Exemptions +8California · Real Estate · English

Under Section 218, the homeowner's exemption provides the first $7,000 of full value exemption for owner-occupied residential property on the lien date. It remains in effect until terminated, and the owner must notify the assessor when no longer eligible.

• ✓First $7,000 of full value exempt for owner-occupied residence (Section 218)
• ✓Applies to owner-occupied unit, condominium, cooperative apartment, or duplex unit
• ✓Remains in effect until terminated; termination triggered by change in title-holder
• ✓Failure to notify assessor of ineligibility may result in escape assessment plus 25% penalty and interest

Section 205 provides up to $4,000 full value exemption for qualifying veterans or unmarried spouses of deceased veterans. Section 205.5 provides larger exemptions for disabled veterans based on income and disability.

• ✓Section 205: up to $4,000 exemption (tax savings up to $40); cannot combine with homeowner's exemption
• ✓Wealth cap for non-home-owning veteran: $5,000 unmarried, $10,000 married
• ✓Section 205.5: disabled veteran exemption of $40,000, $60,000, $100,000, or $150,000 of full cash value of residence

Growing crops, young trees/vines, burial properties, and nonprofit-owned properties (schools, hospitals, churches) are exempt. Timber is not taxed but a yield tax applies to felled timber; timberland remains taxable.

• ✓Fruit/nut trees under 4 years and grapevines under 3 years are exempt
• ✓Nonprofit schools, hospitals, churches, colleges are exempt
• ✓Timber not property-taxed (yield tax on felled timber), but timberland remains taxable
• ✓Public open-space lands used solely for recreation are exempt

The RPA-CA when completed with buyer's terms is an offer. When the seller (or seller/buyer after counteroffers) executes the documents and communicates unqualified acceptance, it becomes a contract that provides joint escrow instructions. A binding agreement is created when a copy of the signed acceptance is personally received by the buyer or the buyer's authorized representative.

• ✓A completed RPA-CA is an offer until unqualified acceptance is communicated
• ✓A binding agreement is created when a copy of signed acceptance is personally received by the buyer or their authorized representative
• ✓Confirmation of acceptance documents the date but is not legally required to create a binding agreement
• ✓Time is of the essence; modifications require a writing signed by both buyer and seller

In general the buyer has 3 days to get the deposit to escrow, 7 days to complete loan applications and provide verification of funds, and 17 days to inspect and investigate. The seller typically has 7 days to provide the buyer all required disclosures.

• ✓Buyer: 3 days for deposit to escrow
• ✓Buyer: 7 days for loan applications and verification of funds
• ✓Buyer: 17 days to inspect and investigate (and remove loan/appraisal contingencies)
• ✓Seller: 7 days to provide all required disclosures

Any removal of contingencies must be in writing using form CR. If a party fails to perform, the other may deliver a Notice To Perform (typically allowing 24 hours), which is generally required before cancellation. Unilateral cancellation of the agreement and escrow may be possible, but disposition of funds on deposit must be bilateral.

• ✓Contingency removal must be in writing using form CR
• ✓A Notice To Perform typically allows 24 hours for performance
• ✓Notice To Perform is typically required before initiating cancellation
• ✓Unilateral cancellation is possible but disposition of deposited funds must be bilateral

The typical contract contains a financing contingency unless both parties agree otherwise. The buyer agrees to act diligently to obtain financing. If financing is not obtained in time, the seller may deliver a Notice To Buyer to Perform (form NBP); the buyer must then remove the contingency and proceed or the seller may cancel.

• ✓The contract typically contains a financing contingency unless waived by both parties
• ✓If FHA/VA financing, buyer has 17 days to provide the seller written notice of lender-required repairs
• ✓Seller may deliver a Notice To Buyer to Perform (NBP) if financing is not obtained in time
• ✓Buyer typically has 17 days to remove loan and appraisal contingencies

If separately signed or initialed by both seller and buyer, the liquidated damages clause releases the seller from the obligation to sell and limits damages to the buyer's deposit, up to a maximum of 3% of the purchase price. It must be printed in at least 10-point bold type or contrasting red 8-point bold type.

