if one is available.
a) Punitive damages of up to $10,000 may be awarded, as well as actual damages.
10. The 1948 U.S. Supreme Court decision in the case of Shelley v. Kraemer held that deed restrictions based on
race were unenforceable and in violation of the 14th Amendment to the Constitution.
11. The Equal Credit Opportunity Act (ECOA) prohibits discrimination based on an applicant’s income coming
from public assistance.
B. Prohibited acts under fair housing laws
1. (also called blockbusting) is the illegal practice of real estate professionals

inducing the listing and selling of homes on the grounds of the prospective entry into a neighborhood of
persons of another race, color, religion, et cetera.
2. is the illegal practice of real estate professionals directing members of protected

classes into or away from certain neighborhoods.
II. SERVICING DIVERSE POPULATIONS
A. Growing diversity in California
1. With the growing diversity of the California population, real estate licensees are increasingly called upon to
make their services more widely available to diverse populations.
2. According to U.S. Census data, various populations of residents are increasing.
a) According to the 2010 census, the population of Californians over the age of 65
13% of the total population.
b) The Asian population of California in 2010 was 13% and in 2014 increased to 14.4%
c) The Hispanic population in California in 2010 was 37.6% and in 2014 increased to 38.6%

d) The proportion of the California population in which a language other than English is spoken at home
increased to 43.8%
e) Half of the nation’s foreign-born population lived in four states:

.
B. Diversity includes
■■ Age
■■ Disability
■■ Ethnicity
■■ National origin
■■ Family status
■■ Mental illness
■■ Criminal background
■■ Gender
■■ Gender identity
■■ Language
■■ Lifestyle
■■ Race
■■ Religion
■■ Sexual orientation
C. The role of the real estate licensee in servicing diverse populations
1. Real estate is a local commodity; however, not all buyers and sellers are local.
2. Immigrants, foreign purchasers, and U.S. citizens with families who live in other countries represent a growing
market for California real estate licensees.
3. According to the National Association of REALTORS®, foreign buyers purchased over $92 billion in
residential properties in the U.S. in 2014, which represents a 35% increase from the previous year.
D. Examples of how real estate licensees can service diverse clients
1. Serving different cultures
a) Awareness of cultural values, such as reliance on family support systems, collective decision making,
spirituality, and respect for parents is important in real estate licensees serving diverse populations.

b) Be mindful of topics that may elicit highly sensitive reactions.
c) Ensure that the real estate office environment, including artwork, is respectful of
.
d) Identify community characteristics and needs.
e) Visit local community centers such as ethnic grocery stores, schools that teach in native languages other
than English, and sports groups for the populations that the real estate licensee wishes to reach.
f ) Offer services to speak to local groups in a variety of settings. Where language could be a barrier, real
estate licensees might ask community members to serve as translators when giving presentations. This
kind of a gesture can help to strengthen relationships within a target community.
2. Helping ex-prisoners find housing
Unit 2
a) Very few newly-released prisoners have a home waiting for them.
b) A safe place to live is essential to a successful reentry.
c) Real estate licensees can help ex-prisoners by providing the following housing assistance:
(1) Interview the newly released prisoners to assess their housing needs and requirements.
(2) Provide accurate information about housing resources available in the specific market area.
3. Survivors of domestic violence often face housing discrimination because of their history or the acts of their
abusers.
a) According to the U.S. Bureau of Justice Statistics, 85% of victims of domestic violence are women1.
b) In a February 9, 2011, memorandum, HUD concluded that domestic violence survivors who are denied
housing, evicted, or deprived of assistance based on the violence in their homes may have a basis for a
of sex discrimination under the Fair Housing Act and the Violence Against
Women Act (VAWA),
c) Examples of fair housing cases involving domestic violence
(1) A victim was assaulted by her husband in their apartment. She obtained a restraining order against
her husband, and he was subsequently arrested and jailed for the assault. She provided a copy of the
restraining order to the property manager. The property manager then served her with a 24-hour
eviction notice based on the incident of domestic violence.
(2) A victim of domestic violence obtained a restraining order against her abusive ex-boyfriend. Months
later, the ex-boyfriend attempted to break into the apartment, breaking the windows and front
door. The owner of the apartment evicted the victim and her children based on the property damage
caused by the ex-boyfriend.
(3) A victim’s ex-boyfriend continued to harass, stalk, and threaten her after she ended their relationship.
He came to her apartment in the middle of the night, banging on the door and yelling. The building
security guard was unable to reason with him. He left before the police arrived. One week later, the
1 U.S. Department of Justice, Office of Justice Programs, Bureau of Justice Statistics. (2003).
Crime Data Brief, Intimate Partner Violence, 1993-2001.

abuser came back to the building, confronted the same security guard, and shot him. The victim was
served an eviction notice from the landlord based on this incident.
III. TRUTH IN ADVERTISING
A. Requirements under TILA, RESPA, and TRID
1. The TILA-RESPA Integrated Disclosure (TRID) rule consolidates four existing disclosures into two forms:
a) form must be delivered or placed in the mail no later than the third
business day after receiving the consumer’s loan application.
b) must be provided to the consumer at least three business

days prior to consummation of the transaction. If the creditor provides a corrected disclosure, it may be
required to provide the consumer with an additional three-business day waiting period.
c) The rule applies to most closed-end credit transactions secured by real property, but does not apply to
(1) Home Equity Line of Credit loans,
(2) reverse mortgages, or
(3) loans secured by a mobile home or a dwelling that is not attached to real property.
2. is a federal offense under the Truth in Lending Act

(TILA).
a) Bait and switch advertising happens when a company has no intention of selling the item they’re
advertising but uses it to grab the attention of consumers and then tries to sell them something else,
usually at a higher price.
3. Referral fees—RESPA provides that escrow companies and other settlement service providers must not give,
and no person can accept, any fee, kickback, or referral fee as a part of a real estate settlement service involving
a federally-related mortgage loan.
4. Under the federal Truth in Lending Act, if only the annual percentage rate (APR) is included in the ad, then
no further disclosures are required in the ad.
5. , business, and construction loans are exempt from the Truth in Lending Act
requirements.
B. Requirements for mobile home ads
1. Mobile home ads should not state that the mobile home can be transported on California highways if it does
not have the appropriate equipment to do so.
2. Mobile home ads must be removed within of the home no longer being available
for sale.
3. Real estate licensees cannot advertise that no down payment is required on a mobile home if a down payment
is required or if the buyer finances the down payment.
4. Real estate licensees cannot advertise or represent that a used mobile home is new.

