SAMPLE PROGRAM

The purpose of this sample program is to give you an insight into the subject matter and vocabulary that you will be tested-on when taking your actual State License Examination and to additionally introduce you to the study process involved in your preparation for that exam.

To start, simply read the information provided in AREA I through AREA VII and then complete the Sample Test. When you have finished the test you may find that you have missed some of the answers to the questions. If so, this would most likely be due to your having only had the opportunity to have read the material one time.

This the very reason why we have developed a study program that not only makes available to you the States "Top Instructor" but also gives you 24-hour a day, 7 day a week access to the course study material. This will provide you with the repetition that we have found to be absolutely crucial in order to properly understand and memorize this large scope of subject matter that you will eventually be tested on.

I. PROPERTY OWNERSHIP

LAND (Boundaries)

1. Surface: The area on the surface of the Earth.

2. Material beneath the surface: Extends to the center of the Earth. Reasonable rights to surface entry implied unless entry is expressly limited to a footage below the surface.

3. Airspace: Infinite height. Due to modern changes it is subject to air travel and may be used only to a "Reasonable And Enjoyable Height"

II. ENCUMBRANCES

HOMESTEADING - DECLARATION OF HOMESTEAD
(Not an encumbrance - Provides protection against the forced sale of a residence)

Purpose: A California Law that allows an owner to protect their home from foreclosure sale resulting from unsecured judgment liens up to specified limited sums.

Eligible Property (Only one residence can be homesteaded at a time)

Will Terminate a Homestead 1. Sale of property (Title transferred to another). 2. Filing a "Declaration Of Abandonment of Homestead".

Will Not Terminate a Homestead 1. Improvements partially or totally destroyed by fire. 2. Moving from the premises e.g. - Property not sold, but leased to another .

III. REAL ESTATE LAW

THE DEPARTMENT OF REAL ESTATE

An agency of the Department of Business, Transportation, and Housing Agency.

Purpose: To enforce California Real Estate Laws .

Maintains Real Estate Accounts For Education, Research and Recovery.

The Department of Real Estate is a self supporting agency, supported by collected fees . Of fees collected, a portion is required to be placed into two separate accounts:

1. Education & Research Fund
Earmarks funds for real estate Education and Research.

2. Recovery Fund
Underwrites payment of uncollectable judgments
against insolvent licensees for amounts limited to:
    a. $20,000 per each individual claim
    b.$100,000 maximum (total claims) per licensee

IV. LAWS OF AGENCY

CREATING A VALID CONTRACT

Four Essential Elements Required

1. Parties Capable Of Contracting
2. Mutual Consent
3. Lawful Object
4. Sufficient Consideration

V. VALUATION AND MARKET ANALYSIS

FOUR ELEMENTS THAT INFLUENCE VALUE

(Value and Worth have the same meaning)

A. UTILITY (Most Important)

To have value, an item must have a use. The use to which an item is put which produces the "Greatest Net Return " is known as it's Highest and Best Use .

B. SCARCITY

A shortage of available supply compared to demand for item.

C. DEMAND

The desire to possess. In order to be effective it must be backed by Purchasing Power .

D. TRANSFERABILITY (Critical to value, but least important of the four)

The condition and capability of the title to be conveyed.

NOTE: Cost is not an element of value. Cost represents what was paid for an item.
Example: Buyer paid $3000 (Cost) in 1931 and resold for $120,000 (Value) in 1993.

VI. FINANCING

TWO TYPES OF LENDERS - Institutional vs. Non-Institutional

Institutional
Commercial Banks (State or Nationally chartered)
Savings and Loan Associations (State or Federally chartered)
Life Insurance Companies
Mutual Savings Banks (Located Predominantly in Northeastern U.S.)
Credit Unions

Non-Institutional
Thrift Companies
Endowed Universities
Private Investors (Individuals or groups. e.g. - sellers, brokers)
Pension Funds
Mortgage Companies - Only considered lenders if they loan money directly to the borrower.

VII. PERSONAL PROPERTY

That property which is not real property.