• ✓Must be separately signed or initialed by both seller and buyer to be activated
• ✓Liquidated damages are limited to the deposit, up to a maximum of 3% of the purchase price
• ✓Must be in at least 10-point bold type or contrasting red 8-point bold type
• ✓An increased deposit subject to liquidated damages requires a separate signed agreement

The date and place the deposit receipt is signed by the prospective buyer is NOT the date used to measure temporal compliance with performance provisions. Time constraints flow from the date a contract is formed by legal acceptance.

• ✓The buyer's offer date is not used to measure performance compliance
• ✓Performance time periods flow from the date the contract is formed by legal acceptance
• ✓The offer expires at 5:00 PM on the third calendar day after the buyer signs unless otherwise stated

The offer must state unmistakably the total purchase price and terms (all cash, new loan, or loan assumption). The total price does NOT include buyer's closing costs or financing costs. The property description must be adequate for a court to identify it (street address, map book/page/parcel, or APN).

• ✓The total purchase price does not include the buyer's closing costs or financing costs
• ✓Property description must be adequate for a court to identify (address, legal description, or APN)
• ✓The offer must state the terms to which the buyer commits

The agent may direct the buyer to deliver the deposit directly to Escrow Holder within 3 business days after acceptance, or hold the buyer's deposit uncashed until acceptance then deposit to broker's trust account or escrow within 3 business days. The standard agreement states the buyer represents the funds will be good when deposited.

• ✓Deposit must go to escrow or broker's trust account within 3 business days after acceptance
• ✓Buyer represents that funds will be good when deposited into escrow
• ✓If holding the deposit, the agent must have it in hand when submitting the offer

The contract allocates costs including pest control inspection (form WPA), other inspections (septic, wells, natural hazard), and government retrofit requirements. Smoke detectors are required per Health & Safety Code 13113.8; water heaters must be braced per Health & Safety Code 19211. Seller must give written certification of compliance.

• ✓Smoke detector compliance required under Health and Safety Code Section 13113.8
• ✓Water heater bracing required under Health and Safety Code Section 19211 per California Plumbing Code
• ✓New construction smoke detectors (since Aug 14, 1992) must be hard-wired with battery backup in each bedroom and centrally outside
• ✓Form WPA is used for wood destroying pest inspections and cost allocation

The offer addresses buyer occupancy and delivery date. Occupancy under 30 days uses form PAA. If tenant-occupied, the seller must vacate the property at least 5 days prior to close of escrow unless agreed otherwise. Income/investment property uses form RIPA.

• ✓Occupancy under 30 days uses the Purchase Agreement Addendum (PAA)
• ✓Tenant-occupied property must be vacated at least 5 days prior to close of escrow unless otherwise agreed
• ✓Seller must transfer unused tenant deposits to the buyer through escrow
• ✓Income/investment property should use form RIPA

Subject to specific exclusions, the buyer is entitled to all fixtures — items permanently attached to what is permanent. The buyer is entitled to only that personal property listed in the contract and subject to lender approval.

• ✓Fixtures (permanently attached items) are included unless specifically excluded
• ✓Buyer is entitled only to personal property listed in the contract
• ✓Large outside potted plants are personal property, not fixtures
• ✓Examples of fixtures: built-in appliances, window coverings, solar systems, in-ground landscaping

Unless agreed otherwise, the property is sold in its present 'as is' condition subject to buyer's right to inspect and investigate, including insurability. The seller must disclose all material facts and defects, including known insurance claims. The seller provides utilities on and access for investigations.

• ✓Property is sold in 'as is' condition subject to buyer's inspection rights
• ✓Seller must disclose all material facts and defects including known insurance claims
• ✓Seller must make the property available with utilities on for investigations
• ✓Buyer must keep the property free of liens and repair any inspection damage

Title vests as directed by the buyer in escrow instructions. Licensees should urge buyers to seek competent advice on taking title due to legal/tax implications. Transfer is typically by grant deed with mineral, oil, and water rights if owned by the seller. Title must be free of financing liens except as provided, subject to matters in the preliminary title report.

