DRE
California Department of Real Estate, regulates real estate.
Getting Started: Exam Success Blueprint
Free knowledge base
California Real Estate Salesperson — key terms, tricks & tips
Everything from the course in one searchable place: 361 entries. Use it to review before a practice test or look up a word you forgot.
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eLicensing
Online system for DRE applications and scheduling exams.
Getting Started: Exam Success Blueprint
Content Outline
Official DRE document detailing exam topics and weighting.
Getting Started: Exam Success Blueprint
Passing Score
Minimum 70% correct answers (105/150) required to pass.
Getting Started: Exam Success Blueprint
Reference Book
Comprehensive DRE guide on California real estate law.
Getting Started: Exam Success Blueprint
Multiple-choice
Exam format with one correct answer among options.
Getting Started: Exam Success Blueprint
Understanding the CA DRE Salesperson Exam
To remember the passing score: 'Seven-Zero' is the 'Hero' score!
Getting Started: Exam Success Blueprint
Understanding the CA DRE Salesperson Exam
The California DRE Salesperson Exam is 150 questions, with a 3-hour, 15-minute time limit. A score of 70% (105 correct) is required to pass. Know the seven main content areas and their approximate weightings.
Getting Started: Exam Success Blueprint
Understanding the CA DRE Salesperson Exam
Underestimating the importance of the DRE's official content outline.
Getting Started: Exam Success Blueprint
Understanding the CA DRE Salesperson Exam
Not bringing proper identification to the exam, leading to being turned away.
Getting Started: Exam Success Blueprint
Understanding the CA DRE Salesperson Exam
Failing to manage time effectively during the 3-hour 15-minute exam period.
Getting Started: Exam Success Blueprint
Active Recall
Testing yourself on information retrieval.
Getting Started: Exam Success Blueprint
Spaced Repetition
Reviewing material at increasing intervals.
Getting Started: Exam Success Blueprint
Keywords
Words in questions that alter meaning.
Getting Started: Exam Success Blueprint
Elimination Strategy
Removing incorrect answer choices first.
Getting Started: Exam Success Blueprint
Time Management
Pacing yourself during the exam.
Getting Started: Exam Success Blueprint
Exam Anxiety
Stress experienced before or during a test.
Getting Started: Exam Success Blueprint
Cramming
Intensive, last-minute study sessions.
Getting Started: Exam Success Blueprint
Study Strategies & Test-Taking Tips
For 'Study Smart, Not Hard': S-M-A-R-T: Spaced repetition, Mark difficult, Active recall, Read carefully, Time yourself.
Getting Started: Exam Success Blueprint
Study Strategies & Test-Taking Tips
The California DRE Salesperson Exam consists of 150 multiple-choice questions. You have 3 hours and 15 minutes to complete it. There is no penalty for guessing, so answer every question.
Getting Started: Exam Success Blueprint
Study Strategies & Test-Taking Tips
Cramming all material the night before the exam instead of consistent study.
Getting Started: Exam Success Blueprint
Study Strategies & Test-Taking Tips
Spending too much time on a single difficult question and running out of time.
Getting Started: Exam Success Blueprint
Study Strategies & Test-Taking Tips
Not reading the entire question or all answer choices carefully before selecting an answer.
Getting Started: Exam Success Blueprint
Freehold Estate
Ownership for an indefinite duration.
Property Ownership & Land Use Controls
Leasehold Estate
Possession for a definite duration.
Property Ownership & Land Use Controls
Fee Simple Absolute
Highest form of property ownership.
Property Ownership & Land Use Controls
Tenancy in Common
Co-ownership with no right of survivorship.
Property Ownership & Land Use Controls
Joint Tenancy
Co-ownership with right of survivorship.
Property Ownership & Land Use Controls
Community Property
Property acquired by spouses during marriage.
Property Ownership & Land Use Controls
Grant Deed
Conveys title with implied warranties.
Property Ownership & Land Use Controls
Quitclaim Deed
Conveys grantor's interest without warranties.
Property Ownership & Land Use Controls
Estates in Land & Forms of Ownership
PITT for Joint Tenancy: Possession, Interest, Time, Title – all four must be present for a valid joint tenancy.
Property Ownership & Land Use Controls
Estates in Land & Forms of Ownership
The California DRE exam frequently tests the distinctions between joint tenancy and community property, especially regarding the right of survivorship and how interests pass upon death. Remember, community property allows a spouse to will their half interest, unlike joint tenancy.
Property Ownership & Land Use Controls
Estates in Land & Forms of Ownership
Confusing the right of survivorship in joint tenancy with the ability to will property in tenancy in common or community property.
Property Ownership & Land Use Controls
Estates in Land & Forms of Ownership
Forgetting that leasehold estates are considered personal property, not real property.
Property Ownership & Land Use Controls
Estates in Land & Forms of Ownership
Assuming all deeds offer the same level of title protection to the grantee.
Property Ownership & Land Use Controls
Encumbrance
A right or interest in property held by someone other than the owner.
Property Ownership & Land Use Controls
Easement
A non-possessory right to use another's land for a specific purpose.
Property Ownership & Land Use Controls
Easement Appurtenant
Benefits an adjacent parcel (dominant tenement) over another (servient tenement).
