Real Estate Exam:
Don't Fall for These Tricks

The Trap

Words like NOT, EXCEPT, or LEAST can completely flip the meaning of a question. These are “qualifying statements”—they introduce a special condition. If you miss one of these words, you might be searching for a different answer than the question is actually asking.

Example Question

Which of the following is NOT a protected class under California’s Fair Employment and Housing Act (FEHA)?

Possible Answers

A. Race

B. Religion

C. Marital Status

D. Political Affiliation

Why the Incorrect Answers Are Wrong

• A. Race: Race is explicitly protected by FEHA. You’d only pick this if you missed the word “NOT.”
• B. Religion: Religion is also a protected class.
• C. Marital Status: FEHA protects people from discrimination based on marital status.

Why the Correct Answer Is Correct

• D. Political Affiliation: FEHA does not explicitly list “political affiliation” as a protected class. However, under case law (e.g., Siri v. Sutter Home Winery), there may be some legal protection against wrongful termination based on political affiliation or activity. Despite that, if we’re strictly looking at FEHA’s enumerated categories, “political affiliation” is not spelled out. Therefore, given the question’s wording, D is the best choice here.

The Trap

Two negatives can make a positive—one of the oldest grammar tricks in the book. Exam questions might say: “Which of the following is not impossible to enforce?” That’s confusing, right?

Example Question (Using Liquidated Damages)

Which of the following statements regarding the liquidated damages clause in a California real estate contract is not unlikely to be true?

(Note the double negative: “not unlikely” means “likely.”)

Possible Answers

A. The seller can collect liquidated damages if the buyer breaches, provided the clause is initialed by both parties.

B. The buyer cannot agree to any damages in writing.

C. Liquidated damages clauses are never enforced in California.

D. Liquidated damages clauses must be waived for the contract to be valid.

Why the Incorrect Answers Are Wrong

• B. The buyer cannot agree to any damages in writing: Buyers and sellers often do agree to a set amount (liquidated damages), typically in writing.
• C. Liquidated damages clauses are never enforced: “Never” is too absolute—California does enforce such clauses if they follow certain guidelines.
• D. They must be waived: There is no requirement to waive liquidated damages clauses; they’re common, especially if both parties initial them.

Why the Correct Answer Is Correct

• A. The seller can collect liquidated damages if the buyer breaches... This is standard practice, provided the clause is properly included and initialed. The question’s wording, “Which is not unlikely to be true?” is essentially asking, “Which is likely true?” The double negative can trip you up, but A is the best choice.

The Trap

Sometimes the exam gives you choices like “All of the Above” or “None of the Above.” Remember these rules of thumb:

• If any statement in the list is incorrect, “All of the Above” can’t be right.
• If any statement is correct, “None of the Above” usually can’t be right.

Which of the following types of listing agreements are legal in California?

1. Exclusive Right to Sell
2. Exclusive Agency
3. Open Listing
4. Net Listing

Possible Answers

A. 1 and 2 only

B. 1, 2, and 3 only

C. All of the above

D. None of the above

• A. 1 and 2 only: Leaves out Open Listings and Net Listings; both can be legal in CA under certain conditions.
• B. 1, 2, and 3 only: Excludes Net Listings, which are controversial but still legal in California with strict rules.
• D. None of the above: Implies none are legal, which is false.

Why the Correct Answer Is Correct

• C. All of the above: All four are legal in California. Net listings are heavily regulated due to the potential conflict of interest (the agent’s commission is what’s left over above a “net” price). While risky and less common, they are not outright illegal.

The Trap

Real estate has plenty of terms that sound alike but mean different things. Mixing these up can cost you critical points.

Here are some commonly confused pairs (and more!):

1. Principle vs. Principal
• Principle: A guiding rule or standard.
• Principal: The main party in a transaction or the original amount of a loan.
2. Statute vs. Statue
• Statute: A written law.
• Statue: A sculpted figure.
3. Grantor vs. Grantee
• Grantor: The person who transfers property.
• Grantee: The person who receives the property.
4. Lessor vs. Lessee
• Lessor: The landlord or property owner in a lease.
• Lessee: The tenant renting the property.
5. Lien vs. Loan
• Lien: A legal claim on a property for payment of a debt.
• Loan: The borrowed money itself.