• ✓Title vests as directed by the buyer in escrow instructions
• ✓Transfer is typically by grant deed with mineral, oil and water rights if owned by seller
• ✓Title is subject to encumbrances/easements/CC&Rs shown in the preliminary title report
• ✓The contract designates which party pays for the preliminary title report and title insurance policy

The buyer has the right to a final inspection within 5 days prior to closing, NOT as a contingency, but solely to confirm the property is in the same condition, repairs are complete, and the seller met other obligations.

• ✓Final verification is within 5 days prior to closing
• ✓The final verification is NOT a contingency of the sale
• ✓Its purpose is only to confirm condition and completion of agreed repairs

Certain ownership expenses are paid current as of close of escrow and become the buyer's responsibility thereafter, including real property taxes (and supplemental), HOA assessments, insurance premiums assumed, and bond payments assumed. Prepaid rent for time after close is credited to the buyer.

• ✓Prorated items include property taxes, HOA assessments, assumed insurance, and assumed bond payments
• ✓Prepaid rent for time on and after close of escrow is credited to the buyer
• ✓Expenses are paid current as of the date of close of escrow

Parties agree to mediate all disputes (absent exclusions) before arbitration or court. A mediator is impartial and cannot impose a settlement but mediation can produce a binding settlement. Arbitration under AAA or JAMS rules results in a binding decision.

• ✓Parties must mediate before resorting to arbitration or court action
• ✓A mediator cannot impose a settlement
• ✓Arbitration under AAA or JAMS rules is binding
• ✓Exclusions include foreclosure, probate, bankruptcy, and small claims actions

The RPA-CA serves as joint escrow instructions; if accepted, the escrow holder provides an acknowledgment disclosing the escrow number, license status, and that acceptance is subject to supplemental instructions. A copy of the agreement must be delivered to the escrow holder within 3 business days after acceptance.

• ✓The RPA-CA serves as joint escrow instructions
• ✓A copy of the agreement must be delivered to the escrow holder within 3 business days after acceptance
• ✓The escrow holder acknowledgment discloses escrow number and license status

If the offer is contingent on the sale of buyer's property, form COP (Contingency For The Sale Or Purchase of Other Property) is used. A seller who counters with a contingency to find a replacement property also uses form COP.

• ✓Form COP is used when the offer is contingent on selling buyer's property
• ✓A seller countering with a replacement property contingency also uses form COP

The offer specifies the seller or buyer, or both, agree to pay broker compensation as specified in a separate written agreement. Compensation is due upon close of escrow, or if escrow does not close, as specified in the separate agreement.

• ✓Broker compensation is specified in a separate written agreement
• ✓Compensation is due upon close of escrow
• ✓Real estate brokers are not parties to the agreement between buyer and seller

Under Business and Professions Code Section 10145, trust funds received must be placed into the hands of the owner(s), into a neutral escrow depository, or into a trust account maintained under Regulation 2832 not later than three business days following receipt by the broker or salesperson.

• ✓Trust funds must be handled within three business days of receipt
• ✓Options: give to fund owner, deposit to neutral escrow, or deposit to broker's trust account maintained per Regulation 2832

An exception to the three-day rule allows a deposit check from an offeror to be held uncashed until offer acceptance if specific conditions are met under Commissioner's Regulation 2832.

• ✓The check must be non-negotiable by its terms OR the offeror gives written instructions not to deposit/cash until acceptance
• ✓The offeree must be informed before or at the time the offer is presented that the check is being held
• ✓After acceptance, the broker may continue to hold uncashed only with written authorization from the offeree; otherwise deposit within three business days of acceptance

A real estate salesperson who accepts trust funds on behalf of the broker must immediately deliver the funds to the broker, or if directed by the broker, place them with the principal, a neutral escrow depository, or the broker's trust account.