Property Ownership & Land Use Controls
Easement in Gross
Benefits a specific person or entity, not an adjacent parcel.
Property Ownership & Land Use Controls
Lien
A financial claim against a property as security for a debt.
Property Ownership & Land Use Controls
Specific Lien
Attaches to a particular piece of property.
Property Ownership & Land Use Controls
General Lien
Attaches to all of a person's property, real and personal.
Property Ownership & Land Use Controls
Dominant Tenement
The land that benefits from an easement appurtenant.
Property Ownership & Land Use Controls
Encumbrances, Easements & Liens
To remember the types of easements, think: 'Appurtenant ADDS to land value, In Gross is just for a GUY (or entity).'
Property Ownership & Land Use Controls
Encumbrances, Easements & Liens
The California exam frequently tests on the creation and termination of easements, especially easement by prescription (requiring 5 years of open, notorious, continuous, and hostile use). Also, know that property tax liens always have priority over other liens in California.
Property Ownership & Land Use Controls
Encumbrances, Easements & Liens
Confusing an easement (right to use) with an encroachment (physical intrusion).
Property Ownership & Land Use Controls
Encumbrances, Easements & Liens
Forgetting that property tax liens always have the highest priority.
Property Ownership & Land Use Controls
Encumbrances, Easements & Liens
Assuming an easement in gross automatically transfers with the sale of the property.
Property Ownership & Land Use Controls
General Plan
Long-term blueprint for local development.
Property Ownership & Land Use Controls
Specific Plan
Detailed plan for a defined area.
Property Ownership & Land Use Controls
Zoning Ordinance
Divides land into districts with use rules.
Property Ownership & Land Use Controls
Zoning Variance
Authorized deviation from zoning rules.
Property Ownership & Land Use Controls
Conditional Use Permit
Allows specific uses under conditions.
Property Ownership & Land Use Controls
Nonconforming Use
Legal use predating new zoning rules.
Property Ownership & Land Use Controls
Downzoning
Changing zoning to a less intensive use.
Property Ownership & Land Use Controls
Police Power
Government's right to regulate for welfare.
Property Ownership & Land Use Controls
Zoning, General Plans & Specific Plans
Think 'G-S-Z' for General, Specific, Zoning – the order of planning detail from broad to narrow.
Property Ownership & Land Use Controls
Zoning, General Plans & Specific Plans
The California DRE exam frequently tests the hierarchy of land use controls. Remember that the General Plan is the 'constitution' for development, and all zoning and specific plans must be consistent with it. Keywords to watch for include 'consistency' and 'police power' in relation to zoning.
Property Ownership & Land Use Controls
Zoning, General Plans & Specific Plans
Confusing a variance (hardship-based deviation) with a conditional use permit (compatible but not standard use).
Property Ownership & Land Use Controls
Zoning, General Plans & Specific Plans
Not understanding that zoning changes (like downzoning) can significantly impact property value and development potential.
Property Ownership & Land Use Controls
Zoning, General Plans & Specific Plans
Assuming a nonconforming use can always be expanded or rebuilt without restriction.
Property Ownership & Land Use Controls
CEQA
California Environmental Quality Act; requires environmental review for projects.
Property Ownership & Land Use Controls
EIR
Environmental Impact Report; detailed analysis of significant environmental impacts.
Property Ownership & Land Use Controls
Negative Declaration
CEQA document stating no significant environmental impact found.
Property Ownership & Land Use Controls
Subdivided Lands Act
DRE law protecting consumers in sales of 5+ subdivided parcels.
Property Ownership & Land Use Controls
Public Report
DRE disclosure document required for selling 5+ subdivided parcels.
Property Ownership & Land Use Controls
Subdivision Map Act
Local government law controlling physical design of 2+ parcel subdivisions.
Property Ownership & Land Use Controls
CEQA & Subdivided Lands Act
CEQA: 'C' for 'California' and 'E' for 'Environment'. Subdivided Lands Act: 'L' for 'Lots' (5 or more) and 'D' for 'DRE' (Department of Real Estate).
Property Ownership & Land Use Controls
CEQA & Subdivided Lands Act
The exam often tests the distinction between the Subdivided Lands Act (DRE, consumer protection, 5+ parcels, Public Report) and the Subdivision Map Act (local government, physical division, 2+ parcels, maps). Memorize the key differences!
Property Ownership & Land Use Controls
CEQA & Subdivided Lands Act
Confusing the purpose or administering agency of the Subdivided Lands Act with the Subdivision Map Act.
Property Ownership & Land Use Controls
CEQA & Subdivided Lands Act
Forgetting that the Subdivided Lands Act applies to 5 or more parcels, not just any subdivision.
Property Ownership & Land Use Controls
CEQA & Subdivided Lands Act
Not understanding that an EIR is required only when significant environmental impacts are identified.
Property Ownership & Land Use Controls
Agent
Party authorized to act on behalf of another.
Laws of Agency & Fiduciary Duties
Principal
Party who authorizes an agent to act for them.
Laws of Agency & Fiduciary Duties
Special Agent
Authorized for a specific, single transaction.
Laws of Agency & Fiduciary Duties
General Agent
Authorized for ongoing transactions in a business.
