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The purpose of this sample program is to give you an insight into the subject matter and vocabulary that you will be tested-on when taking your actual state exam along with the study process you will be following as you go through our study program. This is not a sample of the Qualification Course material or its study process, which is somewhat different than studying for the actual state exam, as the purpose of those courses are to simply get your certificates of completions so you can qualify for a state exam testing date. This is a sample of License Preparation Program…Our 178-page Exam Review Guide which is used to follow along with the DVD and is the focused subject matter and vocabulary you will be tested on for the state exam.

To start, simply read the information provided in AREA I through AREA VII and then complete the sample test. When you have finished the test you may find that you have missed some of the answers to the questions. If so, this would most likely be due to you only having the opportunity to read the material one time. This the very reason why we have developed a study program that gives you all the necessary components of the program such as our Exam Review Guide, DVD, and the Lightning Review CDs. By reading and listening to these over and over, they will provide you with the repetition that we have found to be absolutely crucial in order to properly understand and memorize this large scope of subject matter

Below you will see exactly how simple and easy the process actually is. In result you will not waste your time studying a massive amount of information you don’t need and therefore have a greater chance of passing your state exam on the first try!

Good Luck,



LAND (Boundaries)

  1. Surface: The area on the surface of the Earth.
  2. Material beneath the surface: Extends to the center of the Earth. Reasonable rights to surface entry implied unless entry is expressly limited to a footage below the surface.
  3. Airspace: Infinite height. Due to modern changes it is subject to air travel and may be used only to a “Reasonable And Enjoyable Height”



(Not an encumbrance – Provides protection against the forced sale of a residence)

Purpose: A California Law that allows an owner to protect their home from foreclosure sale resulting from unsecured judgment liens up to specified limited sums.

Eligible Property (Only one residence can be homesteaded at a time)

Will Terminate a Homestead

  1. Sale of property (Title transferred to another).
  2. Filing a “Declaration Of Abandonment of Homestead”.

Will Not Terminate a Homestead

  1. Improvements partially or totally destroyed by fire.
  2. Moving from the premises
    e.g. – Property not sold, but leased to another .



An agency of the Department of Consumer Affairs

Purpose: To enforce California Real Estate Laws .

Maintains Real Estate Accounts For Education, Research and Recovery.

The Department of Real Estate is a self supporting agency, supported by collected fees . Of fees collected, a portion is required to be placed into two separate accounts:

  1. Education & Research Fund
    Earmarks funds for real estate Education and Research.
  2. Recovery Fund
    Underwrites payment of uncollectable judgments
    against insolvent licensees for amounts limited to:
    a. $50,000 per each individual claim
    b.$250,000 maximum (total claims) per licensee



Four Essential Elements Required

  1. Parties Capable Of Contracting
  2. Mutual Consent
  3. Lawful Object
  4. Sufficient Consideration



(Value and Worth have the same meaning)

  1. UTILITY (Most Important)
    To have value, an item must have a use. The use to which an item is put which produces the “Greatest Net Return ” is known as it’s Highest and Best Use .
    A shortage of available supply compared to demand for item.
    The desire to possess. In order to be effective it must be backed by Purchasing Power .
  4. TRANSFERABILITY (Critical to value, but least important of the four)
    The condition and capability of the title to be conveyed.

NOTE: Cost is not an element of value. Cost represents what was paid for an item.
Example: Buyer paid $100,000 (Cost) in 2001 and just recently resold for $250,000 (Value).


TWO TYPES OF LENDERS – Institutional vs. Non-Institutional

Commercial Banks (State or Nationally chartered)
Savings and Loan Associations (State or Federally chartered)
Life Insurance Companies
Mutual Savings Banks (Located Predominantly in Northeastern U.S.)
Credit Unions

Thrift Companies
Endowed Universities
Private Investors (Individuals or groups. e.g. – sellers, brokers)
Pension Funds
Mortgage Companies – Only considered lenders if they loan money directly to the borrower.


That property which is not real property.

A. Personal property can be Tangible or Intangible

  1. Tangible: Items that may be physically possessed.
  2. Intangible: Items having no physical substance.
    e.g. – Rights given by contract, labor, etc.

Sample Test

  1. The classic definition of boundaries of real property is:
    1. a reasonable distance down, unlimited airspace
    2. pratical or reasonable use of the earth and unlimited airspace
    3. surface area indicated on a map
    4. airspace use to a reasonable and enjoyable height, extended to center of Earth

  2. Of the following, which could automatically terminate a Homestead?
    1. moving from the property
    2. move from California
    3. house partially destroyed by fire homestead
    4. prior homestead recorded

  3. The main purpose of the Bureau of Real Estate's Recovery Fund is:
    1. to develop education in the real estate field
    2. for brokers to receive uncollectable commissions
    3. for the public to collect damages against a licensee
    4. for the public to collect a limited amount of damages from insolvent licensee

  4. In a contract there are essential elements that must be present to create a valid and binding contract. All of the following would describe one of these elements, except:
    1. proper writing
    2. capability
    3. mutual consent
    4. lawful object

  5. Of the four major characteristics that create value, which would be the least important?
    1. utility
    2. scarcity
    3. demand
    4. transferabliity        

  6. Concerning institutional lenders. All the following are incorrect, except:
    1. pension funds
    2. insurance companies
    3. universities
    4. mortgage companies

  7. The transfer of personal property is evidenced by the use of a:
    1. Chattel Mortgage
    2. Land Contract of Sale
    3. Deed
    4. Bill of Sale