California Real Estate Salesperson

Key Concepts

Classes of property - In English Common Law, "property" meant the owner's bundle of rights — to possess, use, encumber, transfer and exclude others (Ch. 4 — Historical Derivations). - Real property = (1) land; (2) anything affixed as a permanent part; (3) that which is incidental or appurtenant; (4) that which is immovable by law (Ch. 4 — The Modern View). - Land includes soil and rock plus the space beneath to the center of the earth and above to the top of the sky; a landowner may drill vertically for oil and gas but has no right to drill slantwise under a neighbor's land (Ch. 4 — Land). - Less-than-freehold estates (leases) are personal property; freehold estates are real property (Ch. 4 — Less-Than-Freehold Estates). - Civil Code § 761 classifies estates by duration as: estates of inheritance/perpetual, estates for life, estates for years, estates at will (Ch. 4 — "Modern" Estates). - A chose in action is the right to recover money or other personal property through judicial proceeding (Ch. 4 — Personal Property). - A tenant's crops, industrial growing crops, and things agreed to be severed before sale are treated as goods (Ch.…

Key Concepts

Definition and nature of agency - "An agent is one who represents another, called the principal, in dealings with third persons. Such representation is called agency." (Civil Code § 2295, enacted 1872). - General agent: authorized to conduct a series of transactions involving a continuity of service (Civil Code § 2295; Restatement (Second) of Agency § 3(1)). Special agent: conducts a single transaction or series of transactions not involving continuity of service (Civil Code § 2297; Restatement § 3(2)). A real estate broker is usually a special agent, limited to soliciting and negotiating; brokers generally may not bind or act in place of the principal. Acting in place of the principal requires a power of attorney. - A salesperson is the agent of the broker; the salesperson's duty to any party is equivalent to the duty owed by the broker (Civil Code § 2079.13(b)). - Fiduciary duty of brokers is compared by the courts to the duty of a trustee to beneficiaries under a trust (Civil Code § 2322; Probate Code §§ 16000–16105).

California Real Estate Salesperson — Appraisal and Valuation

Key Concepts

Value, price and cost (USPAP definitions) - Value expresses an economic concept and "is never a fact, but always an opinion of the worth of a property at a given time in accordance with a specific opinion of value." In appraisal practice, value must always be qualified — e.g., market value, liquidation value, investment value. (Appraisal and Valuation chapter – USPAP Definition of Value; Qualification Requirement) - Price is the amount asked, offered, or paid. "Once stated, price is a fact, whether publicly disclosed or retained in private." (USPAP Definition of Price) - Cost is "the amount required to create, produce, or obtain a property," and is either a fact or an estimate of fact. (USPAP Definition of Cost)

Elements of value: utility, scarcity, demand (together with financial ability to purchase), and transferability — all four must be present. Utility is the capacity of a commodity to satisfy a need or desire. (Four Elements of Value; Utility as Element of Value)

California Real Estate Salesperson

Key Concepts

Notes, Deeds of Trust & Security Interests - The promissory note is the evidence of indebtedness and the borrower's promise to pay; the security instrument (deed of trust or mortgage) establishes the lender's security interest in the property (DRE Reference Book, Ch. 12 — Promissory Note). - The deed of trust is the security instrument most frequently used in California real estate loan transactions (Ch. 12 — Security Interest / In General). - Civil Code Section 2920 was amended in 1986 so that "mortgage" also means any security device or instrument that confers a power of sale affecting real property, to be exercised after breach of the obligation so secured (Ch. 12). - One security instrument may secure several debts/loans or obligations (present or future), and one debt may be secured by several instruments on several parcels (Ch. 12 — Additional Characteristics). - The trustor/mortgagor need not be the debtor — one person may give a deed of trust to secure another's obligation, or act as surety/guarantor (Ch. 12 — Additional Characteristics). - A "hidden security device" — a grant deed used as a "deed absolute" to secure a debt — is typically…

California Real Estate Salesperson

Key Concepts

Deeds in general. A deed transfers title from grantor to grantee when properly executed, delivered and accepted. Essentials include: in writing; parties properly described; parties competent; property described so as to distinguish it; a granting clause with operative words of conveyance (e.g., "I hereby grant"); signed by the party making the conveyance; and delivered and accepted. The habendum clause ("to have and to hold"), witnesses, and a seal are not required; a deed need not be acknowledged or recorded to be valid. (Ch. 7 — Deeds in General; Civil Code Section 1092 designates "grant" as a word of conveyance.)

Types of deeds (Ch. 7 — Types of Deeds): - Grant deed — implied warranties; generally conveys after-acquired title. - Quitclaim deed — conveys only the interest held at the time the conveyance is executed; no implied warranties; does not convey after-acquired title; generally used to clear a "cloud on the title." - Warranty deed — express covenants of title; uncommon in California because of the almost universal reliance on title insurance to evidence marketable title. - Reconveyance deed — executed by the trustee back to the trustor upon the beneficiary's "Request for Full…

Key Concepts

Trust fund handling and timing - Trust funds accepted on behalf of another must be placed into the hands of the owner of the funds, into a neutral escrow depository, or into a trust fund account "not later than three business days following receipt of the funds by the broker or by the broker's salesperson" (Commissioner's Regulation 2832(a); B&P Code §10145(a)(1)). - A broker not licensed under the Escrow Law who acts as escrow holder in a real estate purchase and sale, exchange, or loan transaction must deposit funds not later than the next business day following receipt (Commissioner's Regulation 2832(e)). - A broker may deposit and keep a reasonably sufficient amount, not to exceed $200, in the trust account to pay bank service charges or fees; this is not commingling (Commissioner's Regulation 2835(a); §10145(c)). - When the broker's right to a portion of trust funds is disputed by the principal, the disputed portion shall not be withdrawn until the dispute is finally settled (Regulation 2835(b)). - Written consent of every principal who owns funds in the account is required before a disbursement that would reduce the balance below the existing aggregate trust fund liability to all…

Key Concepts

General / dual-role disclosure - A licensee acting as both agent in a sale, lease, or exchange and arranger of financing must make written disclosure of both roles to all parties within 24 hours of the undertaking, including an acknowledgment of receipt signed by all parties (Commissioner's Regs, Article 18, §2903). Where the licensee is a salesperson, the disclosure must be made by the retaining broker. - Failure to disclose the form, amount and source of lender compensation to both parties prior to closing is misrepresentation under §10176(a) (Reg. §2904).

Listing agreements (DRE Reference Book, Ch. 20) - A listing is a bilateral contract: broker promises due diligence in finding a buyer; seller grants exclusive rights and agrees to pay compensation. - A listing must have a definite term, ending at 11:59 PM on a specified day (Ch. 20, "Term"). - Residential property of not more than four units: the listing must contain, in not less than 10-point boldface type, notice that commissions are not fixed by law and may be negotiable (B&P Code §10147.5). - Protection clause: a period after expiration during which compensation is protected if the owner personally sells to someone who physically entered…