Laws of Agency & Fiduciary Duties
Universal Agent
Broad authority for all principal's matters.
Laws of Agency & Fiduciary Duties
Disclosure Regarding Real Estate Agency Relationships (AD-11)
Mandatory CA form explaining agency roles.
Laws of Agency & Fiduciary Duties
Express Agency
Agency created by explicit agreement (written/oral).
Laws of Agency & Fiduciary Duties
Implied Agency
Agency created by actions and conduct of parties.
Laws of Agency & Fiduciary Duties
Agency Relationships & Disclosure
AD-11 for ALL DEALS: Remember the AD-11 form is required for ALL real estate DEALS in California, ensuring everyone knows who represents whom.
Laws of Agency & Fiduciary Duties
Agency Relationships & Disclosure
Memorize that the 'Disclosure Regarding Real Estate Agency Relationships' form (AD-11) must be provided 'as soon as practicable' to both buyers and sellers, and confirmed in the purchase agreement. This is a key California-specific requirement.
Laws of Agency & Fiduciary Duties
Agency Relationships & Disclosure
Failing to provide the AD-11 form at the earliest practical opportunity.
Laws of Agency & Fiduciary Duties
Agency Relationships & Disclosure
Assuming implied agency is sufficient without a written agreement.
Laws of Agency & Fiduciary Duties
Agency Relationships & Disclosure
Continuing to act as an agent after the agency agreement has expired.
Laws of Agency & Fiduciary Duties
Fiduciary Duties
Highest legal and ethical obligations to a client.
Laws of Agency & Fiduciary Duties
Dual Agency
Agent or brokerage represents both buyer and seller.
Laws of Agency & Fiduciary Duties
Confidentiality
Protecting client's private information indefinitely.
Laws of Agency & Fiduciary Duties
Material Fact
Information that affects value or desirability.
Laws of Agency & Fiduciary Duties
Disclosure
Agent's duty to reveal all relevant facts.
Laws of Agency & Fiduciary Duties
Loyalty
Agent acts solely in the client's best interest.
Laws of Agency & Fiduciary Duties
Fiduciary Duties & Dual Agency
Remember the six fiduciary duties with the acronym OLD CAR: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable Care.
Laws of Agency & Fiduciary Duties
Fiduciary Duties & Dual Agency
The California DRE exam places significant emphasis on the specific requirements for dual agency disclosure and consent. Remember that consent must be in writing and obtained from both the buyer and the seller. Know the limitations on a dual agent's ability to advise on price or disclose confidential information.
Laws of Agency & Fiduciary Duties
Fiduciary Duties & Dual Agency
Failing to obtain written consent from both parties for dual agency.
Laws of Agency & Fiduciary Duties
Fiduciary Duties & Dual Agency
Disclosing confidential information about one party to the other in a dual agency situation.
Laws of Agency & Fiduciary Duties
Fiduciary Duties & Dual Agency
Believing that only one agent representing both parties constitutes dual agency, overlooking 'in-house' dual agency with different agents.
Laws of Agency & Fiduciary Duties
Procuring Cause
The agent's actions that directly lead to a completed real estate transaction.
Laws of Agency & Fiduciary Duties
Commission
A fee paid to a broker for services rendered, usually a percentage of the sale price.
Laws of Agency & Fiduciary Duties
Statute of Frauds
Law requiring certain contracts, like real estate commission agreements, to be in writing.
Laws of Agency & Fiduciary Duties
Anti-Trust Laws
Laws preventing monopolies and promoting competition, prohibiting commission fixing.
Laws of Agency & Fiduciary Duties
Cooperating Broker
The broker who finds the buyer for a property listed by another broker.
Laws of Agency & Fiduciary Duties
Independent Contractor
An agent who works under a broker but is responsible for their own taxes and expenses.
Laws of Agency & Fiduciary Duties
Commissions & Compensation
W-R-I-T-E: Written, Rate, Initiated, Terms, Enforceable. Remember these for a valid commission!
Laws of Agency & Fiduciary Duties
Commissions & Compensation
The California DRE exam frequently tests the 'in writing' requirement for commission agreements. Remember, per the Statute of Frauds, a real estate commission agreement MUST be in writing and signed by the party to be charged to be enforceable. Oral agreements are generally not enforceable.
Laws of Agency & Fiduciary Duties
Commissions & Compensation
Assuming an oral agreement for commission is enforceable.
Laws of Agency & Fiduciary Duties
Commissions & Compensation
Discussing commission rates with agents from other brokerages.
Laws of Agency & Fiduciary Duties
Commissions & Compensation
Failing to document all efforts that contribute to procuring cause.
Laws of Agency & Fiduciary Duties
Supervising Broker
Broker legally responsible for actions of salespersons.
Laws of Agency & Fiduciary Duties
Commingling
Mixing client funds with personal/brokerage funds (illegal).
Laws of Agency & Fiduciary Duties
Misrepresentation
False statement or concealment of a material fact.
Laws of Agency & Fiduciary Duties
Code of Ethics
Professional standards for REALTORS®, often exceeding law.
Laws of Agency & Fiduciary Duties
Fiduciary Duty
Legal obligation to act in client's best interest.