C. Blind ads
1. Blind ads are advertisements that that the person or entity placing the
ad is a real estate licensee.
2. Real estate professionals should disclose the name of their brokerage, the word broker or agent, or an
understandable abbreviation (e.g., Agt. or Bkr.) to avoid blind ads.
3. Real estate professionals advertising their lending services should state, “A Real Estate Broker-CA Department
of Real Estate.”
a) The SAFE Act mandates that real estate professionals involved with the selling or making of loans need to
be registered as mortgage loan originators.
D. HUD guidelines for acceptable terminology in advertisements
Unit 2
1. The phrase “female roommate wanted” is acceptable even if the advertisement does not indicate whether
the requirements for the shared living exception have been met. If the housing being advertised is a separate
dwelling unit without shared living spaces, an ad for a female roommate could result in liability.
2. Use of words describing the housing, the current or potential residents, or the neighbors or neighborhood in
racial or ethnic terms (e.g., white family home, no Irish) will create liability.
3. Advertisements that are neutral (e.g., master bedroom or desirable neighborhood) will not create liability.
4. Advertisements containing descriptions of properties that do not state a preference for persons likely to make
use of those facilities are not violations of the law (e.g., 
or kosher meals available).
5. Advertisements should not contain an explicit preference, limitation, or discrimination on account of religion
(e.g., no Jews, Christian home) and cannot contain a religious reference or symbol, such as a cross, which may
indicate a religious preference and violate the law.
6. The use of secularized terms or symbols relating to religious holidays such as Santa Claus, the Easter bunny, or
St. Valentine’s Day, or phrases such as “Merry Christmas,” does not constitute a violation of the law.
7. Terms such as mother-in-law suite and bachelor apartment are commonly used as physical descriptions of
housing units and do not violate the law.
8. Real estate advertisements should not contain explicit exclusions, limitations, or other indications of
discrimination based on handicap (e.g., no wheelchairs). However, advertisements containing
(e.g., jogging trails, within walking distance of a bus
stop) do not violate the law.
9. Advertisements describing the conduct required of residents (e.g., non-smoking or sober living) do not violate
the law.
10. Advertisements may not state an explicit preference on the number of or ages of children or state a preference
for adults, couples, or singles.
11. Advertisements describing the property (e.g., two bedroom, cozy, family room) are not discriminatory on the
surface and do not violate the law.

E. CAN-SPAM
1. CAN-SPAM is a federal law that stands for Controlling the Assault of Non-Solicited Pornography and
Marketing. It is intended to protect consumers by
requiring
a) opt-out provisions where the recipient can indicate that no additional emails are sent to them,
b) the email has a functioning return email address and a legitimate physical address of the maker, and
c) the subject line indicates that it is an advertisement.
2. Violations of the law can result in fines of up to $40,000 per message that is a violation.
F. National Do Not Call Registry
1. The Federal Communications Commission established a National Do Not Call Registry to protect consumers
from unwanted commercial solicitations.
2. Individuals can register landline telephone numbers.
3. In addition to the national maintained registry, individual companies may maintain their own
do-not-call list.
4. Penalties can be up to $40,000 for each unsolicited call.
5. Exceptions for when unsolicited calls can be made are as follows:
a) Existing business relationships (within 18 months)
b) If call is made within of an inquiry
c) Where you have written permission to call
d) Commercial numbers
e) Calls can be made to conduct surveys, but no solicitation can be included in the call
IV. TECHNOLOGY
A. Choosing a computer
1. Real estate professionals do not need high powered computers because most of their technology needs are
done through outside programs, such as the MLS.
2. Access to the multiple listing service is one of the major reasons why real estate professionals need to have a
computer.
3. The operating system you select just needs to support the software that you want to use.
4. Consider mobility when choosing a computer.
a) Have at least one computer that is .

5. Have multiple computers that can access the same information.
6. Real estate professionals who want to develop expertise in technology can get advanced certification as an
from the National Association of REALTORS® (NAR).
B. Technology trends
1. The cloud refers to storing data on a provider’s server or servers as opposed to on an individual’s computer. It is
an alternative to storage on a computer’s hard drive.
2. Instagram is a website where a person can post photos on the internet to share with others.
3. Electronic signatures and document preparation is now prevalent in real estate contracts, loan applications, and
other real estate‒related documents.
4. Surveillance—real estate licensees (or homeowners) holding open houses can now use a webcam to record the
Unit 2
interaction.
5. Virtual Reality video may potentially replace showings enabling people to “visit” properties from a distance.
6. Consumer relationship management (CRM) software is designed to help sales professionals find and then
support their clients.
7. A provides 360° photos so that a viewer can move from room to room
while viewing a property on a computer.

a. AIDS 1. ___ The fine for violating rules can be

b. blind ads up to $40,000.
c. CAN-SPAM 2. ___ The National Do Not Call Registry exists to protect consumers from
unwanted commercial
d. do-not-call
.
e. e-Pro®
3. ___ Prohibited discrimination against handicapped persons includes
f. increasing those afflicted with .
g. inquiry 4. ___ The illegal practice of real estate licensees directing members of a
h. Loan Estimate protected class towards or away from certain neighborhoods is
called .
i. steering
j. telephone 5. ___ The Act protects consumers from
solicitations unsolicited email messages.
6. ___ The percentage of foreign buyers purchasing property in the United
States has been .
7. ___ The required under TRID must
be delivered or placed in the mail no later than the third business
day after receipt of the loan application.
8. ___ are advertisements that do not disclose
that the person or entity placing the ad is a real estate licensee.
9. ___ A professional certification that indicates that a real estate
professional has advanced training in technology is
.
10. ___ An exception, which allows a person to call someone on the
National Do Not Call Registry, is when an
has been made within three months.

UNIT 2 REVIEW QUIZ
1. Real estate professionals are not allowed to call 5. The Civil Rights Act of 1968 is enforced by
consumers on the do-not-call list. However, an A. the EPA.
exception is for calls that are B. the FBI.
A. made to a consumer who has had contact C. HUD.
with the real estate professional within the D. NAR.
last 90 days.
B. made to a consumer who has had 6. One of the major reasons for having a computer
negotiations with the real estate professional is to
within the last 18 months. A. look credible to clients.
C. made to a consumer that the real estate B. use search engines.
professional would like to do business with. C. contact friends through Twitter and
D. personal and have nothing to do with the Facebook.
solicitation of a client. D. access the multiple listing service.
2. Unsolicited email is federally controlled, so to be 7. Software that helps real estate professionals find
legal it must and support clients is called
A. contain an option for a recipient to opt out A. find and support software (FSS).
of receiving the solicitations. B. sales management software (SMS).
B. be a one-time mailing and not a constant C. consumer relationship management software
bombardment to the recipient. (CRM).
C. only be sent to recipients that have previously D. tracking and supporting software (TSS).
agreed to receive marketing emails from the 8. The document that must be provided to the
sender. consumer, according to TRID, at least three busi-
D. only be sent to a recipient list that has been ness days prior to consummation of a real estate
bought from a company that specializes in transaction is called
selling lists. A. Loan Estimate.
3. Which is TRUE of the CAN-SPAM Act of 2003? B. Final Escrow Instructions.
A. It forbids the sending of unsolicited bulk C. Truth-in-Lending Form.
emails. D. Closing Disclosure.
B. It allows the sending of bulk emails only if 9. For consumers who are not on the national do-
the recipients are all showing as a carbon not-call list, they can request
copy (cc) to the email. A. to be put on a company’s internal do-not-call
C. It allows bulk emails only if the recipient has list.
previously signed up for them. B. that the FTC investigate their complaint
D. None of these are true. against a company.
4. The 1968 court case where the U.S. Supreme C. that a solicitor call them back later.
Court held that the Civil Rights Act of 1866 ap- D. to be put on the national do-not-call list by a
plied to private properties barring racial discrimi- solicitor who calls them.
nation is 10. Real estate licensees cannot advertise or represent
A. Easton v. Strassburger. that a used mobile home is
B. Love v. Love. A. a good deal.
C. Shelley v. Kraemer. B. new.
D. Jones v. Mayer. C. used.
D. capable of being transported on California
highways.
19