A. Personal property can be Tangible or Intangible

1. Tangible: Items that may be physically possessed.
2. Intangible: Items having no physical substance.
          e.g. - Rights given by contract, labor, etc.

B. Title is transferred by: Delivery of possession C. Evidence of title transfer: Bill of Sale D. Security interest created by use of a: Security Agreement E. Security interest perfected by filing a: Financing Statement

SAMPLE TEST

Area I

The classic definition of boundaries of real property is:
a. a reasonable distance down, unlimited airspace
b. pratical or reasonable use of the earth and unlimited airspace
c. surface area indicated on a map
d. use of airspace to a reasonable and enjoyable height and extended to center of the Earth

Area II

Of the following, which could automatically terminate a Homestead?
a. moving from the property
b. move from California
c. house partially destroyed by fire homestead
d. prior homestead recorded

Area III

The main purpose of the Department of Real Estate's Recovery Fund is:
a. to develop education in the real estate field
b. for brokers to receive uncollectable commissions
c. for the public to collect damages against a licensee
d. for the public to collect a limited amount of damages from insolvent licensee

Area IV

In a contract there are essential elements that must be present to create a valid and binding contract. All of the following would describe one of these elements, except:
a. proper writing
b. capability
c. mutual consent
d. lawful object

Area V

Of the four major characteristics that create value, which would be the least important?
a. utility
b. scarcity
c. demand
d. Transferabliity

Area VI

Concerning institutional lenders. All the following are incorrect, except:
a. pension funds
b. insurance companies
c. universities
d. mortgage companies

Area VII

The transfer of personal property is evidenced by the use of a:
a. Chattel Mortgage
b. Land Contract of Sale
c. Deed
d. Bill of Sale

Fill-in correct answer…. I. [ ] II. [ ] III. [ ] IV. [ ] V. [ ] VI. [ ] VII. [ ]

ANSWERS

1. (d) This is the best description of the four answers. None are complete. Prior to the invention of the airplane, the definition included indefinite ownership of the airspace into infinity. The airways are now a public domain. Therefore today's ownership of airspace has limited the use to "A Reasonable and Enjoyable Height." Also owned as part of the real property is the surface of the earth and the material beneath the surface to the center of the earth.

2. (d) Only one property at a time can be homesteaded! A prior homestead would invalidate a second one recorded, unless the first one should be released prior through a DECLARATION OF ABANDONMENT. Moving from the property does not terminate a homestead as long as you have the intention of returning to the property to use it some time in the future. Destruction of the improvements also does not terminate a homestead. However, selling (transfer of ownership) DOES TERMINATE THE HOMESTEAD.

3. (d) This answer identifies the purpose of the Recovery Fund and of the four is the most complete. The current protections are $20,000 per claim and $100,000 coverage per licensee. The claimant must have filed an action against the licensee, have been rendered a judgment, had attempted to collect and then had proven the judgment was uncollectable due to insolvency of the licensee. Then the claimant must have filed a proper claim with the proper department.

4. (a) Relating to the four essentials to create a valid contract. We need…Competent Parties (capacity), Mutual Consent, Legal Objective (lawful Object) and the fourth essential is CONSIDERATION , not Proper Writing.

5. (d) Statement of fact. TRANSFERBILITY is the LEAST IMPORTANT of the four characteristics of value. (a) UTILITY is the MOST IMPORTANT of the four. (c) DEMAND is the characteristic that must be backed or implemented by "Purchasing Power" to be effective.

6. (b) An INSURANCE COMPANY is the only organization considered to be an INSTITUTIONAL LENDER of the four choices shown. PENSION FUNDS, UNIVERSITIES and MORTGAGE COMPANIES are classified as NON-INSTITUTIONAL LENDERS.

7. (d) A BILL OF SALE is the receipt (evidences the transfer) that conveys PERSONAL PROPERTY. (a) A CHATTEL MORTGAGE was an instrument that held personal property as security for a loan, which has been replaced by the use of the Security Agreement. (b) A LAND CONTRACT OF SALE is a personal agreement regarding the conditions under which a future transfer of real property may occur. (c) A DEED evidences the conveyance of real property.