Laws of Agency & Fiduciary Duties
Broker Supervision & Ethical Conduct
SUPERvise: **S**et **U**p **P**olicies, **E**nsure **R**eview, **V**erify **I**ntegrity, **S**afeguard **E**thics.
Laws of Agency & Fiduciary Duties
Broker Supervision & Ethical Conduct
The DRE holds the employing broker directly responsible for the supervision of their salespersons. Remember that 'responsible' means the broker can face disciplinary action for an agent's violations, even without direct knowledge of the misconduct. Look for questions testing this direct accountability.
Laws of Agency & Fiduciary Duties
Broker Supervision & Ethical Conduct
Believing that a broker is only responsible for actions they directly approve.
Laws of Agency & Fiduciary Duties
Broker Supervision & Ethical Conduct
Confusing ethical violations with legal violations (though they often overlap).
Laws of Agency & Fiduciary Duties
Broker Supervision & Ethical Conduct
Assuming that 'material fact' only applies to physical defects of a property.
Laws of Agency & Fiduciary Duties
Sales Comparison Approach
Estimates value by comparing to recent sales of similar properties.
Property Valuation & Financial Analysis
Cost Approach
Estimates value by calculating replacement cost minus depreciation plus land value.
Property Valuation & Financial Analysis
Income Capitalization Approach
Estimates value based on the present value of future income.
Property Valuation & Financial Analysis
Comparable Sales (Comps)
Recently sold properties similar to the subject property.
Property Valuation & Financial Analysis
Depreciation
Loss in value from any cause (physical, functional, external).
Property Valuation & Financial Analysis
Net Operating Income (NOI)
Property's income after all operating expenses, before debt service.
Property Valuation & Financial Analysis
Capitalization Rate
Rate of return used to convert NOI into an estimated property value.
Property Valuation & Financial Analysis
Appraisal Approaches: Sales, Cost, Income
Think 'SCI' for the three approaches: Sales, Cost, Income. Or 'SCI-FI' if you imagine a futuristic appraiser!
Property Valuation & Financial Analysis
Appraisal Approaches: Sales, Cost, Income
The California DRE exam frequently tests your ability to match the correct appraisal approach to the type of property. Remember that the Sales Comparison Approach is generally preferred for residential properties and vacant land, the Cost Approach for new or special-purpose properties, and the Income Approach for income-producing properties.
Property Valuation & Financial Analysis
Appraisal Approaches: Sales, Cost, Income
Applying the Income Approach to a single-family owner-occupied home.
Property Valuation & Financial Analysis
Appraisal Approaches: Sales, Cost, Income
Forgetting to adjust comparable sales for differences from the subject property.
Property Valuation & Financial Analysis
Appraisal Approaches: Sales, Cost, Income
Ignoring depreciation when using the Cost Approach, especially for older buildings.
Property Valuation & Financial Analysis
Depreciation (Appraisal)
Loss in property value from any cause.
Property Valuation & Financial Analysis
Physical Deterioration
Loss in value due to wear, tear, and decay.
Property Valuation & Financial Analysis
Functional Obsolescence
Loss in value from outdated design or features.
Property Valuation & Financial Analysis
External Obsolescence
Loss in value from factors outside the property.
Property Valuation & Financial Analysis
Curable Depreciation
Economically feasible to repair or correct.
Property Valuation & Financial Analysis
Incurable Depreciation
Not economically feasible to repair or correct.
Property Valuation & Financial Analysis
Depreciation & Obsolescence in Real Estate
Think 'P-F-E' for the types of depreciation: 'P'hysical, 'F'unctional, 'E'xternal. 'P'ainful repairs, 'F'unny layouts, 'E'vil neighbors!
Property Valuation & Financial Analysis
Depreciation & Obsolescence in Real Estate
The California DRE exam frequently tests your ability to differentiate between the three types of depreciation. Look for keywords describing the cause: 'wear and tear' (physical), 'outdated design' (functional), or 'neighborhood decline' (external). Remember external obsolescence is almost always incurable.
Property Valuation & Financial Analysis
Depreciation & Obsolescence in Real Estate
Confusing appraisal depreciation with accounting (tax) depreciation.
Property Valuation & Financial Analysis
Depreciation & Obsolescence in Real Estate
Assuming all physical or functional issues are 'curable' without considering economic feasibility.
Property Valuation & Financial Analysis
Depreciation & Obsolescence in Real Estate
Forgetting that external obsolescence is almost always incurable because it's beyond the owner's control.
Property Valuation & Financial Analysis
Capitalization Rate (Cap Rate)
NOI divided by property value, indicating return.
Property Valuation & Financial Analysis
Gross Rent Multiplier (GRM)
Property price divided by gross annual rental income.
Property Valuation & Financial Analysis
Income Approach
Valuation method based on expected future income.
Property Valuation & Financial Analysis
Operating Expenses
Costs to run a property, excluding debt service/taxes.
Property Valuation & Financial Analysis
Debt Service
Payments made on a loan, not included in NOI.
Property Valuation & Financial Analysis
Capitalization Rate & Gross Rent Multiplier
Think 'NOI / Value = CAP' for Cap Rate, and 'Price / Gross Rent = GRM' for the Gross Rent Multiplier. CAP is for NET, GRM is for GROSS.
