Corporate Real Estate License +16California · Real Estate · English

A corporation may be licensed as a real estate broker if at least one officer is a qualified real estate broker acting as the designated broker-officer. The corporation must submit the license application, fee, and a Certificate of Status from the Secretary of State issued within 30 days prior to filing.

• ✓At least one officer must be a qualified broker acting as the designated broker-officer
• ✓A Certificate of Status from the Secretary of State (within 30 days) is required
• ✓A Corporation License Application and fee are required for each broker-officer license

A broker-officer license and an individual broker license are separate entities and not transferable. An individual can hold broker-officer licenses for more than one corporation, but a separate application and fee is required for each. A qualified individual may be a broker-officer without holding an individual broker license.

• ✓Individual broker and broker-officer licenses are separate and non-transferable
• ✓Status as broker-officer of one corporation is not transferable to another corporation
• ✓A person may hold a broker-officer license without an individual broker license

The designated officer must submit a Corporation Background Statement (RE 212) for themselves and specified officers/shareholders if subject to conditions in Regulation 2746. Foreign corporations must submit a Certificate of Qualification or Good Standing executed within 30 days prior to application. To use another name, a Fictitious Business Name Statement is required.

• ✓Corporation Background Statement (RE 212) is required per Regulation 2746 conditions
• ✓Foreign corporations need a Certificate of Qualification/Good Standing executed within 30 days
• ✓A copy of the Fictitious Business Name Statement filed with the county clerk is required for a dba

While more than one answer may have some element of correctness, the examinee must eliminate incorrect responses and choose the best/correct answer. Examinees should be alert for negatively phrased questions such as 'all of the following except' or 'which of the following are not,' where the answer called for is the incorrect statement.

• ✓Choose the single best answer by eliminating incorrect responses
• ✓Watch for negatively phrased questions where the exception or incorrect statement is the answer

Test items are phrased to measure the applicant's knowledge without ambiguity. No question is meant to be a trick or catch question, and words are used according to their commonly accepted meanings. All test items are multiple-choice.

• ✓No exam question is intended as a trick or catch question
• ✓Words are used according to their commonly accepted meanings
• ✓All exam items are multiple-choice

LLCs, LLPs, corporations, and trusts may hold title to real property. LLCs are organized like corporations but taxed like partnerships (Corp. Code 17000 et seq.). A real estate broker may NOT license an LLC to perform acts requiring a real estate license (Corp. Code 17375), but may license corporations, and partnerships can act through licensed broker-partners.

• ✓A broker may not license an LLC to perform licensed real estate acts (Corp. Code 17375)
• ✓Brokers may license corporations; partnerships act through licensed broker-partners
• ✓Trusts commonly hold title as family or inter vivos trusts; brokers should not advise principals on transferring trust title (unauthorized practice of law)

Tenancy in partnership exists when two or more persons own property as partners for partnership purposes. A partner has equal right to possess partnership property only for partnership purposes; a partner's right is not individually assignable, not subject to attachment except on a partnership claim, and vests in surviving partners on death. A partner's interest (share of profits/surplus) is governed by community property rules for some purposes.

• ✓Partnership property may be possessed only for partnership purposes
• ✓A partner's right in specific property is not assignable except with all partners' rights
• ✓On death, a partner's right in specific partnership property vests in surviving partners
• ✓Each partner has unlimited liability for firm debts, but profit/loss shares may be by agreement

Partnerships may be structured as general/co-partnerships (equal management) or limited partnerships (general partners manage; limited partners give up control for limited liability). The Uniform Partnership Act of 1994 (Corp. Code 16100 et seq.) governs general partnerships; the Uniform Limited Partnership Act of 2008 (Corp. Code 15900) applies to limited partnerships.

• ✓General/co-partnership = equal management and control among partners
• ✓Limited partnership = general partners manage; limited partners have limited liability but no control
• ✓Understanding which statutes have been repealed vs. remain operative is essential

Every executory contract requires consideration - a benefit conferred or detriment suffered, an act of forbearance, or a change in legal relations. Consideration is the price bargained and paid for a promise. It must have some value but need not be adequate; an option may be given for a nominal sum. Only in specific performance actions is adequacy important.

• ✓Consideration may be a benefit conferred or a detriment suffered
• ✓Consideration must have value but need not be adequate for enforceability
• ✓Adequate consideration is required only for the equitable remedy of specific performance
• ✓Gross inadequacy may indicate fraud or undue influence

Properly drawn and executed escrow instructions become an enforceable contract. An escrow is termed 'completed' or 'perfected' when each term of the instructions has been met or performed (satisfied or waived).

