45 topics · Updated 2026-09-17
The Open Housing Law is the federal law passed in April 1968 that prohibits discrimination in the sale of real estate because of race, color, or religion of buyers.
Redlining is a lending policy, illegal in California, of denying real estate loans on properties in older, changing urban areas (often with large minority populations) based on alleged higher risk without considering individual creditworthiness.
Truth in Lending refers to federal statutes and Regulation Z designed to ensure prospective borrowers and credit purchasers receive credit cost information before entering a transaction.
The Real Estate Settlement Procedures Act (RESPA) is a federal law requiring disclosure to borrowers of settlement (closing) procedures and costs via a pamphlet and forms prescribed by HUD.
Usury is charging a rate of interest greater than that permitted by law on a loan.
A broker must maintain an office or definite place of business in California, with the broker's and salespersons' licenses available for inspection. A broker must inform DRE of a main office address change not later than the next business day, using RE 204 (individual) or RE 204A (corporation). No fee is required.
A branch office license is required for each additional business location when a broker maintains more than one place of business. It permits full operation and must be available for inspection at the branch location. Branch offices are added or deleted using RE 203; no fee is required.
A broker may operate under a fictitious business name only after DRE issues a license bearing that name. The broker must file a Fictitious Business Name Statement with the county clerk showing the broker as registrant. An FBNS expires five years from December 31 of the filing year. Names implying escrow require 'a non-independent broker escrow.'
To transfer employment, the former broker must immediately notify DRE and give the salesperson their license certificate signed on RE 214; within five days the salesperson and new broker complete the change (RE 214). When a salesperson is terminated for a Real Estate Law violation, the broker must immediately file a certified written statement with DRE (Section 10178).
When a broker's license is revoked or suspended, the licenses of every salesperson in the broker's employ are automatically canceled. Those salespersons may transfer their licenses to a new employing broker.
Licensees must maintain a mailing address of record at all times, including during the two-year late renewal grace period. Out-of-state residents must file a Consent to Service of Process (RE 234). Non-resident brokers not engaging in California activities file an Out of State Broker Acknowledgment (RE 235).
California's Holden Act (Health and Safety Code Section 35810 et seq.) ensures no financial depository institution discriminates in financial assistance for purchasing, rehabilitating, improving, or refinancing housing based on neighborhood conditions, characteristics, or trends. It prohibits discrimination based on the racial, ethnic, religious, or national origin composition of a neighborhood (or expected change), and prohibits appraisal practices inconsistent with these prohibitions.
A broker may use DRE columnar records prescribed by Regulations 2831 and 2831.1, with the required records depending on whether funds are deposited or forwarded.
The RE 4522 journalizes all trust funds deposited to and disbursed from the trust fund bank account in chronological order regardless of payee/payor/beneficiary.
The RE 4523 accounts for funds received from or for each beneficiary/transaction so the broker can ascertain funds owed to each.
The RE 4524 tracks funds received but not deposited to a trust account, such as earnest money forwarded to escrow, rents forwarded to landlords, and borrower payments forwarded to lenders.
There is no magic formula for estimating a business's saleable price; initial price guides are rough starting points, and market prices of like businesses vary considerably. To estimate value, the agent examines operating and tax statements for the last three years (with possible reconstruction to an adjusted net profit), intangible assets, lease aspects, financing, legal compliance, employees/insurance, zoning/parking, financial ratios, comparisons, and appraisal reports if needed.
Two common valuation methods are capitalizing value based on estimated annual profit and desired rate of return, and evaluating the fixed assets and inventory being purchased. A broker preparing a pro forma budget or projected income statement should be aware these may be construed as a representation or warranty, creating potential liability to the buyer. Brokers should deal only with factual historic operations and avoid future income representations.
A common interest subdivision combines a separate interest with an interest in common with other owners (condominiums, stock cooperatives). A condominium has an undivided common interest plus a separate unit interest. A cooperative (stock cooperative) involves corporate stock ownership entitling occupancy. Planned developments have separately owned parcels plus common area membership.
Subdivision is a legally regulated division of real property for sale, lease or financing. The Subdivision Map Act requires a tentative map to the planning commission, then a final map. Dedication gives land to public use with acceptance by officials.
A lease sets conditions for a tenant to occupy property. Net lease requires the lessee to pay taxes, insurance and maintenance in addition to rent. Percentage lease bases rent on business done. Graduated lease provides varying rates. Quiet enjoyment is the right to use property without possession interference. Notice to quit directs a tenant to vacate.
