California Real Estate Salesperson flashcards

A loan provision allowing the lender to demand full repayment of the loan balance if the property is sold or transferred without lender approval.

• Also called an alienation clause
• Protects lender from an unapproved assumption at below-market rates
• Federal law (Garn-St. Germain Act) generally allows enforcement of these clauses

Memory trick: Sell without asking, loan comes calling (accelerates).

A contract clause specifying that stated deadlines are material terms, requiring strict and timely performance; failure to meet them constitutes a material breach.

• Makes deadlines legally binding and strictly enforced.
• Missing such a deadline can allow the other party to cancel the contract.
• Without this clause, courts may allow reasonable delays without automatic breach.

Memory trick: When time is 'of the essence,' late means breach—no grace period.

A method of acquiring title to another's land through open, hostile, continuous, exclusive possession for 5 years plus payment of all property taxes during that period.

• 5-year statutory period in California
• Requires payment of property taxes each year (unique to CA)
• Possession must be open, notorious, hostile, and exclusive

Memory trick: 5 years, pay the taxes, or no claim to stakes.

All real estate advertising by a salesperson, regardless of medium, must identify the responsible broker to avoid misleading consumers about licensure status.

• Applies to print, digital, and social media ads
• Salesperson cannot advertise as if independently in business
• DRE Regulation 2770.1 governs advertising disclosure requirements

Memory trick: No broker name, no legit game.

A class of projects identified by CEQA guidelines as having no significant effect on the environment, and therefore exempt from further environmental review.

• Includes minor alterations to existing structures (Class 1)
• No EIR or negative declaration required
• Exemption doesn't apply if unusual circumstances create potential impact

Memory trick: Small remodel, no big deal — categorically exempt.

Housing advertisements may not state a preference, limitation, or discrimination based on any protected class, including familial status.

• Ads are violations on their face, no injured party needed
• Protected classes include familial status, race, religion, disability, etc.
• Applies to print, online, and social media advertising

Memory trick: 'No kids, no ad' — discriminatory words on paper are illegal words, period.

A grant deed automatically implies that the grantor has not already conveyed the property to another and that it is free of grantor-created encumbrances not disclosed.

• Grant deed is the most commonly used deed in California
• Implied warranties exist even without express language
• Does not guarantee against encumbrances created by prior owners

Memory trick: Grant deed 'Guarantees' no prior Grant and no Grantor liens

A disagreement between cooperating brokers over which one caused the ultimate sale, resolved through arbitration rather than by the DRE.

• DRE does not resolve commission disputes
• MLS/Realtor association arbitration is the common venue
• Based on unbroken chain of events leading to the sale

Memory trick: Brokers battle it out at arbitration, not at the DRE's door.

Under Civil Code 2079, a listing agent must conduct a reasonably competent and diligent visual inspection of reasonably accessible areas of a property and disclose material facts discovered.

• Applies to residential 1-4 unit properties
• Covers areas reasonably and normally accessible, not areas requiring special access
• Agent must disclose material defects discovered during inspection

Memory trick: Walk the house, not the crawlspace ceiling — inspect what's reasonably reachable.

Sole ownership of real property by one individual or entity, with no co-owners.

• Title is 'severed' from all other parties
• Owner has complete control without co-owner consent
• Can be an individual or a single legal entity like a corporation

Memory trick: Severalty = 'sever' all other owners — just you.

HOPA allows senior housing communities to be exempt from familial status discrimination claims if they meet specific occupancy percentage and policy requirements.

• 55+ communities: 80% of units must have one occupant 55 or older, plus published policies
• 62+ communities: 100% of units must be occupied by persons 62 or older
• Simply calling a property 'adults only' does not meet the exemption and violates fair housing law

Memory trick: 80% at 55, or 100% at 62 — anything less is just 'adults only' discrimination.

In California, agency relationships must be disclosed to a seller before the listing agreement is signed and to a buyer before signing the purchase agreement, per Civil Code 2079.14.

• Applies to 1-4 unit residential transactions
• Seller must receive disclosure before signing listing agreement
• Buyer must receive disclosure before signing offer if not already given

Memory trick: Disclose before you decide to list

The sum of all forms of depreciation (physical, functional, and external) subtracted from reproduction/replacement cost new to reach depreciated value.