• ✓Properly drawn and executed escrow instructions become an enforceable contract
• ✓An escrow is 'completed' or 'perfected' when all terms of the instructions are met, satisfied, or waived

Some activities constituting crimes under the Corporations Code relate to the sale of securities. A conspiracy to violate the California Corporate Securities Act is a crime. The sale of fractionalized interests in promissory notes secured by deeds of trust may constitute the sale of corporate securities requiring qualification or exemption.

• ✓Conspiracy to violate the California Corporate Securities Act is a crime (PC 182; Corporations Code 25540)
• ✓Sale of fractionalized interests in promissory notes secured by deeds of trust may require qualification or exemption with the Department of Corporations
• ✓Selling such securities without qualification or exemption is illegal and can result in conviction

A lien is extinguished if action on the debt is not brought within time limits. Judicial foreclosure must be filed within four years of maturity. Even when the note is time-barred, the power of sale continues. Under Civil Code 882.020, the lien expires 10 years after final maturity (or 60 years if maturity undeterminable).

• ✓Judicial foreclosure must be filed within four years of maturity
• ✓Power of sale continues even if the note is time-barred
• ✓Lien expires 10 years after maturity (60 years if undeterminable) per Civil Code 882.020
• ✓Notice of intent to preserve interest extends enforceability 10 years

The judicial process involves filing a complaint with lis pendens, serving a summons on parties whose interests are extinguished, trial and decree of foreclosure/order of sale, and recording/serving Notice of Levy followed by Notice of Sale. The Notice of Sale cannot be earlier than 120 days after the Notice of Levy if deficiency is barred/waived.

• ✓Lis pendens binds persons acquiring interests during the action
• ✓120-day notice required if deficiency judgment barred or waived
• ✓When deficiency available, only 20-day Notice of Sale needed (one-year redemption applies)

The Sheriff issues a Certificate of Sale transferring title subject to redemption. The bidder gets no possession during redemption but receives rents. Clear title requires the Sheriff's Deed of Conveyance after the redemption period. A lender seeking deficiency must apply within three months of the sale.

• ✓Certificate of Sale is subject to redemption; no possession during redemption
• ✓Deed of Conveyance issued after redemption period for clear title
• ✓Deficiency application must be filed within three months of sale
• ✓Title relates back to date of initial recording of the deed of trust

The sale is held between 9 a.m. and 5 p.m. on a business day. The foreclosing lender may credit-bid up to the amount owed. Other bidders must bid cash, but may deposit greater of $5,000 or 10% and pay the balance within ten days. A trustee/court may require a second sale on non-payment.

• ✓Foreclosing lender may credit-bid up to amount owed
• ✓Other bidders may deposit greater of $5,000 or 10% of bid
• ✓Failure to pay balance within ten days requires a second sale

An escrow officer obtains borrower signatures on required documents; this should not be delegated to independent signing agents without express lender authority. MLBs/MLOs are not authorized under Real Estate Law to delegate this function. After the lender approves executed documents and wires funds, the escrow holder transmits instruments to the county recorder, confirms recording, orders title insurance, and disburses loan funds per instructions.

• ✓Escrow signing should not be delegated to independent signing agents without express lender authority
• ✓The escrow holder transmits instruments to the county recorder only after receiving and verifying loan funds
• ✓Loan funds are disbursed after recordation per the principals' instructions

Most lenders operate with a Loan Committee of senior officers who consider applications recommended by loan officers or MLBs/MLOs. After approval, the file goes to the Loan Funding/Closing Department for document preparation, funding, and closing. Lender's escrow instructions are prepared and transmitted to the escrow holder for the borrower's signature.

• ✓The Loan Committee approves, declines, or closes loan files for incompleteness
• ✓Lender's escrow instructions are transmitted to the escrow holder for borrower signatures

The sixth RESPA disclosure may be required for Affiliated Business Arrangements (ABAs), formerly Controlled Business Arrangements. ABAs occur when affiliated service providers with common ownership or control refer borrowers to each other in RESPA transactions. If one provider benefits financially by referring borrowers to another, the cautious approach is to assume the referral is subject to ABA disclosures.

• ✓ABAs involve affiliated providers with common ownership or shared control referring borrowers to each other
• ✓If a provider benefits financially by referral, assume ABA disclosure is required
• ✓ABAs must function through a separate adequately capitalized entity, not a division of an affiliated party

Unless done through an acceptable division of labor agreement, an ABA must function through a separate entity (corporation, partnership, LLC, or LLP; corporation preferred). The entity must accept its own business risk, obtain licensing, and have its own facilities, management, and employees. Sham entities are not recognized. Only a bona fide return on ownership interest or franchise relationship (dividends, distributions) may be received.