UNIT
3
Agency Supervision and
CalDRE Jurisdiction and
Disciplinary Actions
LEARNING OBJECTIVES
ff describe the primary responsibilities brokers have to supervise their associate licensees;
ff define the permitted activities of unlicensed sales assistants;
ff describe the general ethical responsibilities of real estate licensees;
ff identify jurisdiction of the CalDRE and disciplinary actions that can be taken against licensees;
and
ff explain the California Real Estate Recovery Fund provisions and how they are available to the
public.
I. AGENCY SUPERVISION
A. Commissioner’s Regulation 2725
1. The broker’s duty to supervise salespeople is based on Commissioner’s Regulation 2725.
a) Regulation 2725—A broker is required to exercise over

the activities of salespersons (including associate broker licensees).
b) Reasonable supervision includes
(1) establishing policies, rules, procedures and systems to review, oversee, inspect, and manage
transactions and documents that have a material effect upon the rights or obligations of a party to a
transaction;
(2) filing, storing, and maintaining of documents;
(3) handling of trust funds;
21

22 Unit 3 Agency Supervision and CalDRE Jurisdiction and Disciplinary Actions
(4) advertising services for which a license is required; and
(5) familiarizing salespersons with the requirements of federal and state laws relating to discrimination.
B. Broker Delegation of Responsibility to Supervise
1. Before July 1, 2012, brokers routinely branch and division managers to

supervise the activities of salespersons. However, only the broker of record of the real estate company was
liable for the actions of the salespersons, not the branch or division manager.
2. If the provisions of the new law are followed, both the broker of record and the responsible branch or division
manager will be liable to CalDRE for the actions of the salespersons.
3. This liability extends up to and includes temporary suspension or permanent revocation of the license of the
branch/division manager.
4. To make the appointment of a branch manager subject to the law, the appointment must be
a) in writing,
b) with the agreement of the branch manager to accept the delegated responsibility in a written contract, and
c) submitted to CalDRE on an approved form RE 242.
5. To be qualified to be appointed under the new law, the branch manager
a) must not hold a restricted license,
b) must not be subject to an order of debarment, or
c) cannot be a salesperson licensee with less than two years of full-time real estate experience within the five
years preceding the appointment.
C. Examples of Reasonable Supervision
1. A broker is required to notify the commissioner not more than following the
termination of employment of a licensee.
2. Record Retention
a) , tweets, emails, and electronic contracts with electronic signatures must be

maintained by the broker as part of the transaction file, just like their previous paper counterparts.
b) All documents executed or obtained by a real estate broker in connection with any transactions for
which a real estate broker license is required are required to be retained for
from the date of closing or from the date of listing if the transaction is not consummated.
3. Responsibilities regarding teams
a) The law provides that a team name is not a fictitious business name. A team name means a professional
identity or brand name used by a salesperson, and one or more other real estate licensees, for providing
real estate services.

Unit 3 Agency Supervision and CalDRE Jurisdiction and Disciplinary Actions 23
b) The team name must include the surname of at least one of the licensee members of the team in
conjunction with the term associates, group, or team.
c) The use of a team name does not require that a separate license be issued for that name.
d) The name cannot include any term or terms, such as real estate broker, real estate brokerage, broker, or
brokerage or any other term that would lead a member of the public to believe that the team is offering
real estate brokerage services, that imply or suggest the existence of a real estate entity independent of a
responsible Broker of Record of a company.
e) The responsible broker’s identity is required to be displayed as

as the team name in all advertising and
solicitation materials.
f ) Nothing in this law changes real estate brokers’ duties to supervise their salespeople.
4. Use of Fictitious Business Names (DBA) by salespeople
a) A responsible broker may, by contract, permit a salesperson to file an application with a county clerk to
obtain a DBA.
b) The broker must deliver to the Department of Real Estate an application form RE 247, “Add/Cancel
Salesperson Owned Fictitious Business Name” form signed by the responsible broker, requesting approval
to use a county-approved DBA that is identified with the responsible broker’s license number.
c) All advertising and solicitation materials, including business cards, print or electronic media, and for sale
signage using a salesperson’s DBA must include the responsible broker’s identity in a manner equally as
Unit 3
prominent as the fictitious business name.
d) All of the above must also include the name and license number of the salesperson who is using the DBA.
5. Disclosure of Licensed Status on Solicitation Materials
a) Regulation 2773 requires real estate brokers and salespeople, when they engage in acts for which a
license is required, to disclose their eight-digit real estate license identification number on all solicitation
materials intended to be the first point of contact with consumers.
b) If the name of more than one licensee appears in the solicitation, the license ID number of each licensee
must be disclosed.
6. The type size of the license ID number can be no smaller than the smallest type size used in the solicitation
material.
7. Solicitation materials intended to be the first point of contact with consumers must include the following:
a)
b) Stationery
c) Websites owned, controlled, or maintained by the soliciting real estate licensee
d) Promotional and advertising flyers, brochures, email and regular mail, leaflets, and any marketing or
promotional materials designed to solicit the creation of a professional relationship between the licensee
and a consumer, or which are intended to incentivize, induce, or entice a consumer to contact the licensee
about any service for which a license is required