• ✓Salesperson must immediately deliver accepted trust funds to the broker
• ✓Salesperson may place funds with principal, neutral escrow, or trust account only if directed by broker

A neutral escrow depository under B&P Code Section 10145 means an escrow business conducted by a person licensed under Division 6 of the Financial Code or persons described in Financial Code Section 17006 subdivisions (a)(1) and (a)(3).

• ✓Must be licensed under Division 6 (Section 17000 et seq.) of the Financial Code
• ✓Or a person described in Financial Code Section 17006(a)(1) and (a)(3)

The property manager has a dual responsibility: to the owner/client interested in the highest return from the property, and to the tenants interested in the best value for their money, including reasonable safety measures and compliance with fair housing laws. The core goals are to rent units at the highest market rent, keep costs within budget, and preserve and enhance the property's value.

• ✓The property manager owes a duty to the owner for the highest return on the property
• ✓The property manager owes a duty to tenants for the best value, safety, and fair housing compliance
• ✓The manager must rent units at the highest market rent, keep costs within budget, and enhance property value

The property manager performs many specific duties including establishing rental schedules for highest yield, merchandising space, collecting rent, supervising maintenance, qualifying tenants' credit, preparing and executing leases, keeping records, reporting to owners, paying insurance and taxes, and complying with applicable federal, state, and local laws.

• ✓Must establish a rental schedule bringing the highest yield consistent with good economics
• ✓Must qualify and investigate a prospective tenant's credit before leasing
• ✓Must maintain proper records and make regular reports to the owner
• ✓Must develop employee policies including an Injury Prevention Plan
• ✓Must be knowledgeable about and comply with applicable federal, state, and local laws

A potential home builder must be aware that defective construction can lead to legal claims from purchasers. This liability can endure for up to and possibly beyond ten years after the home is completed and has been an increasingly critical issue over the past two decades.

• ✓Defective construction can generate legal claims from purchasers
• ✓Construction defect liability can last up to and possibly beyond ten years after completion
• ✓Construction defect liability has become an increasingly critical issue

Development and building requires financing for land acquisition, land use approval, subdividing, construction, marketing, and carrying inventoried properties until sold. A developer-builder often sets up specialized subsidiary companies with separate financing: one to hold title and subdivide, another for building operations, and another for sales and marketing.

• ✓Financing is needed for acquisition, approval, subdividing, construction, marketing, and carrying inventory
• ✓Developer-builders often create separate subsidiaries for title/subdividing, building, and sales/marketing
• ✓Each subsidiary company may have separate financing needs

Subdividing and building is a cyclical business where high productivity and profit may be followed by depressed sales and losses. Important factors include land cost, unpredictability of land use approvals, credit availability, interest rates, inflation, and changing property values.

• ✓Building is cyclical—profitable periods may be followed by depressed sales and losses
• ✓Key factors: land cost, approval unpredictability, credit availability, interest rates, inflation, property values
• ✓Market conditions greatly affect developer profitability

Developers must find ways to build affordable homes despite increases in local agency demands as approval conditions, wages, building supply costs, energy conservation and building code requirements, aggressive competition, and insurance costs. Cost-saving options include precut or prefabricated materials, use of fewer skilled craftsmen through job standardization, complete on-site assembly of prefabricated units, and reducing land cost per home through increased density (planned development/cluster homes and condominiums). Despite production efficiency gains, total construction costs have risen with inflation and consumer demand for more amenities.

• ✓Rising costs include local agency demands, wages, supplies, code requirements, competition, and insurance
• ✓Cost-saving options include prefabricated materials, job standardization, and increased density
• ✓Increased density (cluster homes, condos) reduces land cost per home

Since January 1, 1994, an M.O.G. broker license is no longer required for licensed real estate brokers or salespersons to engage in M.O.G. transactions. Existing M.O.G. license holders may continue and renew their licenses, but no new M.O.G. licenses are issued. Instead, the definition of a real estate broker was expanded to include mineral, oil and gas transactions.

