Property Ownership + Land Use
15%of exam
Laws of Agency + Fiduciary Duties
17%of exam
Valuation + Financial Analysis
14%of exam
Financing
9%of exam
Transfer of Property
8%of exam
Practice + Mandated Disclosures
25%of exam
Contracts
12%of exam
Quick Facts
- Exam
- CA DRE Broker
- Questions
- 200 multiple choice
- Time
- 4 hours
- Pass
- 75% = 150/200
- Choices
- Four per question
- Exam fee
- $150 (re-exam $150)
- License fee
- $450 original broker license
- Pass rate
- 47% FY 2025-26
- Education
- 8 courses, 360 hours
- Experience
- 2 years salesperson
- Blueprint
- RE 425 Rev. 6/25
- Score report
- Only failures get scores
Property Tax Dates
No Darn Fooling Around: Nov, Dec, Feb, Apr
Nov 1: first installment dueDec 10: first delinquentFeb 1: second installment dueApr 10: second delinquent
Lands Act vs Map Act
Subdivided Lands Act
- DRE administers
- Public report required
- Protects buyers
Subdivision Map Act
- City or county
- Tentative and final maps
- Physical design
Selling versus dividing
Estates + Vesting
- Fee simple
- Most complete ownership
- Life estate
- Ends at measuring life
- Severalty
- Sole owner
- Joint tenancy
- Equal shares, survivorship
- Tenancy in common
- Unequal shares, heirs inherit
- Community property
- Spouses, equal halves
- CP with survivorship
- Avoids probateCA
- Tenancy in partnership
- Partners hold business realty
- Leasehold
- Possession without ownership
Joint Tenancy Unities
PITT: possession, interest, time, title
Possession: equal rightInterest: equal shareTime: same momentTitle: same document
Joint Tenancy vs Community Property
Joint tenancy
- Four unities required
- Right of survivorship
- Any two people
Community property
- Spouses only
- Equal halves
- Half is willable
Survivorship versus spousal share
Encumbrances + Liens
- Easement appurtenant
- Runs with the land
- Easement in gross
- Personal, no dominant tenement
- Encroachment
- Unauthorized physical intrusion
- License
- Revocable personal permission
- CC&Rs
- Private deed restrictions
- Mechanic's lien
- Unpaid labor or materials
- Lis pendens
- Notice of pending lawsuit
- Judgment lien
- Recorded abstract, 10 years
- Homestead
- $300k-$600k base, indexed
Land Use Controls
- Police power
- Zoning, no compensation owed
- Eminent domain
- Taking with just compensation
- Escheat
- No heirs, state takes
- Variance
- Exception to zoning
- Conditional use permit
- Special use allowed
- Nonconforming use
- Legal before zoning changed
- Downzoning
- Reduces permitted intensity
- CEQA
- Environmental impact review
- Subdivided Lands Act
- DRE public report
- Subdivision Map Act
- Local map approval
- Williamson Act
- Farmland tax relief
- Coastal Commission
- Coastal development permits
California Property Taxes
- Proposition 13
- 1% base, 2% cap
- Reassessment
- Sale or new construction
- Proposition 19
- Base transfer for seniors
- Supplemental bill
- Follows a reassessment
- Homeowner exemption
- $7,000 assessed reduction
- Lien date
- January 1 yearly
- Installments due
- November 1, February 1
- Delinquent after
- December 10, April 10
- Documentary transfer tax
- $0.55 per $500
- Mello-Roos
- CFD special tax
- 1915 Bond Act
- Assessment district bonds
Fiduciary Duties
OLDCAR: obedience, loyalty, disclosure, confidentiality, accounting, care
O: obedienceL: loyaltyD: disclosureC: confidentialityA: accountingR: reasonable care
Fiduciary vs Third-Party Duty
To your principal
- Utmost care, loyalty
- Confidentiality
- Full disclosure
To other party
- Honesty, fair dealing
- Disclose material facts
- No loyalty owed
Loyalty only to client
Agency Types + Creation
- Special agent
- One deal, limited authority
- General agent
- Ongoing, property manager
- Universal agent