8. Solicitation materials do not include the following:
a) Advertisements in electronic media (including radio, cinema and television ads, and the opening section
of streaming video and audio)
b) or periodical print advertising
c) placed on or around a property intended to alert the public the

property is available for lease, purchase, or trade
II. PERMITTED ACTIVITIES OF UNLICENSED SALES ASSOCIATES
A. CalDRE guidelines for unlicensed sales associates
1. It is important for the broker to know and identify those activities which do and do not require a real estate
license.
2. Broker knowledge and consent is a prerequisite to the performance of the following unlicensed activities:
a)
(1) Making telephone calls to identify interest in using the services of a real estate broker is permitted for
unlicensed assistants.
(2) If a person who answers such a call indicates an interest in using the services of a broker, or if there is
an interest in ascertaining the kind of services a broker can provide, the person must be referred to a
licensee.
(3) At no time can the unlicensed assistant attempt to induce the person to use a broker’s services, and
the call may not be designed for solicitation purposes with respect to a specific property, transaction,
or product.
b)
(1) With the principal’s consent, an unlicensed assistant can
■■ place signs,
■■ greet the public,
■■ provide factual information or hand out preprinted materials prepared by or reviewed and
approved for use by the licensee,
■■ arrange appointments with the licensee.
(2) Only a licensee may engage in the following activities:
■■ Show or exhibit the property
■■ Discuss terms and conditions of a possible sale
■■ Discuss features of the property, such as its location, neighborhood, or schools
■■ Any other conduct which is designed for solicitation purposes with respect to the property

c)
(1) Unlicensed assistants may prepare a comparative market analysis subject to the approval of and for
use by the licensee.
d)
(1) With the principal’s consent, unlicensed assistants may let a person into the property who is either to
inspect a portion or all of the property for the purpose of preparing a report or issuing a clearance, or
who is to perform repair work to the property, in connection with a transaction.
(2) which is needed by the person making

the inspection must be provided by the broker or associate licensee, unless it comes from a data
sheet prepared by the licensee or principal, and that fact is made clear to the person requesting the
information.
(3) Unlicensed assistants can communicate with a party to a transaction about when reports or other
information will be delivered, or when certain services will be performed.
e)
(1) An unlicensed assistant may prepare advertising relating to the transaction for which the licensee was
employed, if the advertising is by the licensee prior
to its publication.
f )
Unit 3
(1) Unlicensed assistants may prepare and complete documents under the supervision and direction
of the licensee if the final documents will be reviewed or approved by the licensee prior to being
presented to a party to the transaction.
(2) An unlicensed assistant must not discuss the content, relevance, importance or significance of a
document with a party to the transaction.
(3) An unlicensed assistant may review transaction documentation for completeness or compliance,
providing the final determination as to completeness or compliance is made by the licensee.
III. GENERAL ETHICS
A. Real estate profession codes of ethics
1. CalDRE enforce ethics rules.
2. Various professional real estate associations have Codes of Ethics which are duties of membership in the
private association, including the following:
a) National Association of REALTORS® (NAR)
b) National Association of Real Estate Brokers (NAREB)—an organization of predominantly

African-American real estate licensees
c) National Association of Hispanic Real Estate Professionals (NAHREP)
d) Asian Real Estate Association of America (AREAA)

3. The Code of Ethics and Standards of Practice of the National Association of REALTORS® is the most widely
recognized and adhered to real estate code of ethics.
B. Specific provisions of the NAR code of ethics
1. In 2013, the NAR modified its code of ethics to include protection from
for individuals based on gender identity.
2. Under the NAR Code of Ethics REALTORS® must not undertake to provide
concerning a type of property or service that is outside their
field of competence unless they engage the assistance of one who is competent on such types of property or
service, or unless the facts are fully disclosed to the client.
a) They are also required to identify anyone who provides such assistance and what their contribution to the
assignment consisted of.
3. REALTORS® should not engage in activities that constitute the

and are required to recommend that legal counsel
be obtained when the interest of any party to the transaction requires it.
4. It is considered unethical, under NAR’s Code of Ethics for a REALTOR® to knowingly or recklessly make
false or misleading statements about other real estate professionals, their businesses, or their business practices.
IV. CALDRE JURISDICTION AND DISCIPLINARY ACTIONS
A. CalDRE jurisdiction
1. The CalDRE was established in 1917 with the formation of the first real estate licensing law in the United
States, which was upheld and became effective in 1919.
2. The appoints the real estate Commissioner.
3. The real estate Commissioner is authorized to issue and revoke licenses and
for the enforcement of real estate laws.
4. The Department of Real Estate real estate licensees, not unlicensed persons.
5. The real estate Commissioner collect penalties for victims of licensees.
6. Upon a court discovering fraud against a real estate licensee, the real estate Commissioner must first hold
a before suspending or revoking a license.
7. The California attorney general acts as the CalDRE’s .
8. The local district attorney acts as the for real estate law violations.
9. The CalDRE may take disciplinary action against a licensee if the licensee has been guilty of making any
, whether a member of the public is injured or
not.
10. Only the real estate Commissioner, the courts, has the ability to suspend or revoke a real
estate license.

B. Reorganization
1. As of July 1, 2018, the Bureau of Real Estate (CalBRE) returned to being the Department of Real Estate
(DRE).
2. It falls under the administrative and fiscal umbrella of the Business, Consumer Services, and Housing Agency.
C. Employment contracts
1. Every real estate broker is required to have a with every licensee who
associates with the broker.
a) Contracts should establish that the broker is required to supervise the associate licensee.
b) Contracts set forth the licensee’s status as an independent contractor or employee.
2. Brokers should carry workers’ compensation insurance on their salespeople.
D. CalDRE disciplinary actions
1. Upon the verified complaint, or upon the Commissioner’s own motion, the department may investigate
the actions of any person engaged in the business or acting in the capacity of a real estate licensee within
California.
2. A formal hearing is conducted in accordance with procedures in the Administrative Procedures Act.
Unit 3
3. In the hearing, the Commissioner is the complainant and brings the charges against the licensee.
4. The licensee may appear with or without counsel.
5. An administrative law judge hears the case, and issues a proposed decision.
6. The Commissioner may accept or reject the proposed decision.
7. The licensee may petition for reconsideration, or appeal through the courts.
E. Common violations
1. —failure to disclose material facts
2. Undisclosed —failure to disclose that the licensee is acting as an agent for

more than one party in the transaction
3. —mixing the funds of a principal with the broker’s own money
4. Failing to include a specified in exclusive listing

agreements
5. Realizing a , for example, when the licensee has a higher offer from
a buyer, and makes a lower offer herself, usually through a “dummy” purchaser; then the broker sells the
property to the interested buyer at the higher price
6. —misstatements of fact in an application for a

license

7. —including failing to disclose the

existence of a special relationship (e.g., a relative or an entity in which a licensee has an ownership interest)
8. Not complying with handling and recordkeeping requirements involving
9. Making an addition to or modification of the terms of a document previously signed or initialed by a party to
a transaction without the knowledge and consent of the party
10. Failing to of any document to the party signing it at the time it is signed
F. Recovery fund
1. The Consumer Recovery Fund Account was created to enable individuals who have been defrauded by a real
estate licensee in a transaction requiring a license, and who satisfy specified requirements to recover at least
some of their actual loss when the licensee has insufficient personal assets to pay for that loss.
2. Money to pay for the above amounts comes from real estate license fees.
3. The maximum amount that can be received by an injured party is up to