Property Valuation & Financial Analysis
Capitalization Rate & Gross Rent Multiplier
The California DRE exam expects you to know the formulas for both Cap Rate and GRM, and when each is appropriately used. Remember that NOI excludes debt service and income taxes. GRM is for gross income, Cap Rate for net.
Property Valuation & Financial Analysis
Capitalization Rate & Gross Rent Multiplier
Confusing gross income with net operating income (NOI) when calculating cap rates.
Property Valuation & Financial Analysis
Capitalization Rate & Gross Rent Multiplier
Using GRM for complex commercial properties where operating expenses vary significantly.
Property Valuation & Financial Analysis
Capitalization Rate & Gross Rent Multiplier
Including debt service (mortgage payments) in the calculation of Net Operating Income (NOI).
Property Valuation & Financial Analysis
Percentage
A rate, number, or amount in each hundred.
Property Valuation & Financial Analysis
Assessed Value
Value placed on property by a public tax assessor for taxation.
Property Valuation & Financial Analysis
Ad Valorem
Latin for 'according to value,' used for property taxes.
Property Valuation & Financial Analysis
Acre
A unit of land area equal to 43,560 square feet.
Property Valuation & Financial Analysis
Proration
Division of expenses or income between buyer and seller at closing.
Property Valuation & Financial Analysis
Area
The extent or measurement of a surface or piece of land.
Property Valuation & Financial Analysis
Real Estate Math Fundamentals
To remember the T-Bar formula: 'Part Over Whole Times Rate' – just draw a T, put Part on top, and Whole and Rate on the bottom.
Property Valuation & Financial Analysis
Real Estate Math Fundamentals
The California DRE exam frequently tests on commission calculations, property tax under Proposition 13 (1% base rate), and acreage conversions (1 acre = 43,560 sq ft). Be precise with these numbers.
Property Valuation & Financial Analysis
Real Estate Math Fundamentals
Confusing assessed value with market value, especially for property tax calculations in California.
Property Valuation & Financial Analysis
Real Estate Math Fundamentals
Incorrectly converting percentages to decimals (e.g., using 5 instead of 0.05 for 5%).
Property Valuation & Financial Analysis
Real Estate Math Fundamentals
Forgetting to account for all splits when calculating net commission for an agent.
Property Valuation & Financial Analysis
Conventional Loan
Not government-insured; higher down payment often required.
Financing Real Estate
FHA Loan
Government-insured loan with low down payment, requires MIP.
Financing Real Estate
VA Loan
Guaranteed by VA for eligible veterans, no down payment.
Financing Real Estate
Fixed-Rate Loan
Interest rate remains constant throughout the loan term.
Financing Real Estate
Adjustable-Rate Mortgage (ARM)
Interest rate changes periodically, payments fluctuate.
Financing Real Estate
Primary Mortgage Market
Where loans are originated (banks, credit unions, etc.).
Financing Real Estate
Secondary Mortgage Market
Where existing loans are bought and sold (Fannie Mae, Freddie Mac).
Financing Real Estate
Mortgage-Backed Securities (MBS)
Bundles of mortgages sold to investors.
Financing Real Estate
Loan Types & Sources of Financing
To remember the government-backed agencies: 'Fannie and Freddie Buy Mortgages, Ginnie Guarantees Government ones.'
Financing Real Estate
Loan Types & Sources of Financing
The California DRE exam expects you to know the basic characteristics and purposes of FHA, VA, and conventional loans. Pay attention to which agency insures or guarantees which loan type, and the general requirements like down payment differences. Also, understand the distinction between mortgage bankers and mortgage brokers.
Financing Real Estate
Loan Types & Sources of Financing
Confusing the roles of mortgage bankers (originate and fund) and mortgage brokers (connect borrowers to lenders).
Financing Real Estate
Loan Types & Sources of Financing
Assuming all government-backed loans are the same; FHA, VA, and USDA have distinct features.
Financing Real Estate
Loan Types & Sources of Financing
Forgetting that the secondary market provides liquidity by buying existing loans, not originating new ones.
Financing Real Estate
Trust Deed
Instrument securing a loan, involving trustor, beneficiary, trustee.
Financing Real Estate
Mortgage
Two-party instrument securing a loan; borrower and lender.
Financing Real Estate
Trustor
The borrower in a trust deed.
Financing Real Estate
Beneficiary
The lender in a trust deed.
Financing Real Estate
Trustee
Neutral third party holding bare legal title in a trust deed.
Financing Real Estate
Non-Judicial Foreclosure
Foreclosure without court intervention, via trustee's sale.
Financing Real Estate
Notice of Default (NOD)
First step in non-judicial foreclosure, recorded by trustee.
Financing Real Estate
Deficiency Judgment
Court order for borrower to pay remaining debt after sale.
Financing Real Estate
Trust Deeds, Mortgages & Foreclosure
Think of the 'T' in Trust Deed for 'Three Parties' (Trustor, Beneficiary, Trustee). For 'M' in Mortgage, remember 'Me and My Lender' (Mortgagor, Mortgagee).