- Broad power of attorney
- Express agency
- Stated written agreement
- Ratification
- Approved after the act
- Estoppel
- Conduct implies authority
- Ostensible agency
- Principal's conduct creates it
- Coupled with interest
- Principal cannot revoke
- Subagent
- Serves the same principal
Agency Three Steps
Disclose, Elect, Confirm
Disclose: deliver the formElect: choose the roleConfirm: state in contract
Fiduciary Duties
- Obedience
- Follow lawful instructions
- Loyalty
- Client interest first
- Disclosure
- Reveal all material facts
- Confidentiality
- Protect bargaining position
- Accounting
- Track funds and documents
- Reasonable care
- Competent, diligent service
- Third-party duty
- Honesty and fair dealing
- Visual inspection
- 1-4 units, accessible areas
- Inspection suit limit
- 2 years from possession
- Secret profit
- Undisclosed extra compensation
Agency Disclosure Timing
- Listing agent
- Before signing listing agreement
- Buyer's agent
- Before buyer signs offer
- Seller's copy
- Before presenting the offer
- Confirmation
- In or with contract
- Property scope
- Residential and commercial
- Leases covered
- Longer than one year
- Dual agency
- Written consent from both
- Price confidentiality
- Never reveal without permission
- Buyer agreement deadline
- By offer execution
Elements of Value
DUST: demand, utility, scarcity, transferability
Demand: buyers want itUtility: serves a purposeScarcity: limited supplyTransferability: title can pass
Cap Rate vs GRM
Cap rate
- Uses net income
- Value = NOI/rate
- Expense sensitive
GRM
- Uses gross rent
- Price / rent
- Ignores expenses
Net versus gross
Value Approach Picker
- Income producing property→Income approach(Capitalize NOI)
- New or special purpose→Cost approach(Land added separately)
- Single-family resale→Sales comparison(Adjust the comparables)
- Fast rent screen→Gross rent multiplier(Ignores expenses)
- Vacant land→Sales comparison(Highest and best use)
- Insurance replacement value→Cost approach(Excludes the land)
Valuation Formulas
- Cap rate
- NOI / value
- Value
- NOI / cap rate
- NOI
- Effective income - expenses
- Effective gross income
- Gross income - vacancy
- GRM
- Price / monthly rent
- GIM
- Price / annual income
- Cost approach
- Cost - depreciation + land
- Age-life depreciation
- Effective age / economic life
- Equity
- Value less liens
- Commission
- Price x rate
- Seller net
- Price less costs, loans
- Profit percent
- Gain / original cost
Highest and Best Use
Legal, physical, feasible, most productive
Legally permissiblePhysically possibleFinancially feasibleMaximally productive
Principles of Value
- Substitution
- Cheapest equivalent sets value
- Conformity
- Similar uses maximize value
- Progression
- Better neighbors raise value
- Regression
- Worse neighbors lower value
- Contribution
- Value an improvement adds
- Anticipation
- Future benefits drive value
- Highest and best use
- Greatest net land return
- Plottage
- Assemblage adds value
- Change
- Value is never static
- Supply and demand
- Scarcity lifts price
Depreciation + Obsolescence
- Physical deterioration
- Wear, age, damage
- Functional obsolescence
- Bad layout or design
- External obsolescence
- Off-site cause, incurable
- Curable
- Cost less than gain
- Incurable
- Fix costs exceed benefit
- Effective age
- Condition, not actual age
- Economic life
- Years improvement adds value
- Accrued depreciation
- Total loss from new
Trust Deed vs Mortgage
Deed of trust
- Three parties
- Power of sale
- No post-sale redemption
Mortgage
- Two parties
- Judicial foreclosure
- Redemption allowed
Trustee versus court
Foreclosure Path
- Deed of trust default→Trustee's sale(Nonjudicial and faster)
- Notice of default recorded→3-month reinstatement(Cure stops the sale)