• ✓Effective January 1, 1994, no separate M.O.G. license is required for real estate licensees
• ✓Existing M.O.G. licensees may continue and renew, but no new M.O.G. licenses are issued
• ✓The definition of real estate broker was expanded to include mineral, oil and gas transactions

Agency is the relationship between principal and agent arising out of contract where the agent is employed to deal with third parties. Fiduciary duty requires the agent to act in highest good faith toward the principal, avoiding any advantage through misrepresentation, concealment, duress or pressure. A material fact is one likely to affect the principal's judgment.

• ✓An agent owes the principal the highest good faith fiduciary duty
• ✓An agent must not gain advantage over the principal by misrepresentation or concealment
• ✓A material fact must be disclosed because it affects the principal's judgment

A broker is employed for a fee to carry on licensed activities. The Broker-Salesperson Relationship Agreement is a written agreement required by Real Estate Commissioner regulations setting forth the relationship. A Desist and Refrain Order directs a person to stop violating the Real Estate Law. Advance fees may be unlawful when charged for advertising with no intent to obtain a buyer.

• ✓A written Broker-Salesperson Relationship Agreement is required by Commissioner regulations
• ✓A Desist and Refrain Order stops a person from violating the Real Estate Law
• ✓Charging advance fees for advertising with no intent to sell is an illegal practice

Actual authority is expressly given or given by law. Ostensible authority is what a third person reasonably believes an agent possesses from the principal's acts. Imperative necessity gives expanded emergency authority. Discretionary powers allow judgment-based decisions. A power of attorney creates an attorney in fact.

• ✓Ostensible authority arises from the principal's acts or omissions leading third persons to believe authority exists
• ✓Actual authority is expressly given by the principal or by law
• ✓A power of attorney authorizes an agent (attorney in fact) to act

Dual agency is when an agent acts concurrently for both principals in a transaction. A subagent has powers conferred by an agent (as authorized by principal), not directly by the principal. A gratuitous agent is unpaid but bound to good faith once acting.

• ✓Dual agency means the agent represents both principals in a transaction
• ✓A subagent's powers are conferred by the agent, not directly by the principal
• ✓A gratuitous agent must act in good faith even though unpaid

Commission is the agent's compensation, typically a percentage of the selling price. Procuring cause is the agent who, through unbroken continuity of events, first produces a ready, willing and able buyer and is entitled to the commission. A ready, willing and able buyer is fully prepared and financially qualified.

• ✓The procuring cause agent who first produces a ready, willing and able buyer earns the commission
• ✓A ready, willing and able buyer must meet the financing requirements of the purchase

A contract is an agreement to do or not do a certain thing requiring four essential elements: parties capable of contracting (capacity), consent of the parties, a lawful object, and consideration. A contract for sale of real property must also be in writing and signed by the party charged (Statute of Frauds). Consideration is anything given or promised to induce another to contract.

• ✓Four essential elements: capable parties, consent, lawful object, and consideration
• ✓A real property sale contract must be in writing and signed by the party to be charged
• ✓Consideration may be a benefit conferred or a detriment suffered

Bilateral contract = both parties promise to do something; unilateral = one party promises only if the other performs an act. Executed contract = fully performed (or signed); executory = performance not yet completed. Express contract is in words (spoken/written); implied contract is inferred from actions.

• ✓Bilateral contract has mutual promises; unilateral contract is a promise for an act
• ✓Executory contract has remaining performance; executed contract is fully performed
• ✓Express contracts are stated in words; implied contracts arise from conduct

Acceptance is agreeing to the terms of an offer, creating the 'meeting of the minds' essential to a contract. A counter offer changes terms of the original offer; it is a rejection (not acceptance) and creates no binding contract unless accepted by the original offeror. A deposit receipt is a written offer to purchase accompanied by a deposit that becomes the contract upon owner's acceptance.

