Question 1
Under California DRE regulations, which of the following describes the proper handling of a buyer's earnest money deposit by a real estate broker when the broker does not place the funds into a trust account?
- A. The broker may give the funds directly to the seller or into escrow if the parties have agreed in writing and the funds are not commingled with the broker's own money. ✓ Answer
- B. The broker must always deposit the funds into the broker's trust account first before disbursing to escrow or the seller.
- C. The broker may hold the funds in cash in a locked safe at the office until close of escrow.
- D. The broker must forward all earnest money deposits to the DRE for safekeeping until escrow is opened.
Explanation: Under California Commissioner's Regulation 2832(a), a broker who receives trust funds is not required to deposit them in a trust account if the broker instead delivers the funds to the principal, to a neutral escrow, or to a specified third party as directed in writing by the principal. This written authorization allows funds to bypass the trust account entirely without a regulatory violation.
Question 2
Maria's California real estate salesperson license was issued four years ago and expires next month. She has not received any renewal notice from the Department of Real Estate. Which of the following correctly describes what Maria must do to renew her license on time?
- A. She must retake and pass the salesperson qualifying examination and pay the renewal fee, because a new four-year term requires re-demonstrating competency.
- B. She may wait to act until the DRE mails her the renewal form, because the license cannot expire until the Department has given written notice.
- C. She must submit the renewal fee together with evidence that she has completed the required continuing education, and her failure to receive a notice from the DRE does not excuse a late renewal. ✓ Answer
- D. She only needs to pay the renewal fee, because continuing education is required for broker renewals but not for salesperson renewals.
Explanation: Real estate licenses in California are issued for four-year terms and are renewed without examination. Renewal requires the appropriate fee and evidence that the licensee has completed the required continuing education. The DRE mails a courtesy renewal form approximately 90 days before expiration, but non-receipt of that notice does not relieve the licensee of the responsibility to renew on time. Option A is wrong because no examination is required for renewal; Option B is wrong because expiration is not tolled by a missing courtesy notice; Option D is wrong because continuing education applies to salesperson renewals as well as broker renewals.
Question 3
A California DRE licensee is convicted of a felony that is substantially related to the qualifications, functions, or duties of a real estate licensee. Under California law, which of the following statements best describes the effect of that conviction on the licensee's license?
- A. The conviction is grounds for suspension or revocation of the license, but the DRE must still follow due process procedures before taking disciplinary action. ✓ Answer
- B. The license is automatically revoked upon entry of the criminal conviction without any DRE proceeding.
- C. The conviction is grounds for discipline only after the licensee has exhausted all criminal appeals.
- D. The DRE may only discipline the licensee after the conviction is at least one year old.
Explanation: Under California Business and Professions Code Sections 490 and 10177, a substantially related felony conviction is grounds for license discipline, but the DRE must still provide due process — meaning it must file an accusation and afford the licensee an administrative hearing before the license is suspended or revoked. The license does not self-revoke automatically upon conviction.
Question 4
Under California DRE regulations, if a real estate broker fails to maintain the required written employment agreements with their affiliated salespersons, which of the following best describes the consequence?
- A. The broker may be subject to DRE disciplinary action, including suspension or revocation of their broker license. ✓ Answer
- B. The salespersons' licenses are automatically suspended until written agreements are executed.
- C. The broker is only required to pay an administrative fine; no other disciplinary action is authorized.
- D. There is no regulatory consequence unless a client files a written complaint with the DRE.
Explanation: California Commissioner's Regulation 2726 requires a broker to have a written contract with each salesperson, addressing supervision, compensation, and duties. Failure to maintain these agreements violates DRE rules and exposes the broker to disciplinary action, including license suspension or revocation under the Business and Professions Code. The salespersons' own licenses are not automatically suspended for the broker's failure.
Question 5
Under California law, a licensed real estate salesperson who wishes to engage in mortgage loan activities must do which of the following in addition to holding a salesperson license?
- A. Work under and through a licensed real estate broker who has obtained a California Finance Lenders Law license or acts as a mortgage broker under the broker's real estate license authority. ✓ Answer
- B. Obtain a separate California Department of Financial Protection and Innovation (DFPI) license independently of any broker.
- C. Register directly with the Nationwide Multistate Licensing System (NMLS) as an independent mortgage loan originator without a supervising broker.
- D. No additional license or registration is required; a real estate salesperson license automatically authorizes mortgage loan origination.
Explanation: A California real estate salesperson may conduct mortgage loan activity only through a properly licensed employing broker; the salesperson cannot act independently. For residential mortgage loan origination, however, the salesperson must also obtain and maintain an individual MLO license endorsement through NMLS and be properly sponsored/authorized under the broker. The broker's authority alone is not enough for residential MLO activity.
Question 6
Under the California Business and Professions Code, which of the following best describes the DRE's authority to discipline a licensee for acts committed prior to obtaining their real estate license?
- A. The DRE may discipline or deny renewal of a license based on pre-licensing conduct if that conduct would have been grounds for denial of the original application. ✓ Answer
- B. The DRE has no authority over conduct that occurred before the license was issued, as its jurisdiction begins on the date of licensure.
- C. The DRE may only consider pre-licensing conduct if a criminal conviction resulted from that conduct.
- D. The DRE may consider pre-licensing conduct only during the first renewal cycle and not thereafter.
Explanation: California Business and Professions Code Section 480 authorizes the DRE to deny, suspend, or revoke a license based on conduct occurring prior to licensure if that conduct constitutes grounds that would have warranted denial of the original application. The DRE's authority is not strictly limited to post-licensure conduct.