Financing Real Estate
Trust Deeds, Mortgages & Foreclosure
The California DRE exam frequently tests the distinction between trust deeds and mortgages, especially regarding the parties involved and the foreclosure process. Remember that trust deeds are standard in California and primarily use non-judicial foreclosure, which generally prohibits deficiency judgments. Judicial foreclosure, common for mortgages, allows for deficiency judgments and a right of redemption.
Financing Real Estate
Trust Deeds, Mortgages & Foreclosure
Confusing the parties in a trust deed (e.g., thinking the beneficiary is the borrower).
Financing Real Estate
Trust Deeds, Mortgages & Foreclosure
Believing that all foreclosures in California require a court order.
Financing Real Estate
Trust Deeds, Mortgages & Foreclosure
Assuming a deficiency judgment is always possible after any type of foreclosure in California.
Financing Real Estate
RESPA
Real Estate Settlement Procedures Act; protects consumers from abusive settlement practices.
Financing Real Estate
TILA
Truth in Lending Act; promotes informed use of credit by requiring cost disclosures.
Financing Real Estate
TRID
TILA-RESPA Integrated Disclosure rule; combines and simplifies mortgage disclosures.
Financing Real Estate
Loan Estimate (LE)
Disclosure of estimated loan costs and terms, provided within 3 days of application.
Financing Real Estate
Closing Disclosure (CD)
Final statement of all loan costs and terms, provided 3 days before closing.
Financing Real Estate
Annual Percentage Rate (APR)
The true annual cost of borrowing, including interest and certain fees.
Financing Real Estate
Kickback
Illegal payment for referring business, prohibited by RESPA.
Financing Real Estate
RESPA, TILA & Lending Regulations
Think 'RESPA protects RESidents from PAying too much.' And 'TILA is Truth In Lending Annual (Percentage Rate).' TRID integrates them!
Financing Real Estate
RESPA, TILA & Lending Regulations
The California DRE exam expects you to know the federal laws RESPA and TILA, and their integrated TRID rule. Memorize the 3-day delivery requirements for the Loan Estimate and Closing Disclosure. Also, be aware that RESPA's anti-kickback rules are strictly enforced.
Financing Real Estate
RESPA, TILA & Lending Regulations
Confusing the purpose of RESPA (settlement costs, anti-kickbacks) with TILA (cost of credit, APR).
Financing Real Estate
RESPA, TILA & Lending Regulations
Forgetting the 3-business-day rule for delivering the Loan Estimate and Closing Disclosure.
Financing Real Estate
RESPA, TILA & Lending Regulations
Believing that a 'small' referral fee is acceptable if it doesn't directly increase the client's cost; RESPA prohibits all unearned fees.
Financing Real Estate
Loan Points
Fees paid to the lender at closing, each point equals 1% of the loan amount.
Financing Real Estate
Discount Points
Points paid to reduce the interest rate over the life of the loan.
Financing Real Estate
Origination Points
Fees charged by the lender to cover administrative costs of processing a loan.
Financing Real Estate
Amortization
Gradual repayment of a debt over time through regular principal and interest payments.
Financing Real Estate
Fully Amortized Loan
Loan where regular payments completely pay off principal and interest by term end.
Financing Real Estate
Interest
The cost of borrowing money, usually expressed as a percentage rate.
Financing Real Estate
Loan Points & Amortization
P.O.I.N.T.S. - 'P'ercent 'O'f 'I'nterest 'N'egotiated 'T'o 'S'ave (discount points) or 'S'ervice (origination points).
Financing Real Estate
Loan Points & Amortization
The California DRE exam often tests on the calculation of loan points. Remember that 1 point always equals 1% of the loan amount, not the purchase price. Also, understand the difference in purpose between discount points (rate reduction) and origination points (lender fees).
Financing Real Estate
Loan Points & Amortization
Confusing loan points with a percentage of the purchase price instead of the loan amount.
Financing Real Estate
Loan Points & Amortization
Not understanding that discount points reduce the interest rate, while origination points cover lender's administrative costs.
Financing Real Estate
Loan Points & Amortization
Believing that early loan payments significantly reduce the principal balance due to the interest-heavy nature of amortization.
Financing Real Estate
Deed
Written instrument conveying real property title.
Transferring Property
Grantor
Party conveying title to real property.
Transferring Property
Grantee
Party receiving title to real property.
Transferring Property
Delivery
Grantor's intent to pass title immediately.
Transferring Property
Acceptance
Grantee's agreement to receive title.
Transferring Property
Legal Description
Precise identification of a property's boundaries.
Transferring Property
Deeds & Methods of Conveyance
To remember the essential elements of a deed, think of 'G-G-G-P-S-D-A': Grantor, Grantee, Granting clause, Property description, Signature, Delivery, Acceptance.
Transferring Property
Deeds & Methods of Conveyance
The California exam frequently tests the essential elements of a valid deed, especially that acknowledgment (notarization) is required for recording but not for validity between parties. Also, know the specific implied warranties of a Grant Deed in California.
Transferring Property
Deeds & Methods of Conveyance
Confusing acknowledgment (notarization) with a requirement for a valid deed; it's for recording.
Transferring Property
Deeds & Methods of Conveyance
Believing a Quitclaim Deed offers the same protection as a Grant Deed.