- Notice of sale given→20 days minimum(Published, posted, mailed)
- Five days before sale→Reinstatement ends(Full payoff still works)
- Lender wants deficiency→Judicial foreclosure(Court supervised)
- After judicial sale→Redemption period(3 months or year)
Loan Instruments + Clauses
- Promissory note
- Evidence of the debt
- Deed of trust
- Trustor, trustee, beneficiary
- Mortgage
- Two parties, judicial foreclosure
- Hypothecation
- Pledge, keep possession
- Acceleration clause
- Whole balance due now
- Alienation clause
- Due on sale
- Subordination
- Lien accepts junior position
- Assumption
- Buyer takes personal liability
- Subject to
- No buyer liability
- Novation
- New party replaces old
- Reconveyance
- Trustee clears paid loan
- Prepayment penalty
- Charge for early payoff
Financing + Credit Laws
- TILA / Reg Z
- Discloses cost of credit
- Loan Estimate
- Within 3 business days
- Closing Disclosure
- 3 days before signing
- Rescission right
- 3 days, refinance only
- RESPA
- Settlement services, no kickbacks
- ECOA
- No credit discrimination
- MLDS
- Broker disclosure, 3 days
- Article 7 reach
- First <$30k, junior <$20k
- Article 7 commission
- 5%, 10%, or 15%
- Article 7 costs
- 5% or $390, $700 cap
- Usury limit
- 10% for nonexempt lenders
- Seller carryback
- Financing disclosure required
Loan Types + Programs
- Conventional
- No government backing
- FHA
- Insured, low down payment
- VA
- Guaranteed for veterans
- CalVet
- State buys, resells veteran
- CalHFA
- First-time buyer assistance
- ARM
- Index plus margin adjusts
- LTV
- Loan / value ratio
- PMI
- Conventional low-down insurance
- Hard money
- Private equity-based loan
- AITD
- Wraparound seller financing
- Blanket loan
- Many parcels, release clause
- Impound account
- Taxes and insurance reserve
Grant vs Quitclaim
Grant deed
- Two implied warranties
- No prior conveyance
- No hidden encumbrances
Quitclaim deed
- No warranties at all
- Releases what exists
- Clears clouds
Warranty versus release
Deeds + Title
- Grant deed
- Two implied warranties
- Quitclaim deed
- Releases interest, no warranty
- Trustee's deed
- Issued after trustee's sale
- Sheriff's deed
- Issued after judicial sale
- Gift deed
- Love and affection
- Valid deed
- Written, signed, delivered, accepted
- Acknowledgment
- Notarized, needed to record
- Recording
- Constructive notice to all
- Chain of title
- Successive ownership record
- Cloud on title
- Claim clouding ownership
- CLTA
- Standard, record plus forgery
- ALTA
- Extended, adds physical risks
CLTA vs ALTA
CLTA standard
- Matters of record
- Forgery, incompetence
- No survey
ALTA extended
- Adds physical inspection
- Parties in possession
- Unrecorded easements
Record versus off-record
Escrow + Closing
- Escrow
- Neutral dual agent
- Valid escrow
- Binding contract, conditional delivery
- Escrow licensing
- DFPI licenses escrow companies
- Broker exemption
- Own transactions only
- Proration
- 360-day banker's year
- Buyer debits
- Price and loan costs
- Seller credits
- Price, prepaid taxes
- FIRPTA
- 15% foreign seller withholding
- CA withholding
- 3 1/3% of price
- Withholding exemption
- Price $100,000 or less
- Escrow complete
- All conditions satisfied
Trust Fund Numbers
3 days in, $200 rest, 25 days out
3 business days to deposit$200 broker funds allowed25 days to take commissionReconcile every month
Commingling vs Conversion
Commingling
- Mixing funds together
- Records may exist
- B&P 10176(e)
Conversion
- Spending client money
- Misappropriation
- Revocation likely
Mixing versus taking
Trust Fund Destination
- Broker receives buyer deposit→Trust account(Within 3 business days)
- Principal wants funds back→Hand to owner(Same 3-day limit)