• ✓The separate entity must accept its own business risk, obtain licensing, and have its own facilities, management, and employees
• ✓Sham entities are not recognized and are treated as ploys to avoid referral fee prohibitions
• ✓Only a return on ownership interest or franchise relationship (dividends, distributions of capital/equity) may be received

For face-to-face interviews or written/electronic referrals, the ABA disclosure must be delivered at or before the referral in a separate writing, with a record kept. After face-to-face interviews, the creditor/lender must attempt to obtain a written receipt (noting any refusal, records kept five years). For telephonic referrals, the substance is given during the call with written disclosure following within three business days.

• ✓ABA disclosure must be delivered at or before the time of referral in a separate writing
• ✓For telephonic referrals, a written disclosure must follow within three business days
• ✓Refusal to sign a receipt must be noted and records maintained for five years
• ✓Attorney referrals to a title insurance agent require disclosure no later than when the attorney is engaged

A creditor/lender may require the use of a particular provider of settlement services when the provider is an attorney, credit reporting agency, or real estate appraiser chosen to represent the creditor/lender's interests. The ABA disclosure form (Section B) discloses this required-use charge and states it is a condition of the loan to represent the lender's interests.

• ✓A lender may require use of a particular attorney, credit reporting agency, or real estate appraiser to represent its interests
• ✓For listed providers (Section A), the borrower is NOT required to use them and is free to shop around
• ✓The disclosure form includes an acknowledgment signed by the borrower

The FTC enforces TILA and Regulation Z with respect to real estate brokers, mortgage loan brokers, and mortgage bankers. Other creditors are regulated by: OCC (national banks); FDIC (insured non-member banks); FRB (state member banks); OTS (federally-insured savings institutions); and NCUA (federally chartered credit unions).

• ✓FTC enforces TILA/Reg Z for real estate brokers, mortgage loan brokers, and mortgage bankers
• ✓OCC oversees national banks; FDIC oversees insured non-Fed-member banks; FRB oversees state member banks
• ✓OTS oversees federally-insured savings institutions; NCUA oversees federally chartered credit unions

The FTC may order a creditor/lender to cease and desist. Violation of such an order may result in an $11,000 civil penalty per day. Known unfair/deceptive practices may lead to court penalties up to $11,000 per violation. Where an APR or finance charge is inaccurately disclosed, the FTC can require account adjustments so obligors do not pay more than the disclosed charge/APR equivalent, whichever is lower.

• ✓Violation of a cease-and-desist order can result in an $11,000 civil penalty each day
• ✓Known unfair/deceptive practices can result in up to $11,000 penalty per violation
• ✓FTC can require account adjustments for inaccurate APR/finance charge disclosures (Section 108(e) TILA)

Under Sections 3351-3972, county tax collectors (not assessors) administer sale of tax-defaulted properties after five or more years of unpaid taxes. Properties are sold at public auction or by sealed bid to adjoining owners, and buyers receive a tax deed free of most prior encumbrances.

• ✓Property is 'tax-defaulted' when 5+ years have passed since taxes paid
• ✓Tax collector must attempt to sell within 2 years of becoming subject to power to sell
• ✓Minimum bid = sum of all taxes, penalties, costs, and fees; must be approved by County Board of Supervisors
• ✓Purchaser receives tax deed free of prior encumbrances except those in Section 3712

Under Sections 20581 et seq., senior citizens (62+), blind, or disabled persons may defer payment of property taxes on their residences if they meet ownership, equity, and income requirements. A state lien is placed and interest charged until sale.

• ✓Must be 62+, blind, or disabled; own and occupy the home
• ✓Must have at least 20% equity in the property
• ✓Household income limit ($35,500 for calendar year 2007)
• ✓A state lien is placed; postponed taxes and interest recovered when property is sold

Under Sections 4101 et seq., tax-defaulted property may be redeemed upon payment of taxes, interest, costs, and penalties. Redemption can be paid in installments, and the right of redemption terminates before an auction.

• ✓Redemption paid to county tax collector, who issues a certificate of redemption
• ✓Delinquent taxes payable in five annual installments if current taxes are paid
• ✓Right of redemption terminates at close of business the last business day before auction begins
• ✓If property not sold at auction, right of redemption is revived

Success factors for a new salesperson include: the broker/designated manager/mentor being available for consultation and ensuring the salesperson is trained, informed, and up-to-date; the broker maintaining an organizational chart and plan with clear positions and duties; and constantly evaluating the salesperson's attitude, knowledge, transaction documents, and production. The broker must have a process to keep salespersons informed of Policy and Procedures changes.