Transferring Property
Deeds & Methods of Conveyance
Forgetting that both delivery AND acceptance are necessary for title transfer.
Transferring Property
Escrow Holder
Neutral party managing escrow process per instructions.
Transferring Property
Title Insurance
Protects against financial loss from title defects.
Transferring Property
Owner's Policy
Title insurance protecting the buyer's equity in the property.
Transferring Property
Lender's Policy
Title insurance protecting the lender's loan interest.
Transferring Property
CLTA Policy
Standard owner's title policy covering recorded defects.
Transferring Property
ALTA Policy
Expanded title policy covering recorded and unrecorded defects.
Transferring Property
Escrow & Title Insurance
Think of 'ESCROW' as 'Every Step Carefully Reviewed On Watch'. The escrow holder watches over every step.
Transferring Property
Escrow & Title Insurance
Memorize the standard practice for who pays for title insurance in California: the seller typically pays for the owner's title policy, and the buyer typically pays for the lender's title policy (if required). Also, know that an escrow holder must be a neutral third party.
Transferring Property
Escrow & Title Insurance
Confusing the escrow holder's role with that of a real estate agent; the escrow holder is neutral.
Transferring Property
Escrow & Title Insurance
Believing title insurance protects against future events or property damage, instead of past title defects.
Transferring Property
Escrow & Title Insurance
Not understanding the difference in coverage between a CLTA and an ALTA title policy.
Transferring Property
Recording
Filing a document with the County Recorder to provide public notice.
Transferring Property
Constructive Notice
Legal presumption that everyone knows about a recorded document.
Transferring Property
County Recorder
Office responsible for maintaining public records of real estate.
Transferring Property
Ad Valorem Tax
A tax based on the assessed value of property.
Transferring Property
First in Time, First in Right
Principle that the first recorded document generally has priority.
Transferring Property
Delinquent Tax
Property tax that is past due, incurring penalties.
Transferring Property
Recording Documents & Property Taxes
To remember property tax deadlines: 'No Darn Fooling Around' (Nov 1st, Dec 10th; Feb 1st, Apr 10th).
Transferring Property
Recording Documents & Property Taxes
The California DRE exam frequently tests the property tax payment deadlines: 'No Darn Fooling Around' (November, December, February, April) for the due and delinquent dates. Remember the 1st and 10th of those months.
Transferring Property
Recording Documents & Property Taxes
Assuming an unrecorded document provides full legal protection against all parties.
Transferring Property
Recording Documents & Property Taxes
Confusing the due dates for property tax installments with their delinquent dates.
Transferring Property
Recording Documents & Property Taxes
Believing that all real estate documents must be recorded to be valid between the immediate parties.
Transferring Property
Documentary Transfer Tax (DTT)
Tax on real property transfers, paid to county/city.
Transferring Property
Consideration
The value exchanged in a real estate transaction.
Transferring Property
Proposition 13
California law limiting property tax to 1% of assessed value.
Transferring Property
Full Cash Value
Property value for tax purposes; 1975 value or purchase price.
Transferring Property
Base Year Value
The initial assessed value from which Prop 13 increases are calculated.
Transferring Property
Change in Ownership
Event triggering property reassessment to current market value.
Transferring Property
Documentary Transfer Tax & Prop 13
DTT: 'Dollars To Transfer' – reminds you it's a tax on transfers. Prop 13: '1% for 2%' – 1% tax rate, 2% max annual increase.
Transferring Property
Documentary Transfer Tax & Prop 13
The exam often tests the DTT rate ($0.55 per $500) and the maximum annual increase for Prop 13 (2%). Memorize the 1% of full cash value for the base tax rate. Be aware of common exemptions for DTT and Prop 13 reassessment.
Transferring Property
Documentary Transfer Tax & Prop 13
Forgetting to include city transfer tax in DTT calculations.
Transferring Property
Documentary Transfer Tax & Prop 13
Confusing the seller's current property tax with what a new buyer will pay under Prop 13.
Transferring Property
Documentary Transfer Tax & Prop 13
Not knowing the specific exemptions to Prop 13 reassessment (e.g., parent-child transfers).
Transferring Property
Documentary Transfer Tax & Prop 13
Incorrectly calculating DTT by not rounding up to the nearest $500 increment.
Transferring Property
TDS
Transfer Disclosure Statement; seller's disclosure of known defects.
Real Estate Practice & Disclosures
NHD
Natural Hazard Disclosure; report on property's natural hazard zones.
Real Estate Practice & Disclosures
Agent's Visual Inspection
Agent's duty to disclose visible material facts.
Real Estate Practice & Disclosures
Rescission Right
Buyer's right to cancel an offer within a set period.
Real Estate Practice & Disclosures
Lead-Based Paint
Hazardous paint in homes built before 1978; requires disclosure.
Real Estate Practice & Disclosures
Asbestos
Hazardous material found in older building components.
Real Estate Practice & Disclosures
TDS, NHD & Environmental Disclosures
Think 'TDS = Truthful Disclosure by Seller' and 'NHD = Natural Hazards Disclosed'.