- Transaction opens escrow→Neutral escrow depository(Also compliant)
- Salesperson accepts check→Give broker immediately(No 3-day window)
- Buyer says hold check→Keep it uncashed(Written instruction, disclose)
- Broker's own money→$200 maximum(Service charges only)
- Commission fully earned→Withdraw in 25 days(Longer is commingling)
- Disbursement causes shortage→Get written consent(From every owner)
Trust Fund Rules
- Deposit deadline
- 3 business daysKey
- Three destinations
- Owner, escrow, trust account
- Salesperson receipt
- Give broker immediately
- Broker's own funds
- $200 for service charges
- Earned commission
- Withdraw within 25 days
- Reconciliation
- At least once monthly
- Beneficiary record
- Separate record per principal
- Signatory bond
- Unlicensed signer must bond
- Shortage consent
- Written consent every owner
- Interest earned
- Belongs to the owner
- Record retention
- 3 years from closing
- Uncashed check
- Written instruction, disclose it
Broker vs Salesperson Exam
Broker exam
- 200 questions
- 4 hours
- 75% to pass
Salesperson exam
- 150 questions
- 3 hours
- 70% to pass
Longer and stricter
Which Disclosure
- Selling 1-4 units→Transfer Disclosure Statement(Cannot be waived)
- Property in mapped zone→Natural Hazard Disclosure(Six statutory zones)
- Built before 1978→Lead paint disclosure(10-day inspection right)
- Inside a CFD→Mello-Roos notice(Good faith effort)
- Buyer asks about offenders→Megan's Law notice(No duty to research)
- Seller carries the note→Seller financing disclosure(1-4 residential units)
- Taking a listing→Agency disclosure form(Before signing listing)
- Death occurred on property→Disclose for 3 years(Not AIDS-related deaths)
Supervision + Office Rules
- Regulation 2725
- Written supervision policies
- Regulation 2726
- Broker-salesperson written agreement
- Responsible broker
- Cannot delegate final responsibility
- Branch office
- License each added location
- Address change
- Report next business day
- Designated officer
- Corporation's licensed broker
- Salesperson license
- Held under employing broker
- Independent contractor
- Still fully supervised
- Unlicensed assistant
- No soliciting or negotiating
Advertising + Identification
- License ID number
- Required on solicitations
- NMLS ID
- Required for loan activity
- Blind ad
- Hides licensee status
- Fictitious name
- Register DBA with DRE
- Team name
- Broker name must appear
- First contact
- Identify yourself as licensee
- Electronic ads
- Same rules as print
- False advertising
- Grounds for discipline
Fair Housing Laws
- Federal Fair Housing
- Seven protected classes
- FEHA
- Broader California protections
- Unruh Act
- Business establishments, all customers
- Holden Act
- Bans lender redlining
- Blockbusting
- Panic selling for profit
- Steering
- Channeling by protected class
- Redlining
- Denying loans by area
- Source of income
- Includes housing vouchers
- ADA
- Public accommodation access
Property Management + Rentals
- Manager license
- Broker license managing others
- Resident manager
- Required at 16 units
- Security deposit
- One month's rent maximum
- Small landlord
- Two months, narrow exception
- Deposit return
- Within 21 days
- AB 1482 cap
- 5% plus CPI, 10% max
- Just cause
- After 12 months occupancy
- Entry notice
- 24 hours written notice
- Nonpayment notice
- 3-day notice to pay
- Termination notice
- 30 or 60 days
DRE Discipline + Recovery
- B&P 10176
- Violations during licensed activity
- B&P 10177
- Grounds outside transactions
- Desist and refrain
- Order stopping conduct
- Restricted license
- Conditional, probation terms
- Suspension
- Temporary license loss
- Revocation
- License permanently taken
- Recovery Account