, with a possible total amount of up to
.
4. Requirements to qualify for payment include
a) a final judgment based on fraud, misrepresentation, or deceit;
b) a transaction in which the licensee was licensed at the time and was performing acts for which a real estate
license was required;
c) diligent pursuit of any assets of all judgment debtors;
d) filing of an application with CalDRE no more than one year after the judgment became final;
e) the underlying judgment and debt must not have been discharged in bankruptcy;
f ) CalDRE has in which to make a decision whether and how much of the
amount claimed should be paid;
g) if the application is denied the claimant has to file a verified application in

court;
h) the licensees license is automatically suspended upon payment from the Recovery Account until the
amount paid is repaid by the licensee, plus ; and
i) the licensee has 30 days after receipt of the notice to petition for a judicial review of the suspension of his
license.

a. Recovery Fund 1. ___ A broker is required to exercise

b. Business, Consumer over the activities
Services, and of salespersons.
Housing Agency 2. ___ Under the NAR Code of Ethics, REALTORS® should not
c. ethics undertake to provide
d. For Sale signs
outside of their field of competence.
e. governor 3. ___ The CalDRE operates under the

.
f. reasonable
supervision 4. ___ The maximum amount that can be received under the
by an injured party is up to
g. reviewed and
approved $50,000 per transaction.
h. specialized services 5. ___ A broker is required to notify CalDRE not more than 10 days
following the of employment of a
i. termination licensee.
j. written contract
6. ___ Solicitation materials that do not require disclosure of licensed
status include .
7. ___ An unlicensed assistant may prepare advertising so long as it
is by the licensee
prior to its publication.
Unit 3
8. ___ CalDRE does not enforce rules.
9. ___ The appoints the real estate
Commissioner.
10. ___ A real estate broker is required to have a
with every licensee who
associates with the broker.

UNIT 3 REVIEW QUIZ
1. A broker is required to exercise reasonable super- 6. The Department of Real Estate
vision over the activities of his salespersons, which A. disciplines unlicensed individuals.
includes B. can discipline anyone.
A. establishing rules and filing documents. C. can only discipline real estate licensees.
B. handling trust funds, advertising services, D. can find monetary damages against real estate
and familiarizing salespersons on licensees.
discrimination laws.
C. all of these. 7. The written contract between a broker and associ-
D. merely having a written contract that states ate licensee must stipulate that the
the responsibilities of the parties. A. broker is not liable for the actions of the
associate licensee.
2. The broker is required to maintain copies of B. associate licensee can operate independently
which of the following documents? of the broker.
A. Pictures of listings C. broker and associate licensee are full and
B. Scripts of sales meetings equal partners.
C. Texts D. broker is required to supervise the associate
D. Appointment calendars licensee.
3. Solicitation materials intended to be a first point 8. An unlicensed assistant can

of contact with consumers include A. order structural pest control inspections.
A. business cards. B. install signs.
B. For Sale signs. C. attend open houses.
C. television ads. D. do any of these.
D. newspaper advertising.
9. Which of the following is NOT a common viola-
4. An unlicensed assistant can perform which of the tion of the real estate law?
following activities at an open house without hav- A. Misrepresentations
ing to have a real estate license? B. Undisclosed dual agency
A. Show or exhibit the property C. Disparaging the business practice of a
B. Greet people competitor
C. Discuss terms and conditions of a possible D. Commingling
sale
D. Discuss the location of the property 10. If the Department of Real Estate pays a consumer
including describing the neighborhood or out of the Consumer Recovery Account, the real
schools estate licensee’s license will be suspended until the
licensee
5. The California attorney general acts as CalDRE’s A. repays the amount in full.
A. prosecutor for real estate law violations. B. repays the amount in full plus 10% interest.
B. national exam administrator. C. repays the amount in full plus 10% interest
C. legal counsel. and pays a fine.
D. media spokesperson. D. apologizes.
30

UNIT
4
Property Management
and Specialty Areas
LEARNING OBJECTIVES
ff explain the essential elements of the property management field and the role of the property
manager;
ff distinguish the essential elements of lease interests;
ff list and describe various areas of specialization in the real estate profession; and
ff discuss the general tax ramifications involved in real estate.
I. PROPERTY MANAGEMENT
A. Responsibilities of the property manager
1. Obtain the from the property for the owner.
2. Furnish the best value to the tenants for their rent, including reasonable safety measures.
3. Maintain proper records and make regular reports to the owner of the property.
4. Advertise vacancies.
5. Qualify prospective tenants.
6. Prepare and execute leases.
7. Pay the property’s bills.
8. Recommend repairs and improvements.
9. Be aware of competitive market conditions.

31

32 Unit 4 Property Management and Specialty Areas
10. Stay current on federal, state, and local laws.
11. Establish for the property.
a) Rent schedules are the rents to be asked for in the lease.
b) is scheduled rent less any inducements provided to the tenant.
c) The property manager sets up rent schedules by making a thorough analysis of the neighborhood.
B. Property management contract
1. Written contract that sets forth the responsibilities of the parties
a) Management fee can be either a flat amount per month or a percentage of the gross rents collected.
b) Authority is given to the agent by the owner.
(1) Typically, property managers are a general agent of the owner with the authority to perform any act
the owner themselves can perform (e.g., sign leases and other contracts on behalf of the owner).
c) Maintenance of accounting and trust fund records and ability to make regular reports to the owner.
C. Types of property managers
1. Licensee/property manager
a) Manages a number of properties typically for various owners
b) May employ unlicensed employees to perform various functions, including interviewing prospective
tenants, collecting rents, etc.
2. Resident manager
a) Lives on the property and may be employed by an owner or property manager
b) Does not require a license
c) Required to reside on the premises
d) Required to be paid a minimum hourly rate with a maximum amount of rent offset for wages in exchange
for free or reduced rent is established by law
e) Required on residential properties with or more units
3. Professional designations
a) Certified Property Manager ( )
(1) Designation provided for education and experience by the Institute of Real Estate Management
(IREM).

Unit 4 Property Management and Specialty Areas 33
II. LEASES
A. Types of leasehold estates
1. An is an estate in real property that continues for a definite, fixed

period of time (year-to-year, month-to-month, or week-to-week) and may be for less or more than one year.
a) It terminates at the end of the term with .
b) Although referred to as a lease, the lease itself is the contract, not an estate in property.
2. A is an estate in real property that lasts for a specified length of time

and continues to be automatically renewed until notice, as required by law, is given to terminate.
a) Statutory notice requirements
(1) The term of the period but not less than 30 days’ notice
(2) If occupancy is more than one year, 60 days’ notice required
b) Typically referred to as “renting” property
3. An is capable of being terminated at the will or unilateral decision of

either party.
a) Not allowed by law in the state of California because notice must be given to terminate a leasehold estate;
allowed in some states
b) Would be like allowing a relative to stay with a person for as long as the owner agreed
4. An is one where a person has had the right to possession of the

property but retains possession after the expiration of the term.
a) A form of trespassing
b) Examples
Unit 4
(1) A tenant under an estate for years who does not move out after a one year lease period
(2) A property owner who continues to occupy property after a foreclosure proceeding has been finalized
c) If a landlord accepts rent money from a tenant at sufferance he may establish a periodic tenancy.
B. Types of lease contracts
1. Gross lease tenant pays and landlord pays all expenses.
2. Net lease tenant pays

(e.g., utilities,property taxes, insurance, and maintenance costs).
3. tenant pays rent based on a percentage of

. This is typical in retail types of properties.