• Three types: physical, functional, external
• Total depreciation = sum of all three types
• Percentage = Total depreciation ÷ Cost new

Memory trick: Add all three losses, then compare to cost new

A discretionary approval allowing a specific use in a zone where it is conditionally permitted, subject to conditions addressing community impacts.

• Used for uses like hospitals, churches, or daycare centers in restrictive zones
• Conditions may address traffic, noise, hours of operation
• Different from a variance, which addresses physical dimensional standards

Memory trick: CUP = 'Conditionally Usable Permit' for special uses.

Employing brokers are ultimately responsible to the DRE for the proper and timely handling of trust funds received by their salespersons.

• Brokers must supervise all trust fund handling activities of their agents
• Salesperson violations can result in disciplinary action against the broker's license
• Trust funds received by a salesperson must reach the broker within required timeframes

Memory trick: The broker's license is on the line for every agent's trust fund slip-up.

California's statewide rent cap limits annual increases to the lesser of 5% plus local CPI or 10% total, for covered rental units.

• Applies to most multifamily units older than 15 years, with exceptions
• Formula: increase = lesser of (5% + CPI) or 10%
• Some properties (single-family homes owned by individuals, new construction) may be exempt

Memory trick: Five plus CPI, but never past ten — remember when

A deed of trust involves three parties: the trustor (borrower), the trustee (neutral title holder), and the beneficiary (lender).

• Trustor = borrower who signs the note and deed of trust
• Trustee = holds bare legal title for security purposes
• Beneficiary = lender who receives loan payments

Memory trick: TTB: Trustor gives Title to Trustee for Beneficiary's benefit.

California borrowers may cure a default and reinstate their loan up until 5 business days before the scheduled trustee's sale, per Civil Code 2924c.

• Reinstatement requires paying missed payments plus fees and costs
• Cutoff is 5 business days before the trustee's sale date
• Distinct from the right of redemption, which may apply after judicial foreclosure

Memory trick: Five days before the gavel falls, reinstatement calls.

California limits liquidated damages in residential purchase contracts to a maximum of 3% of the purchase price unless the buyer separately initials a higher amount meeting specific statutory conditions.

• Cap applies to residential property of one to four units intended for buyer occupancy
• Amount above 3% requires separate proof of actual damages
• Formula: deposit ÷ purchase price = percentage
• Purpose is to prevent sellers from imposing punitive default penalties

Memory trick: '3% Ceiling'—residential deposits capped unless justified otherwise.

California law requires written confirmation of the agency relationship(s) in the purchase contract or a separate writing, executed at or before the contract's signing.

• Applies to all residential transactions, not just dual agency.
• Confirmation must be in or accompanying the purchase contract.
• Distinct from the earlier listing-side agency disclosure requirement under 2079.14.

Memory trick: 'Confirm before you sign, not after the finish line.'

Brokers must keep trust fund records and related transaction files for three years for DRE audit purposes.

• Three-year retention period applies from close of escrow or termination of listing
• Applies to trust account ledgers, bank statements, and transaction files
• DRE audits can occur without notice during this period

Memory trick: 'Three years to spare' for trust fund care

A point equals 1% of the loan amount, paid upfront to the lender, often to lower the loan's interest rate.

• 1 point = 1% of loan amount
• Points are calculated on the loan amount, not sale price
• Paying points can lower the interest rate ('buying down' the rate)

Memory trick: Point = Percent of Principal.

An agency automatically ends once its stated objective has been fully accomplished, such as the successful completion of a sale.

• No formal written termination is required.
• Applies once escrow closes/title transfers.
• Distinct from termination by expiration, death, or revocation.

Memory trick: Mission accomplished, agency concluded.

An agent's fiduciary duty to properly receive, deposit, track, and account for all client funds and property, including timely deposit of trust funds into a neutral account.

• Trust funds must be deposited within 3 business days of receipt.
• Commingling trust funds with personal/business funds is prohibited.
• Violation can result in DRE discipline separate from contract issues.

Memory trick: Client money needs a home fast—three days, no delays.