• ✓The broker must ensure salespersons are trained, informed, and up-to-date
• ✓The broker must maintain an organizational chart with clear duties and evaluate salesperson performance

Effective merchandising of available rental space is essential. The most common method today is advertising on the internet. Other methods include business cards, newspaper ads, property signs, radio and TV advertising, brochures, billboards, business contacts, and tenant referrals. A sound maintenance program helps secure tenants since advertising and vacancy carry high costs.

• ✓The most common method of merchandising rental property today is internet advertising
• ✓When a qualified prospect responds, the manager must make every effort to secure the tenant due to high advertising and vacancy costs
• ✓Property showing wear and tear from previous occupants discourages prospective tenants

The NATIONAL ASSOCIATION OF REAL ESTATE BROKERS, INC. (NAREB) was established in Miami, Florida in 1947. Comprised primarily of African-American licensees, it is the oldest minority professional/trade association in America. Members are denoted 'Realtists' and follow the theme 'Democracy in Housing.' Active membership in a state and/or local board is a prerequisite for NAREB membership.

• ✓NAREB was established in Miami, Florida in 1947
• ✓NAREB is the oldest minority professional/trade association in America
• ✓NAREB members are called Realtists, with the theme 'Democracy in Housing'
• ✓Local/state board membership is a prerequisite for NAREB membership

The CALIFORNIA ASSOCIATION OF REAL ESTATE BROKERS, INC. (CAREB), established in 1955, is the oldest and largest state chapter of NAREB. Its members are distinguished by the trade name 'Realtists.' CAREB has eight local board/association affiliates in California. Historically CAREB advocated for fair housing and the Community Reinvestment Act.

• ✓CAREB was established in 1955
• ✓CAREB is the oldest and largest state chapter of NAREB
• ✓CAREB has eight local board/association affiliates in California
• ✓Local board membership affiliated with CAREB is a prerequisite for CAREB and NAREB membership

NAHREP (National Association of Hispanic Real Estate Professionals), established in 1999, is a national non-profit trade association whose mission is to increase Hispanic homeownership. AREAA (Asian Real Estate Association of America), formed in 2001, enhances business opportunities for professionals serving the Asian American community and promotes Asian American home ownership.

• ✓NAHREP was established in 1999 to increase Hispanic homeownership
• ✓AREAA was formed in 2001 to serve the Asian American community
• ✓Both are national trade associations serving minority homeownership

Every parcel sold, leased, or mortgaged must be properly identified or described using a legal description. A good legal description describes no other piece of property but the one involved in the transaction. The three most common methods are: recorded map, U.S. Government section and township, and metes and bounds.

• ✓Every parcel sold, leased, or mortgaged must have a proper legal description
• ✓A good description identifies only the one property in the transaction
• ✓The three common methods are recorded map, section/township, and metes and bounds

California's Subdivision Map Act (Government Code Sections 66410 et seq.) requires mapping of all new subdivisions. Once accepted by county/city authority and filed with the county recorder, a lot can be described by lot number, block, and map, plus the city, county, and state (e.g., 'Lot 14, Block B, Parkview Addition, City of Sacramento...').

• ✓The Subdivision Map Act requires mapping of all new subdivisions
• ✓Recorded map descriptions use lot number, block, map, and city/county/state
• ✓The map must be filed in the county recorder's office

A township contains 36 sections, each one mile square. A mile is 5,280 feet; a square mile is 27,878,400 sq ft; an acre is 43,560 sq ft. Each section is 640 acres, a half-section 320 acres, a quarter-section 160 acres, and a quarter of a quarter-section 40 acres. Each side of a quarter-quarter section measures 1,320 feet.

• ✓A section is one mile square and contains 640 acres
• ✓An acre is 43,560 square feet; a mile is 5,280 feet
• ✓Half-section=320 acres, quarter-section=160 acres, quarter-quarter=40 acres
• ✓Each side of a quarter-quarter section is 1,320 feet

A metes and bounds description may be needed when property is not covered by a recorded map and is irregularly shaped. It starts at a fixed point of beginning and follows boundaries by courses and distances until returning to that point. Metes are measures of length (feet, yards); bounds are boundaries, natural or manmade, often marked by monuments (trees, boulders, fences, iron pipes). A mistake at the point of beginning renders the description worthless.

• ✓Metes and bounds starts and returns to a fixed point of beginning
• ✓Metes are measures of length; bounds are boundaries marked by monuments
• ✓An error at the point of beginning makes the entire description worthless
• ✓Monuments are subject to destruction and should be used only when necessary

Every parcel sold, leased, or mortgaged must be properly identified by a legal description—one that describes no other property but the one involved. The three most common methods are recorded map, U.S. Government section and township, and metes and bounds.