• ✓Acceptance establishes the meeting of the minds essential to a contract
• ✓A counter offer is a rejection of the original offer, not an acceptance
• ✓A deposit receipt becomes a binding contract upon acceptance by the owner

A deed conveys title from grantor to grantee when properly executed and delivered. A grant deed (limited warranty) assures the grantor has not already conveyed the land and that it is free from encumbrances placed by the grantor. Bargain and sale deed recites consideration and purports to convey; a quitclaim deed removes clouds. Gift deed has no consideration. Conveyance is any written instrument transferring title.

• ✓A deed must be properly executed and delivered to convey title
• ✓A grant deed warrants the grantor has not previously conveyed and that title is free of grantor-placed encumbrances
• ✓Grantor transfers title; grantee receives it
• ✓A gift deed involves no consideration

Actual fraud is an intentional act to deceive (false statement, promise without intent to perform, suppressing truth). Constructive fraud is a breach of duty by a fiduciary without actual fraudulent intent that misleads to another's prejudice. Duress is unlawful constraint forcing an act against one's will. Estoppel bars a person from asserting/denying a fact due to prior acts or words.

• ✓Actual fraud requires intent to deceive; constructive fraud does not require fraudulent intent
• ✓Duress involves unlawful constraint forcing action against one's will
• ✓Estoppel bars a party from contradicting their own prior acts or words

A condition precedent must occur before a contract/transfer takes full effect. A condition subsequent defeats an already-vested estate or extinguishes a contract upon its non-performance. Assignment transfers rights under a contract; the assignor transfers and assignees receive. Novation and assumption transfer obligations.

• ✓Condition precedent must happen before the contract takes effect
• ✓Condition subsequent can defeat an already-vested estate
• ✓Assignment transfers a person's rights under a contract to another

A material fact is one the agent should realize would likely affect the principal's judgment in consenting to a transaction. Misrepresentation is a false or misleading statement or assertion.

• ✓A fact is material if it would likely affect the principal's judgment
• ✓Misrepresentation is a false or misleading statement or assertion

Actual notice is express or implied knowledge of a fact. Constructive notice is a fact imputed by law that should have been discovered. Legal notice is information required by law; recording gives constructive/legal notice.

• ✓Actual notice = express or implied knowledge
• ✓Constructive notice = fact imputed by law that should have been discovered
• ✓Recording imparts constructive (legal) notice to the public

A mechanic's lien is a statutory lien against real property in favor of persons who performed work or furnished materials for improvement of the real property.

• ✓Created by statute
• ✓Exists in favor of those who performed work or furnished materials
• ✓Applies to improvements of real property

A notice of nonresponsibility relieves a property owner from responsibility for the cost of unauthorized work done or materials furnished. It must be verified, recorded, and posted.

• ✓Relieves owner from cost of unauthorized work or materials
• ✓Must be verified, recorded, AND posted

Marketable title is title a reasonable purchaser, informed and acting with reasonable care, would accept. Opinion of title is an attorney's written evaluation of title condition after examining the abstract of title.

• ✓Marketable title is acceptable to a reasonable, informed purchaser
• ✓Opinion of title is an attorney's written evaluation based on abstract of title

Metes and bounds describes boundary lines with terminal points and angles, used when accuracy is required. Meridians and range lines/townships form the government survey (rectangular) system.

• ✓Metes and bounds sets forth boundary lines, terminal points, and angles
• ✓Meridians are north-south lines intersecting base lines
• ✓A township is 6 miles square containing 36 sections; a section is 640 acres, one mile square

A mile is 5,280 feet, a yard is 3 feet long, a section contains 640 acres and is one mile square, and a township is 6 miles square with 36 sections.

• ✓Mile = 5,280 feet
• ✓Yard = 3 feet
• ✓Section = 640 acres, one mile square
• ✓Township = 6 miles square = 36 sections

A minor is a person under 18 years of age; this affects capacity to contract in real estate transactions.

• ✓A minor is a person under 18 years of age