A land use that was lawful when established but no longer complies with current zoning; it is typically allowed to continue under grandfather clauses.

• Must have existed legally before the zoning change
• Expansion or rebuilding after destruction may be limited
• Also called a 'grandfathered use'

Memory trick: Grandfathered in — old use survives new rules.

California usury law does not limit interest rates on loans arranged by a licensed real estate broker when secured by real property, exempting such loans from the general constitutional usury ceiling.

• Applies to loans arranged or negotiated by a licensed real estate broker
• Loan must be secured by real property (deed of trust or mortgage)
• Institutional lenders like banks are also generally usury-exempt

Memory trick: Broker plus real property equals no usury story.

CLTA (standard) policies cover recorded title matters; ALTA (extended) policies add coverage for off-record risks like surveys, unrecorded liens, and encroachments.

• CLTA = standard coverage, based on public records
• ALTA = extended coverage, includes physical inspection/survey risks
• Lenders typically require ALTA policies for greater protection

Memory trick: ALTA = 'All the Land, Then Add' extra survey risks

California law grants a borrower a statutory right to redeem property after a judicial foreclosure sale: one year if a deficiency judgment is sought, or three months if the lender waives it.

• Only applies to judicial foreclosures, not nonjudicial trustee's sales
• 1 year if deficiency judgment is obtained (CCP §729.030)
• 3 months if lender waives the deficiency judgment

Memory trick: Deficiency demanded? A full year granted.

A ratio lenders use to measure whether a property's income is sufficient to cover its debt payments, calculated as NOI divided by annual debt service.

• DCR = NOI ÷ Annual Debt Service
• DCR above 1.0 indicates positive cash flow after debt payments
• Lenders often require a minimum DCR (e.g., 1.20 or 1.25) for commercial loans

Memory trick: Income Over Debt keeps the Deal alive (DCR = NOI/Debt).

A listing where the broker is the only agent authorized to sell the property, but the seller retains the right to sell it herself without owing a commission.

• Differs from exclusive right-to-sell listings.
• Seller-procured sales owe no commission.
• Broker still earns commission if broker or any other agent procures a buyer.

Memory trick: 'Exclusive Agency = Except the owner' can still sell free.

California Real Estate Law requires brokers to supervise all licensed activities of their salespersons regardless of whether the salesperson is classified as an independent contractor for tax purposes.

• IC agreements affect tax/employment law, not supervisory duty.
• Broker remains liable for salesperson's licensed conduct.
• DRE regulations mandate written supervision policies.

Memory trick: 'IC for the IRS, but supervision's still yours, boss.'

A ratio used by lenders to measure risk, calculated as (Operating Expenses + Debt Service) ÷ Gross Potential Income; indicates the occupancy level needed to cover all costs.

• Lower ratio = lower risk for lender
• Formula: (OpEx + Debt Service) ÷ GPI
• Shows minimum occupancy needed to break even

Memory trick: Expenses plus debt, over income, tells the break-even point

A broker's trust fund bank account must be titled to show it is a trust account with the broker as trustee, keeping client funds separate from personal or business funds.

• Prevents commingling
• Required by California Business and Professions Code
• Bank must acknowledge trust nature of account

Memory trick: Label it 'Trust' or lose your license bust.

California landlords must return a tenant's security deposit or provide an itemized deduction statement within 21 calendar days after the tenant moves out.

• 21-day deadline applies statewide under Civil Code 1950.5
• Landlord must provide receipts for deductions over $125
• Tenant may request pre-move-out inspection to cure issues in advance

Memory trick: 21 days to settle the security deposit debate

An equitable remedy that cancels a contract and restores both parties to the position they held before the contract was made, often used in cases of fraud or mistake.

• Requires restoring any benefits received (restitution)
• Common remedy for fraud, misrepresentation, or mutual mistake
• Different from specific performance, which enforces the contract

Memory trick: Rescind = rewind the deal

The rate of return on a real estate investment property based on the income it is expected to generate, calculated as NOI divided by Value.

• Formula: Cap Rate = NOI ÷ Value
• Higher cap rate generally signals higher risk/return
• Used in the income approach to appraisal

Memory trick: NOI over Value—Cap rate reveals!