• ✓A good legal description describes no other property but the one involved
• ✓The three common methods are: recorded map, section and township, and metes and bounds

The government survey system uses horizontal base lines and vertical meridians. Ranges are vertical lines and township lines are horizontal, spaced six miles apart. Each square is a township (6 miles per side, 36 square miles). Guide meridians run every 24 miles east/west and standard parallels every 24 miles north/south as correction lines to adjust for Earth's curvature.

• ✓Base lines are horizontal; meridians are vertical
• ✓A township is six miles on each side and contains 36 square miles
• ✓Correction lines (guide meridians and standard parallels) occur every 24 miles

California has three sets of base lines and meridians: Humboldt (northwestern), Mt. Diablo (central), and San Bernardino (southern). Descriptions move townships north/south from a base line and ranges east/west from a meridian (e.g., 'township 4 north, range 3 east, Humboldt Base Line and Meridian').

• ✓California's three base line/meridian sets are Humboldt, Mt. Diablo, and San Bernardino
• ✓Townships are measured north/south from base lines; ranges east/west from meridians

Sections in a township are numbered 1 through 36 in a serpentine pattern, beginning with Section 1 in the northeast corner, moving west to Section 6, then dropping down and moving east, alternating direction row by row, ending with Section 36 in the southeast corner.

• ✓Section numbering starts at 1 in the NE corner and ends at 36 in the SE corner
• ✓Numbering follows a serpentine (boustrophedon) pattern

California's Subdivision Map Act (Government Code Sections 66410 et seq.) requires mapping of all new subdivisions. Once accepted and filed with the county recorder, lots are described by lot number, block, and map, including city, county, and state.

• ✓The Subdivision Map Act (Gov. Code 66410 et seq.) requires mapping of all new subdivisions
• ✓Recorded map descriptions include lot number, block, map, plus city, county, and state
• ✓The map must be filed in the county recorder's office

A salesperson license is required for one employed under the control and supervision of a licensed broker, and permits licensed activity only while employed. Licenses must be available for inspection in the broker's main office (Regulation 2753). A salesperson can be compensated only by the employing broker.

• ✓A salesperson may perform licensed acts only while in the employ of a broker
• ✓A salesperson can be compensated only by the employing broker (Sections 10132, 10137)
• ✓Salesperson licenses must be available for inspection in the broker's main office (Regulation 2753)

An applicant must be at least 18, apply on the prescribed form, be honest and truthful, and pass the exam. Before the exam, the applicant must complete three college-level courses: Real Estate Principles, Real Estate Practice, and one additional basic real estate course from a listed group.

• ✓Salesperson applicants must be at least 18, honest, truthful, and pass the exam
• ✓Must complete Real Estate Principles, Real Estate Practice, and one additional listed course before the exam
• ✓Courses must be three semester-units from an accredited institution or DRE-approved school

The salesperson exam application (RE 400A) requires the exam fee. After passing, apply for a four-year license using RE 202 within one year of the exam date, with the license fee, proof of Legal Presence, and fingerprints. Combined exam/license application is form RE 435.

• ✓After passing, apply for the license using RE 202 within one year of the exam date
• ✓There is no limit on reexaminations; each application includes the reexamination fee
• ✓The Salesperson Exam/License combined application is form RE 435

Under no circumstances may a broker misrepresent material facts, as material misrepresentation is a violation of law. A broker MAY receive commission from both buyer and seller with knowledge of both, appoint subagents with prior consent, and sell the principal's property to a relative if the principal has full knowledge.

• ✓A broker may never misrepresent material facts—it is a violation of law
• ✓A broker may collect commission from both parties only if both have knowledge of the arrangement
• ✓A broker may appoint subagents with prior consent of the principal
• ✓A broker may sell to a relative if the principal has full knowledge

A valid deed must contain the grantor's signature, a granting clause evidencing intent, and an adequate description of the property. An acknowledgment is necessary only for recordation—not for the deed to be valid.

• ✓A valid deed requires the grantor's signature, a granting clause and adequate property description
• ✓An acknowledgment is required for recordation but not for deed validity
• ✓Without the grantor's signature, title will not pass

A valid bill of sale must contain the seller's signature. A bill of sale is an instrument that has been executed (signed) and delivered to convey title to personal property. A date, acknowledgment, and verification are advisable but not required for validity.

• ✓A bill of sale must contain the seller's signature to be valid
• ✓A bill of sale conveys title to personal property
• ✓A date, acknowledgment and verification are not legally required for validity