Assessment includes valuation for tax and HOA payments for maintenance/reserves. Special assessment is a public charge for improvements (street lights, sidewalks) or an HOA charge beyond regular assessment for unanticipated repairs. Reserves accumulate funds for future common area replacement and major maintenance.
A lease is a contract between owner and tenant setting occupancy conditions and term. Lessor/landlord rents to the lessee/tenant. A graduated lease provides varying rental rates, often based on future appraisals; used in long-term leases. A ground lease is for land use only. An escalator clause allows upward/downward rent adjustments tied to an index.
Eviction is dispossession by process of law. Constructive eviction is breach of the covenant of quiet enjoyment where the lessee cannot obtain possession or occupancy is hazardous. A holdover tenant remains after lease expiration. Assignment of rents lets the beneficiary collect income upon trustor default.
Fixtures are appurtenances attached to land/improvements that become real property and usually cannot be removed without agreement. Annexation attaches personal property to land so law views it as a fixture (actual or constructive). Chattels are personal property. Emblements are crops considered personal property of the cultivator. A bill of sale passes title to personal property.
A condominium is an undivided interest in common in a portion of real property coupled with a separate interest in a unit. A common interest subdivision includes a separate interest combined with an interest in common (condos, stock cooperatives). CC&Rs (covenants, conditions and restrictions) establish owners' rights and obligations. A cooperative is owned by a corporation; tenancy is by stock purchase.
Proposition 6 (June 8, 1982) repealed California's inheritance tax and gift tax. The repeals have specific effective dates.
Proposition 6 enacted the California estate tax, structured as a 'pick-up' tax equal to the federal credit for state death taxes, so it does not add cost to the estate. A return is required and payable within nine months of death.
Under the 1968 Federal Fair Housing Act, all persons have the right to bring suit when acts of discrimination deny housing opportunities, when they are evicted for having minority guests, or when discrimination causes their residential loan to be denied.
Lenders choose between non-judicial (trustee's) sale and judicial sale depending on the security value.
California requires advance notice before a balloon payment becomes due.
Parties and property must be properly identified, signed, delivered, and accepted; acknowledgment is needed for recording.
A grant deed used as a disguised security device is treated as a mortgage without power of sale.
An interest-only note is a straight note with a balloon payment of principal due at maturity.
Sheltered loans have specific controls on broker compensation and balloon timing.
Piggyback financing uses two conventional loans to purchase or refinance a residential property.
A swing/bridge loan is a temporary loan against home equity used for a down payment or construction.
Security instruments can secure multiple debts, cover multiple parcels, and be given by non-debtors.
When subsequent events make early disclosures inaccurate, the lender must re-disclose three days before consummation. Redisclosure of all changed terms is required if the APR at consummation varies from the disclosed APR by more than 1/8 of 1 percentage point in a regular transaction, or more than 1/4 of 1 percentage point in an irregular transaction.
If a transaction involves more than one creditor, only one set of disclosures need be delivered and the creditors agree who complies. With multiple borrowers, disclosures may be made to a borrower primarily liable, but in rescindable transactions, disclosures must go to each borrower with the right to rescind.
After consummation, three events require new disclosures. A refinancing is a separate transaction (an existing obligation satisfied and replaced); renewals, APR reductions, and default-related payment changes are not refinancings. An assumption occurs when a new person becomes obligated as a subsequent maker (mere addition of a guarantor is not an assumption). Variable-rate adjustments require annual disclosures and notice at least 25 but not more than 120 days before a new payment level.
Disclosures must reflect the terms of the legal obligation. If information is unknown, disclosures reflect the best information reasonably available and must clearly state they are estimates. Lenders may disregard whole-cent rounding, non-business-day scheduling, varying month lengths, leap years, and certain minor first-period irregularities within defined limits.
Effective October 1, 2009, a Section 35 (higher-priced) mortgage loan is a consumer credit transaction secured by the borrower's principal dwelling with an APR exceeding the average prime offer rate by 1.5+ points for first liens or 3.5+ points for subordinate liens. 'Average prime offer rate' is derived from rates offered for low-risk transactions and published by the FRB at least weekly.
Section 35 does not include initial-construction financing, bridge loans of 12 months or less, reverse mortgages (226.33), or HELOCs (226.5b). For first-lien Section 35 loans, an escrow/impound account must be established before consummation for property taxes and required insurance. Borrowers may request cancellation no earlier than 365 days after consummation.
Section 35 loans apply the same disclosure and prohibited-practice standards as Section 32/226.34. A creditor may not extend credit based on collateral without regard to repayment ability. Prepayment penalties are barred unless permitted by law, do not apply after two years, do not apply if prepaid via lender/affiliate refinancing, and payments cannot change during the four years after consummation.
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