TILA gives borrowers a 3-business-day period to cancel certain non-purchase-money loans secured by their primary residence, such as refinances.

• Applies to refinances and home equity loans on primary residence
• Does NOT apply to purchase-money mortgages
• 3-business-day period begins after signing and receiving disclosures

Memory trick: Refinance? Right to rescind in 3 days.

An agent who makes an undisclosed profit at the principal's expense must disgorge that profit, as it violates the fiduciary duty of loyalty and full disclosure.

• Applies when agent benefits secretly from a transaction
• Principal can rescind the deal and recover the profit
• Distinct from an agreed and disclosed commission

Memory trick: Secret profits sneak out the back door — the law drags them back.

A listing agreement giving one broker the right to a commission regardless of who sells the property during the listing term, including the owner.

• Most protective listing type for brokers
• Commission owed even if seller finds their own buyer
• Common in California residential transactions

Memory trick: Exclusive RIGHT means broker always gets paid, even by the owner

The presumed form of co-ownership in California when a deed to multiple unmarried grantees does not specify joint tenancy or another form.

• No right of survivorship
• Interests can be unequal
• Each owner can transfer or will their share separately

Memory trick: Silent deed? Think 'Common' — no survivorship guaranteed.

In the first payment of an amortized loan, interest is calculated on the full loan balance, and the remainder of the payment reduces principal.

• Monthly interest = loan balance × (annual rate ÷ 12)
• Principal portion = total payment − interest portion
• Early payments have the smallest principal reduction of the loan term

Memory trick: Payment minus interest equals principal peeled off.

A form of co-ownership requiring equal interests acquired at the same time via the same document, with the key feature of right of survivorship.

• Requires unity of time, title, interest, and possession (the four unities)
• Right of survivorship avoids probate on death of a joint tenant
• Any joint tenant can sever the joint tenancy by conveying their interest

Memory trick: Joint tenants share the same TTIP (Time, Title, Interest, Possession) and the last one standing wins it all.

California brokers must deposit trust funds received on behalf of others into a trust account or neutral escrow within 3 business days of receipt.

• 3 business day rule applies to broker trust accounts
• Funds may be held uncashed only if buyer/seller instructs and seller is informed
• Commingling trust funds with broker's personal funds is prohibited

Memory trick: Three days to bank the buyer's cash

A nontransferable-to-land easement benefiting a specific person or entity rather than an adjacent parcel; commercial easements in gross are usually assignable.

• No dominant tenement exists
• Common for utility companies and pipelines
• Personal easements in gross generally cannot be assigned; commercial ones can

Memory trick: In gross = benefits a person/company, not a parcel.

An agent owes every party in a transaction honesty and fair dealing, but owes fiduciary duties (loyalty, confidentiality, obedience) only to their own client.

• Fiduciary duties are exclusive to the client relationship.
• Non-clients get honesty/fair dealing, not loyalty.
• Misrepresentation to a non-client is still actionable.

Memory trick: Clients get loyalty, everyone else just gets honesty.

California requires 60 days' notice to terminate a month-to-month tenancy of one year or more, and 30 days' notice for tenancies under one year.

• Under 1 year = 30 days notice
• 1 year or more = 60 days notice
• AB 1482 just-cause rules may also apply to covered units

Memory trick: 'One year in, sixty days to spin.'

An appraisal technique of choosing comparable sales that fall both above and below the subject's estimated value to support the value conclusion.

• Strengthens credibility of value opinion
• Uses at least one comp above and one below estimated value
• Different from reconciliation, which blends approaches

Memory trick: Bracket it — high comp, low comp, value in between

An ownership interest in real property that lasts only for the duration of a person's life, after which title passes to a remainderman or reverts to the grantor.

• Life tenant can possess and use the property but not commit waste
• Remainderman holds future interest that becomes possessory at life tenant's death
• Life estate is not inheritable by the life tenant's heirs

Memory trick: Life estate lasts 'til life's end, then it bends to the remainderman's hand.

Federal law requires sellers/landlords of housing built before 1978 to disclose known lead-based paint hazards and provide an EPA-approved pamphlet to buyers/tenants.