4. is when rent increases at predetermined intervals and the amount is set

in the lease terms.
5. is when rent is adjusted based on an economic indicator (e.g., consumer price

index).
6. is when a tenant leases land and places improvements on the land, and
when the lease terminates, the improvements are turned over to the owner of the land.
III. SPECIALTY AREAS
A. Areas of specialization other than residential brokerage
1. Commercial property
2. Industrial property
3. Business opportunities
4. Vacant land and lot sales
5. Farms
6. Time-shares
7. Loan brokerage and mortgage loan activities
8. Leasing agent
IV. TAXATION
A. Property taxes
1. Historically, governments have favored real estate taxation because it is the one form of taxation that
be evaded.
2. A change-in-ownership statement is required to be filed

or within 90 days if the transfer is not recorded.
3. Exemptions:
a) Homeowners exemption =
b) Qualified veterans exemption =
4. Proposition 13 provides that real estate will be taxed at a maximum rate of of fair market
value at the time of purchase and can only increase a maximum of per year thereafter, plus
voter approved indebtedness.
5. against specific properties that benefit from a public

improvement.
6. Amount of tax = assessed value × tax rate

Unit 4 Property Management and Specialty Areas 35
7. Property taxes have first right of priority over .
8. Real property taxes are an example of an (according to value) tax.
9. Appeals of assessed value are first made to a .
B. Documentary transfer tax
1. Applies to transfers of real property located in the county in which the property is located.
2. Notice of payment is typically placed on the face of the deed.
3. Tax rate is $0.55 for each $500 of cash and new loans placed on the property (assumed loans are not subject to
the tax).
C. Street Improvement Act of 1911
1. Utilized more than any other law for street improvements in California
D. Mello-Roos
1. Mello-Roos provides for a wider variety of facilities and services than other improvement bond acts and has no
requirement that the improvements will specifically benefit individual properties.
2. The law requires that a seller of one-to-four dwelling units disclose a Mello-Roos assessment to a purchaser.
3. Failure to give notice of a Mello-Roos bond prior to signing the sales contract gives the buyer a three day right
of rescission after receipt of the notice.
E. Federal income tax
1. Long-term capital gains tax rates
a) 15% for most real property
b) 20% for high-income individuals
Unit 4
c) 25% for depreciation recapture
2. Home mortgage interest deductibility on your main home or a second home
a) Home acquisition debt (to buy, build, or improve) your home, interest on up to
in loan amount is deductible.
3. 1031 tax deferred exchanges
a) Properties must be like-kind in nature. Personal use property does not qualify.
b) Cash or other assets (“boot”) are recognized and fully taxable.

c) Mortgage debt relief is treated as “boot” and is taxable.
d) The basis of the old property is carried over as the basis for the new property, thus tax is deferred not
avoided.
4. Installment sales
a) If a taxpayer sells real property and receives one or more payments in a later year or years she recognizes
the gain and spreads paying the tax over the years when the gain is received.
5. Sale of personal residence
a) Exclusion from gain for sale of a principal residence where individuals have lived in the house for periods
totaling at least two of the last five years.
(1) $500,000 exclusion for married couples filing a joint return
(2) $250,000 exclusion for singles or married couples filing separately
a. ad valorem 1. ___ A property manager is responsible to the owner to obtain the

b. change-in-ownership from the property.
c. depreciation 2. ___ Under a gross lease, a tenant pays a
recapture and the landlord pays all expenses.
d. estate for years 3. ___ A statement is
e. fixed rent required to be filed at the time of recording or within 90 days if
the transfer is not recorded.
f. highest return
4. ___ The law that is used more than any other law for street
g. homeowner’s improvements in California is the
exemption .
h. real property
5. ___ The maximum amount of interest that is
i. Street Improvement on home acquisition
Act of 1911 indebtedness is not to exceed $750,000.
j. tax deductible 6. ___ An is for a definite fixed
period of time and does not require notice to terminate.
7. ___ A property tax is for
$7,000.
8. ___ The maximum long-term capital gains tax rate on
is 20%.
9. ___ The long-term capital gains tax rate for
is 25%.
10. ___ Real property taxes are an example of an
tax.

UNIT 4 REVIEW QUIZ
1. The type of property manager who lives on the 6. In a 1031 tax-deferred exchange which of the fol-
property and does not require a real estate license lowing is taxable?
is A. Only cash received is taxable
A. a licensed property manager. B. Only mortgage debt relief is taxable
B. a CPM. C. Boot
C. a resident manager. D. The amount of gain is taxable
D. an IREM.
7. A designation awarded to property managers by
2. Which type of leasehold estate requires at least a the Institute of Real Estate Management (IREM)
30-day notice to terminate? for education and experience is
A. Estate for years A. CRM.
B. Tenancy at sufferance B. GRI.
C. Periodic tenancy C. RPM.
D. Estate for 30 days D. CPM.
3. Which of the following lease contracts has rent 8. A type of estate held by a tenant who stays in a
that is adjusted at predetermined intervals? property after an estate for years has terminated
A. Graduated lease without the consent of the landlord is called an
B. Percentage lease A. estate in trespass.
C. Index lease B. estate at will.
D. Net lease C. illegal estate.
D. estate at sufferance.
4. Which of the following would constitute areas of
specialization in real estate? 9. A percentage lease would most commonly be
A. Commercial or industrial sales of real used on
property A. an industrial property.
B. Vacant land and lot sales B. single family rental.
C. Time-shares C. a retail store.
D. All of these D. an office building.
5. The tax rate for documentary transfer tax is 10. Proposition 13 provides that real estate is initially
A. $1 per $1,000 of cash or assumed loans. taxed on the fair market value at the time of pur-
B. 1% of the selling price. chase of a maximum rate of
C. 0.55 per $500 of cash or new loans. A. 1%.
D. 1% of the assessed value. B. 2%.
C. 5%.
D. 10%.
37