- $50,000 per transaction
- Aggregate cap
- $250,000 per licensee
- Automatic suspension
- Until fund repaid, interest
- Renewal cycle
- 4 years, 45 hours
Exclusive Right vs Exclusive Agency
Exclusive right to sell
- Broker always paid
- Owner sale included
- Most protective
Exclusive agency
- Owner sale exempt
- One broker only
- Commission at risk
Owner sale decides
Listing Agreement Picker
- Seller wants full effort→Exclusive right to sell(Paid regardless of seller)
- Seller may sell alone→Exclusive agency(Owner sale pays nothing)
- Several brokers competing→Open listing(Procuring cause paid)
- Broker keeps excess price→Net listing(Disclose before approval)
- Representing a buyer→Buyer representation agreement(Three months maximum)
- Any exclusive listing→Add termination date(Omission risks discipline)
Contract Essentials + Status
- Valid contract
- Capacity, consent, object, consideration
- Void
- No legal effect ever
- Voidable
- One party may cancel
- Unenforceable
- Valid but not provable
- Bilateral
- Promise for a promise
- Unilateral
- Promise for performance
- Executory
- Not yet fully performed
- Statute of frauds
- Must be in writing
- Written action limit
- 4 years to sue
- Oral action limit
- 2 years to sue
- Assignment
- Rights pass, liability remains
- Counteroffer
- Rejects and replaces offer
Listing + Compensation Rules
- Exclusive right to sell
- Broker paid regardless
- Exclusive agency
- Owner sale avoids commission
- Open listing
- Procuring cause is paid
- Net listing
- Excess becomes broker's fee
- Termination date
- Required in exclusive listings
- Safety clause
- Protects post-expiration sales
- Procuring cause
- Uninterrupted effort producing buyer
- Buyer agreement term
- Three months maximum
- Entity buyers
- Exempt from month cap
- Commission source
- Only employing broker pays
Purchase Contract Rules
- Liquidated damages
- 3% presumed reasonable
- Separate initials
- Required for damages clause
- Contingency period
- 17 days, form default
- Option
- Unilateral, consideration required
- Option holder
- No equitable title yet
- Advance fee
- DRE review, 10 days
- Advance fee money
- Treated as trust funds
- Acceptance
- Communicated to be binding
- Time is essential
- Deadlines strictly enforced
Common Traps
Commingling vs conversion
Commingling mixes funds ≠ Conversion spends them
Passing score differs
Broker needs 75% ≠ Salesperson needs 70%
Deposit timing
Broker gets 3 days ≠ Salesperson delivers immediately
Which property adjusts
Comparables get adjusted ≠ Subject is never adjusted
Cap rate direction
Higher rate, lower value ≠ Lower rate, higher value
Who approves subdivisions
Map Act is local ≠ Lands Act is DRE
Who licenses appraisers
BREA licenses appraisers ≠ DRE licenses brokers
Mello-Roos and Proposition 13
Proposition 13 caps 1% ≠ Mello-Roos adds more
Reinstatement window
Ends 5 days early ≠ Payoff lasts until sale
Article 7 thresholds
First deeds under $30,000 ≠ Junior liens under $20,000
Exam is qualifying only
Failing candidates see scores ≠ Passing candidates see none
Last Minute
- 1.Broker exam: 200 questions, 4 hours
- 2.Passing score is 75 percent
- 3.Practice + disclosures is 25%
- 4.Agency 17%, ownership 15%, valuation 14%
- 5.Trust funds: deposit within 3 days
- 6.Broker may leave $200 only
- 7.Reconcile trust account every month
- 8.Keep transaction records 3 years
- 9.Value = NOI / cap rate
- 10.GRM uses gross rent only
- 11.Adjust comparables, never the subject
- 12.Grant deed carries two warranties
- 13.Transfer tax: $1.10 per $1,000
- 14.Recovery Account pays $50,000 maximum
- 15.Buyer agreements cap at 3 months
- 16.Exclusive listings need termination dates
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