Exam Cheat Sheet · Quick Reference
California Real Estate Salesperson
California · California Department of Real Estate (DRE)
California State Portion 150 questions
Key Distinctions
A special agent (the usual classification of a real estate broker) is authorized to conduct a single transaction or series of transactions not involving continuity of service, while a general agent is authorized to conduct a series of transactions involving a continuity of service and is an integral part of a business enterprise.
DRE Reference Book (2010), Chapter 10 (Agency); Civil Code § 2297Actual authority focuses on what the agent is led to believe, while ostensible authority is that which the principal intentionally, or by want of ordinary care, causes or allows third persons to believe the agent possesses.
Ca Code Excerpts, Civil Code § 2317A grant deed generally conveys any after-acquired title the grantor obtains after executing the conveyance, whereas a quitclaim deed transfers only the interest the grantor holds when the conveyance is executed and conveys no after-acquired title.
DRE Reference Book (2010), Chapter 7 - Principal Instruments of Transfer, Grant Deed and Quitclaim DeedRiparian rights attach to land bordering or crossed by flowing water (rivers, streams); littoral rights attach to land bordering standing water (lakes, oceans); both generally run with the land and cannot be sold separately from it.
Ca Code Excerpts — Civil Code, Water Rights, Riparian RightsUnder USPAP, price is the amount asked, offered, or paid and becomes a fact once stated (whether publicly disclosed or retained in private), while value is never a fact but always an opinion of worth at a given time.
Appraisal and Valuation chapter – USPAP Definitions of Price and ValueIn the Cost Approach, replacement cost new views the building as reconstructed with modern methods, design, and materials providing the same utility, while reproduction cost new is the cost of an exact replica in actual design and materials.
Appraisal and Valuation chapter – Cost Approach, Replacement vs. Reproduction Cost NewDirect capitalization converts income from a single annual period into an opinion of value, while yield capitalization measures the present worth of a series of income payments occurring over the multi-year life of the investment.
Appraisal and Valuation chapter – Income Approach, Direct vs. Yield Capitalization definitionsPolice power regulates private property use (zoning, building codes, environmental rules) to promote public health, safety, morals, and general welfare without compensating the owner, while eminent domain requires just compensation for taking property for public use.
DRE Reference Book (2010), Ch. 5 (Title to Real Property) — Restrictions, Zoning as Public Use RestrictionJoint tenancy's most important characteristic is the right of survivorship (excluding heirs/devisees of the deceased) and requires the four unities of interest, title, time, and possession; tenancy in common has no right of survivorship and is presumed when a conveyance to two or more persons does not specify joint tenancy, partnership, or community property.
DRE Reference Book (2010), Ch. 4 (Property) — Civil Code Section 683Under an exclusive agency listing the broker is protected against other brokers but the owner retains the right to sell independently, which defeats the commission; the exclusive right to sell does not permit that defeat.
DRE Reference Book (2010), Chapter 19 (Brokerage) — Types of Listing AgreementsAn appurtenant easement benefits a dominant tenement and burdens a servient tenement, while an easement in gross is a personal right attached to the holder (e.g., a utility stringing wires with no adjacent land owned) rather than to any dominant tenement.
DRE Reference Book (2010), Ch. 5 (Title to Real Property) — Easements, Appurtenant EasementsBoth divide a comparable's sales price by its income, but GRM uses gross monthly rent while GIM uses annual income.
Appraisal and Valuation chapter – GRM vs. GIM, Monthly vs. Annual Income DistinctionKey Terms
Formulas to Know
I ÷ R = V — Net Annual Income ÷ Overall Capitalization Rate = Property Value (e.g., $60,000 ÷ 0.08 = $750,000; $120,000 ÷ 0.07 = $1,714,286)R = I ÷ V — Net Annual Income ÷ Sales Price (e.g., $52,500 ÷ $750,000 = 7%); a higher cap rate indicates a better return relative to price and typically suggests higher perceived riskPotential Gross Income − vacancy and collection loss = Effective Gross Income; Effective Gross Income − annual operating expenses = Net Operating Income (e.g., $180,000 × 0.95 = $171,000; $171,000 − $68,400 = $102,600)GRM = comparable's sales price ÷ its gross monthly rent (e.g., $234,000 ÷ $1,800 = 130); Value = selected GRM × subject's monthly market rent (e.g., 130 × $2,100 = $273,000). Multipliers are NOT averaged — compare each comparable to the subject and select the GRM of the most comparable propertyLand value + Replacement cost new of improvements − total accrued depreciation (physical deterioration + functional obsolescence + external obsolescence) = Value (e.g., $200,000 + $800,000 − $350,000 = $650,000)Annual depreciation = Reproduction cost ÷ total economic life; Total depreciation = annual × effective age; Value = (Reproduction cost − total depreciation) + land value (e.g., $340,000 ÷ 50 = $6,800; × 12 = $81,600; $258,400 + $95,000 = $353,400)Interest = Principal × Rate × Time (days ÷ 360) (e.g., $6,500 × 0.08 × 90/360 = $130.00)Maximum loan = LOWER of sale price or appraised value × LTV%; Down payment = Sale price − maximum loan (e.g., $305,000 × 0.80 = $244,000; $310,000 − $244,000 = $66,000)Sale Price = Purchase Price × (1 + profit %), so Purchase Price = Sale Price ÷ (1 + profit %) (e.g., $276,000 ÷ 1.15 = $240,000); do not apply the percentage to the sale priceArea = ½ × base × height; Acres = area in sq ft ÷ 43,560 (e.g., ½ × 320 × 250 = 40,000 sq ft; 40,000 ÷ 43,560 ≈ 0.92 acres)