ANSWER KEY
Unit 1 Unit 1 Glossary Review
Lecture outline fill-ins Page 6
Page 1
1. Interpleader is a court proceeding by
never a holder of deposit money to determine who is legally
should not entitled to the money.
one
Commingling 2. Advance fee agreements are required to
be submitted to CalDRE no less than 10 days before
$200
being used.
Page 2 3. Sellers are exempt from providing transfer

disclosure statements to buyers on sales
segregating including foreclosures .
Conversion
buyer 4. Sellers of residential properties built before 1978
are required to deliver an EPA booklet, Protect Your
monthly
Family from Lead in Your Home, to prospective buyers
aggregate trust fund liability and lessees.
Interpleader
5. Pest control reports are filed with the
California Structural Pest Control
Page 3 Board .
10 days
must retain for three years 6. Conversion is the unlawful appropriation
of another’s property for the broker’s personal use.
electronic image
one- to four or more 7. The illegal mixing of personal funds with
three days money held in trust on behalf of a client is
called commingling .
Page 4 8. Trust fund records must be reconciled

Foreclosure monthly.
never
9. A transfer disclosure statement
Earthquake fault zone must be delivered to a buyer on a sale of residential real
residential properties built before 1978 property with up to four dwelling units.
10. Earthquake fault zones are covered in

Page 5 the natural hazards disclosure
one mile statement .
reasonably competent and diligent visual
Disclose Unit 1 Review Quiz
Elect
Page 7
Confirm
State Structural Pest Control Board
1. C Trust funds never belong to the broker. Either they
buyer are the property of the buyer or the property of the
one mile seller.
38

Answer Key 39
2. C Trust fund records are required to be reconciled Rumford Act

with bank statements monthly. business establishments
3. A The broker accepts the deposit as an agent for

the buyer and is responsible to the buyer for the Page 11
deposit.
“redlining”
4. B Advance fees are fees paid to real estate seller who discriminates
professionals in advance of any services rendered Panic selling
and are a form of trust funds. Steering
increased to
5. A Licensees are required to keep copies of documents
on transactions for which a license is required for
three years from the close of escrow or if there is Page 12
no close of escrow from the date of listing of the
California, New York, Texas, and Florida
property.
6. C Either manually produced or computerized Page 13

accounting records are acceptable to track trust
funds. cultural beliefs and values
lawsuit
7. D The buyer has the right to cancel within three days
from delivery of a Transfer Disclosure Statement
that is received after delivery. Page 14
Loan Estimate
8. D The seller typically pays for installation of smoke
detectors and water heater bracing where required Closing Disclosure
by law. Bait and switch advertising
Agricultural
9. C On the sale of dwelling units in condominiums, 48 hours
planned developments, or cooperative property, the
visual inspection required of agents only includes
the unit involved and not the common areas. Page 15
do not disclose
10. B A licensee has a duty to deliver copies of any
structural pest control reports she has in her apartment complex with chapel
possession. descriptions of properties
Unit 2 Page 16
Lecture outline fill-ins from unsolicited emails
internal
Page 9
three months
Jones v. Mayer mobile
National origin
Page 17
Page 10
e-Pro®
(HUD) virtual tour
pregnant persons
AIDS
Unit 2 Glossary Review
seminary dormitory
public accommodations Page 18
accessible
1. The fine for violating do-not-call rules
can be up to $40,000.

40 Answer Key
2. The National Do Not Call Registry 4. D Jones v. Mayer is the U.S. Supreme Court case
exists to protect consumers from upholding the 1866 Civil Rights Act which
unwanted commercial telephone involved the 14th Amendment.
solicitations .
5. C The 1968 Civil Rights Act is enforced by the
3. Prohibited discrimination against handicapped persons Department of Housing and Urban Development
includes those afflicted with AIDS . (HUD).
4. The illegal practice of real estate licensees directing 6. D While the other activities are fun, real estate
members of a protected class towards or away from professionals would not be able to be productive in
certain neighborhoods is called steering . today’s real estate world if they did not have access
to a multiple listing service through a computer.
5. The CAN-SPAM Act protects consumers
from unsolicited email messages. 7. C Consumer relationship management (CRM)
software fulfills many functions that help real
6. The percentage of foreign buyers purchasing property in estate professionals be more effective and efficient,
the United States has been increasing . including tracking prospects to convert them to
clients and having a “tickler file” system that results
7. The Loan Estimate required under in them automatically keeping in touch with
TRID must be delivered or placed in the mail no later clients on a regular basis.
than the third business day after receipt of the loan
application. 8. D The Closing Disclosure must be provided to the
consumer at least three business days prior to the
8. Blind ads are advertisements that do not consummation of the transaction. Under specified
disclose that the person or entity placing the ad is a real circumstances if a change must be made to the
estate licensee. disclosure form an additional three day waiting
period may be required.
9. A professional certification that indicates that a real
estate professional has advanced training in technology 9. A Each company must keep its own do-not-call list of
is e-Pro® . consumers who request not to be called again.
10. An exception, which allows a person to call someone 10. B A licensee cannot advertise or represent that
on the National Do Not Call Registry, is when a used mobile home is new. A licensee cannot
an inquiry has been made within three represent that a mobile home can be transported
months. on California highways if it does not have the
appropriate equipment to do so.
Unit 2 Review Quiz
Page 19 Unit 3
Lecture outline fill-ins
1. D The exception for real estate professionals who have
Page 21
had prior contact with a consumer is only good for
30 days. The 18-month exception is only valid if reasonable supervision
the real estate professional had prior contact with
the consumer. Personal calls are exempt because
they are not solicitations. Page 22
appointed
2. A The CAN-SPAM Act of 2003 requires bulk email
ten days
senders to provide recipients a way to opt out of
future emails. Texts
three years
3. D The CAN-SPAM Act of 2003 allows bulk email
solicitations. Including recipients in the cc list
should not be done because it would share their Page 23
email addresses and it may also get the email prominently and conspicuously
marked as spam. Recipients do not have to opt in, Business cards
which is why lists can be bought.

Answer Key 41
Page 24 six months

10% interest
Newspaper
For Sale signs
Cold Calling Unit 3 Glossary Review
Open house Page 29
Page 25 1. A broker is required to exercise reasonable

supervision over the activities of salespersons.
Comparative Market Analysis
Access to Property 2. Under the NAR Code of Ethics, REALTORS® should
Information about the property not undertake to provide specialized
Advertising services outside of their field of competence.
reviewed and approved
3. The CalDRE operates under the Business,
Documents Consumer Services, and Housing
does not Agency .
4. The maximum amount that can be received under

Page 26 the Recovery Fund by an injured party is
discrimination up to $50,000 per transaction.
specialized services
5. A broker is required to notify CalDRE not more than
unauthorized practice of law 10 days following the termination of
governor employment of a licensee.
adopt regulations
disciplines 6. Solicitation materials that do not require disclosure of
cannot licensed status include For Sale signs .
hearing 7. An unlicensed assistant may prepare advertising so long
legal advisor as it is reviewed and approved by
prosecutor the licensee prior to its publication.
substantial misrepresentation
8. CalDRE does not enforce ethics rules.
Page 27 9. The governor appoints the real estate