• Applies to housing built before 1978
• Buyer gets 10-day opportunity to test for lead
• Seller must attach a signed disclosure addendum

Memory trick: '78 or before, disclose galore

A junior financing instrument that includes the balance of an existing loan; the wraparound lender collects payments on the full new amount and continues servicing the underlying loan.

• Existing first loan stays in place, not paid off
• Wraparound lender profits from the interest rate spread
• Common seller-financing tool when assuming or paying off the old loan is undesirable

Memory trick: Wrap it like a burrito: new loan wraps the old loan inside.

A promissory note requiring interest-only payments during the term, with the entire principal due as a balloon payment at maturity.

• Also called a term note or interest-only note
• No principal reduction until maturity
• Common in short-term or seller-carryback financing

Memory trick: Straight as an arrow: interest only, principal at the end.

Every valid contract must contain capable parties, mutual consent, a lawful object, and consideration.

• Capacity means legal age and sound mind
• Mutual consent = offer + acceptance
• Consideration must have value, even if nominal
• Lawful object means the purpose must not violate law or public policy

Memory trick: CLOC: Capacity, Lawful object, Offer/acceptance, Consideration.

A non-exclusive listing where a seller may engage multiple brokers, and only the broker who successfully finds a ready, willing, and able buyer earns the commission.

• Seller can also sell the property personally without owing commission
• No broker has exclusivity
• Least commonly used listing type due to lower broker incentive
• Commission earned only by procuring cause

Memory trick: Open Listing = 'Race to the Buyer'—first broker to close wins the prize.

Proposition 19 allows a parent's primary residence to pass to a child with the Prop 13 base year value preserved, if the child uses it as their primary residence within one year and value stays under the exclusion cap.

• Effective February 16, 2021, replacing older unlimited parent-child exclusion
• Exclusion cap: factored base year value + $1,000,000
• Child must file for homeowner's exemption and reside within one year

Memory trick: Keep the family discount, but only under the million-dollar ceiling.

If a developer sells subdivided lots without providing the legally required Public Report, the buyer generally has the right to rescind the purchase within a statutory period.

• Public Report required before offering subdivided lots for sale to the public
• Failure to provide it can trigger buyer rescission rights
• Developer may also face DRE enforcement action or penalties

Memory trick: No report, no deal — buyer gets to walk away.

When a buyer's earnest money check is to be held uncashed per instructions, the broker must disclose this fact to the seller before or with offer presentation.

• Buyer may request the check be held until offer acceptance
• Broker must disclose this arrangement to the seller in writing
• Failure to disclose can mislead seller about buyer's actual funds committed

Memory trick: Hold it, but tell the seller — no secret uncashed checks.

Steering is the illegal practice of directing homebuyers or renters toward or away from certain neighborhoods based on a protected characteristic such as race or national origin.

• Violates Fair Housing Act and California FEHA
• Limits housing choices based on protected class
• Distinct from blockbusting and redlining

Memory trick: 'Steer clear of steering—let buyers choose their own gear.'

California law prohibits lenders from obtaining a deficiency judgment against a borrower after a nonjudicial trustee's sale foreclosure.

• Applies to nonjudicial (trustee's sale) foreclosures
• Judicial foreclosure may allow deficiency unless it's a purchase-money loan (CCP 580b)
• Encourages lenders to use trustee's sale process, forgoing deficiency rights

Memory trick: Trustee's sale = trade deficiency rights for speed.

A private land use restriction created by recorded covenants (CC&Rs) that runs with the land and is enforceable in equity, typically through an injunction, by other burdened/benefited property owners.

• Enforced privately, not by city zoning departments
• Typical remedy is injunctive relief in civil court
• Must be recorded and reasonably related to a legitimate purpose to be enforceable

Memory trick: CC&Rs are contracts on the land — enforce them in court, not city hall.

Commissions must always be negotiable; any agreement among competing brokers to set uniform rates violates antitrust law.

• Commission rates are never fixed by law or custom
• Antitrust laws (state and federal) prohibit broker price-fixing agreements
• Listing agreements must state rates are negotiable

Memory trick: Brokers who team up on price break the antitrust ice.