Real Estate Practice & Disclosures
TDS, NHD & Environmental Disclosures
The California DRE exam frequently tests the specific timelines for rescission rights related to the TDS: 3 days after personal delivery, 5 days after mail delivery. Memorize these exact numbers!
Real Estate Practice & Disclosures
TDS, NHD & Environmental Disclosures
Assuming the seller's 'no knowledge' response on a TDS absolves the agent of their visual inspection duty.
Real Estate Practice & Disclosures
TDS, NHD & Environmental Disclosures
Failing to provide the TDS or NHD within the legally required timeframe, triggering buyer rescission rights.
Real Estate Practice & Disclosures
TDS, NHD & Environmental Disclosures
Not advising buyers to get their own inspections, even after receiving disclosures.
Real Estate Practice & Disclosures
Fair Housing Act
Federal law prohibiting housing discrimination based on 7 protected classes.
Real Estate Practice & Disclosures
Unruh Civil Rights Act
California law prohibiting discrimination by businesses based on many characteristics.
Real Estate Practice & Disclosures
FEHA
California law prohibiting housing and employment discrimination, broad protections.
Real Estate Practice & Disclosures
Steering
Directing clients to or from neighborhoods based on protected class.
Real Estate Practice & Disclosures
Blockbusting
Inducing sales by exploiting fears of changing neighborhood demographics.
Real Estate Practice & Disclosures
Redlining
Denying services to specific areas based on protected class characteristics.
Real Estate Practice & Disclosures
Familial Status
Protected class including families with children under 18 or pregnant women.
Real Estate Practice & Disclosures
Protected Class
A group of people legally protected from discrimination.
Real Estate Practice & Disclosures
Fair Housing Laws & Practices
Remember 'FRSH CRN' for the original Federal Fair Housing Act protected classes: Familial status, Race, Sex, Handicap (Disability), Color, Religion, National origin.
Real Estate Practice & Disclosures
Fair Housing Laws & Practices
Memorize the additional protected classes under California law (Unruh and FEHA) beyond the federal Fair Housing Act. The exam often tests your knowledge of these expanded state protections, such as sexual orientation, marital status, and source of income.
Real Estate Practice & Disclosures
Fair Housing Laws & Practices
Assuming fair housing only applies to sales, not rentals or financing.
Real Estate Practice & Disclosures
Fair Housing Laws & Practices
Unintentionally steering clients by making assumptions about their preferences based on their background.
Real Estate Practice & Disclosures
Fair Housing Laws & Practices
Not knowing the expanded protected classes under California law, which are broader than federal law.
Real Estate Practice & Disclosures
Trust Funds
Money or valuables held by a licensee for a client.
Real Estate Practice & Disclosures
Conversion
Illegal misappropriation of client funds for personal use.
Real Estate Practice & Disclosures
Trust Account
A special bank account for holding client funds, separate from broker's own.
Real Estate Practice & Disclosures
Reconciliation
Monthly process of verifying trust account balances and records.
Real Estate Practice & Disclosures
Blind Ad
An advertisement that does not disclose the advertiser is a licensee.
Real Estate Practice & Disclosures
DRE License Number
Required identifier for all real estate licensees in advertising.
Real Estate Practice & Disclosures
Trust Fund Handling & Advertising Rules
TRUST: T-hree days, R-ecords, U-nmingled, S-eparate, T-ruthful ads.
Real Estate Practice & Disclosures
Trust Fund Handling & Advertising Rules
Memorize the 'three business days' rule for depositing trust funds. Also, for advertising, always include the broker's name and DRE license number, and avoid 'blind ads' at all costs. The DRE takes these violations very seriously.
Real Estate Practice & Disclosures
Trust Fund Handling & Advertising Rules
Forgetting to deposit trust funds within three business days.
Real Estate Practice & Disclosures
Trust Fund Handling & Advertising Rules
Mixing personal funds with client trust funds (commingling).
Real Estate Practice & Disclosures
Trust Fund Handling & Advertising Rules
Running an advertisement without the broker's name and DRE license number.
Real Estate Practice & Disclosures
Trust Fund Handling & Advertising Rules
Salespersons depositing funds directly into an escrow account instead of giving them to their broker first.
Real Estate Practice & Disclosures
Real Estate Commissioner
Head of the DRE, appointed by the Governor.
Real Estate Practice & Disclosures
Salesperson License
Allows real estate activity under broker supervision.
Real Estate Practice & Disclosures
Broker License
Allows independent operation and salesperson supervision.
Real Estate Practice & Disclosures
Recovery Fund
Compensates public for licensee's fraud/dishonesty.
Real Estate Practice & Disclosures
License Law & DRE Regulations
DRE: Don't Risk Everything! Follow the rules to keep your license.
Real Estate Practice & Disclosures
License Law & DRE Regulations
The California DRE is the primary regulatory body. Memorize that the Real Estate Commissioner is appointed by the Governor. Know the difference between a salesperson (supervised) and a broker (independent). Disclosing material facts is a critical and frequently tested concept.
Real Estate Practice & Disclosures
License Law & DRE Regulations
Operating independently as a salesperson without a supervising broker.
Real Estate Practice & Disclosures
License Law & DRE Regulations
Failing to disclose a known material fact about a property.
Real Estate Practice & Disclosures