Commissioner.
not
written contract 10. A real estate broker is required to have
Misrepresentation a written contract with every licensee
dual agency who associates with the broker.
Commingling
definite termination date Unit 3 Review Quiz
secret profit
Page 30
Page 28 1. C Reasonable supervision includes establishing

Obtaining a license by fraud rules, maintaining records, handling trust funds,
advertising services, and familiarizing salespersons
Failing to disclose ownership interest
with laws dealing with discrimination.
trust funds
deliver a copy 2. C Brokers are required to keep digital copies of
$50,000 per transaction electronic documents including texts that relate to
$250,000 per licensee real estate transactions.
90 days
CA_RE_Practice_workbook_Answer_Key.indd 41 4/15/2019 8:01:48 AM

42 Answer Key
3. A First point of contact solicitation materials include estate at will

business cards, stationery, websites, and flyers. estate at sufferance
fixed rent
4. B An unlicensed assistant can greet the public at an
base rent plus some or all expenses
open house without having to have a real estate
license. Percentage lease
gross income
5. C The California attorney general acts as CalDRE’s
legal counsel. The local district attorney acts as the
prosecutor for real estate law violations. Page 34
Graduated lease
6. C The CalDRE only has the ability to discipline real
Index lease
estate licensees. All other actions must go through
the courts. Ground lease
cannot
7. D The written contract between the broker and at the time of recording
salesperson indicates that the broker is responsible $7,000
for supervising the activities of the salesperson. $4,000
8. D Unlicensed assistants can perform many activities 1%
for real estate licensees without possessing a license, 2%
such as order inspections, install For Sale signs, Special assessments
attend open houses and greet people, but they
cannot perform acts for which a license is required
(e.g., offer property for sale, negotiate sales Page 35
agreements). all other liens
ad valorem
9. C Disparaging the business practice of a competitor
is a violation of NAR’s Code of Ethics, but it does board of appeals
not violate any provision of the real estate law. The $750,000
other choices are violations of the law.
10. B The license is suspended until the amount is repaid Unit 4 Glossary Review
in full plus 10% interest. There is no fine and Page 35
apologizing does not end the suspension.
1. A property manager is responsible to the owner to
Unit 4 obtain the highest return from the
property.
Lecture outline fill-ins
2. Under a gross lease, a tenant pays a fixed rent
Page 31
and the landlord pays all expenses.
highest return
3. A change-in-ownership statement is
required to be filed at the time of recording or within
Page 32 90 days if the transfer is not recorded.
rent schedules
4. The law that is used more than any other law for street
Effective rent improvements in California is the Street
16 Improvement Act of 1911 .
CPM
5. The maximum amount of interest that is tax
deductible on home acquisition indebtedness
Page 33 is not to exceed $750,000.
estate for years
6. An estate for years is for a definite
no notice required
fixed period of time and does not require notice to
periodic tenancy terminate.

Answer Key 43
7. A property tax homeowner’s exemption 4. D All of the areas of activity are specialized areas of
is for $7,000. real estate.
8. The maximum long-term capital gains tax rate 5. C The documentary transfer tax rate is .55 per $500
on real property is 20%. of cash or new loans.
9. The long-term capital gains tax rate 6. C In a tax deferred exchange, cash or other assets
for depreciation recapture is 25%. referred to as “boot” is taxable.
10. Real property taxes are an example of an ad 7. D The Certified Property Management (CPM)
valorem tax. designation is awarded by the Institute of Real
Estate Management (IREM).
Unit 4 Review Quiz 8. D The estate which exists when a tenant under an
Page 37 estate for years remains in the property without the
landlord’s consent is called an estate at sufferance.
1. C Resident managers are a type of property manager 9. C A percentage lease would be most commonly used
that live on the property and are not required to on a retail type of property, and based on the store’s
have a real estate license. They are required on gross sales or income.
properties involving 16 or more units.
10. A The maximum rate initially is 1% of the fair
2. C A periodic tenancy requires a minimum of 30 days’ market value at the time of the purchase.
notice to terminate.
3. A A graduated lease has rent based on predetermined

intervals. An index lease has rent that is adjusted
based on an economic indicator such as the
consumer price index.
CA_RE_Practice_workbook_Answer_Key.indd 43 4/15/2019 7:56:48 AM

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California Real Estate Practice

Ted Highland, Contributing Editor

CA_RE_Practice_workbook.indb 1 4/12/2019 9:41:39 AM

President: Dr. Andrew Temte

CALIFORNIA REAL ESTATE PRACTICE WORKBOOK FOURTH EDITION

Printed in the United States of America

CA_RE_Practice_workbook_Copyright.indd 2 4/16/2019 9:42:13 AM

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A. Trust fund concepts

a) Trust funds belong to the broker.

d) is the illegal mixing of personal funds with money held in trust on

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e) The opposite of commingling is funds into separate accounts.

f ) is the unlawful appropriation of another’s property by a broker for

2. Trust fund requirements

b) The at any one time for a trust account

g) is a court proceeding by the holder of deposit money to determine who

CA_RE_Practice_workbook.indb 2 4/12/2019 9:41:40 AM

1. Licensed real estate brokers copies of all listings,

3. Alternatively, brokers may use storage technology to store records as

A. Transfer Disclosure Statement (TDS)

4. Seller disclosure exemptions include the following:

a) Sale pursuant to court order (e.g., probate)

c) Sale from one co-owner to another

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B. Natural Hazards Disclosure Statement

1. Special flood hazard areas

2. Very high fire hazard zones

3. Wildland areas that may contain substantial fire risks

5. Seismic hazard zones

6. Sellers, not agents, required to comply with this law

C. Lead-Based Paint Hazards

1. Duties apply to sellers or lessors.

a) Sellers or lessors of must

D. Smoke Detector and Water Heater Bracing Statement of Compliance

E. Disclosure of Ordnance Location

CA_RE_Practice_workbook.indb 4 4/12/2019 9:41:40 AM

F. Disclosure of Material Facts Affecting Property Value

5. Agents are not required to disclose

a) deaths that have occurred on a property, or

b) whether a previous occupant has been afflicted with AIDS.

1. Required in one- to four-unit residential transactions

a) various agency relationships in statutory agency disclosure form.

b) who the agent represents in the specific transaction.

c) the election in purchase contract or separate document.

3. Pest control reports are filed with the .

7. Disclosure is required if a former military munitions site is located within of

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UNIT 1 GLOSSARY REVIEW

a. 1978 1. ___ is a court proceeding by a holder

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6. Acceptable methods of maintaining accounting

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2 Fair Housing and Advertising

A. Fair housing laws

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b) Prohibited discrimination against handicapped persons, including persons afflicted with

d) Statutory exemptions to the Fair Housing Act include the following:

5. The Americans with Disabilities Act applies to , defined as a

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a) Sale pursuant to court order (e.g., probate)