If the principal in a real estate transaction cannot attend the closing, which party may legally act on their behalf according to the statute?

Possible Answers

A. The principle, by signing a general power of attorney.

B. The principal’s agent, authorized in writing.

C. The statue, if recognized by the county.

D. The principal’s loan officer.

• A. Principle: This confuses “principle” (a rule) with “principal” (the main party).
• C. The statue: A statue is a carved figure, not a person with legal rights.
• D. The principal’s loan officer: Loan officers generally don’t act as legal agents unless specifically authorized.

• B. The principal’s agent, authorized in writing: Under California law (the statute), someone with power of attorney or another valid written authorization can act on the principal’s behalf.

The Trap

You’ll see many California-specific terms on the exam. If you’re not familiar with them, you might guess incorrectly.

• Mello-Roos: A special tax district used to finance infrastructure in new developments.
• Transfer Disclosure Statement (TDS): A mandatory form in California that the seller must provide, detailing the property’s condition.
• Natural Hazard Disclosure (NHD): Discloses whether a property is in a flood, fire, or earthquake zone, among other hazards.
• Escrow: An entity that holds funds and documents until all conditions of the sale are met.
• Probate Sale: A court-supervised sale of a deceased person’s property, often with unique rules and timelines.
• 1031 Exchange: A tax-deferred exchange of investment properties (also called a “like-kind exchange”).
• HOA (Homeowners Association): Governs planned communities; they enforce CC&Rs (Covenants, Conditions & Restrictions).

A “quiet title action” in California is best described as:

Possible Answers

A. An action taken to stop a noisy neighbor.

B. A lawsuit to establish or settle ownership of a property.

C. A required disclosure for homes in a Mello-Roos district.

D. A new escrow requirement set by the DRE.

• A. Stop a noisy neighbor: “Quiet” is misleading; it’s about title, not noise.
• C. A required disclosure: Confuses a lawsuit with a disclosure form like TDS or NHD.
• D. A new escrow requirement: Sounds legal, but not relevant to a quiet title action.

• B. A lawsuit to establish or settle ownership of a property: That’s exactly what a quiet title action accomplishes.

The Trap

Words like always, never, must or only are extreme. Real estate laws often have exceptions. If you see an absolute word, be cautious.

Which statement about easements in California is always true?

Possible Answers

A. They must only be granted in writing.

B. They never terminate without a court order.

C. They must be recorded to be valid.

D. No statement is always true in every situation.

• A. Must only be granted in writing: Easements can be created by implication, necessity, or prescription.
• B. Never terminate without a court order: Easements can terminate through mutual agreement, abandonment, or merger of properties, among other ways.
• C. Must be recorded to be valid: Recording is recommended but not an absolute requirement for validity.

• D. No statement is always true: Because real estate law has multiple exceptions, watch out for absolute words like “always” or “never.”

The Trap

A “red herring” is an answer choice that sounds correct or is factually true—but doesn’t actually address the question asked. It’s about relevance and scope.

When selling a property with a tenant in place, what must the seller typically provide to the buyer under a standard California purchase agreement?

Possible Answers

A. A copy of the tenant’s background check.

B. Proof of the tenant’s rental insurance.

C. A copy of the existing lease agreement.

D. The buyer’s financing information.

• A. Tenant’s background check: Private data, not a standard requirement.
• B. Tenant’s rental insurance: Nice to have, but not legally required.
• D. Buyer’s financing info: Irrelevant to the tenant’s status.

• C. A copy of the existing lease agreement: If the tenant will remain post-closing, the buyer must know the lease terms.

Interpreting questions carefully is just as important as knowing the material. Here’s a quick recap:

• Negatives (NOT, EXCEPT, LEAST): Spot them so you don’t pick the wrong answer by mistake.
• Double Negatives: Rewrite them to make sense. “Not unlikely” → “likely.”
• All of the Above / None of the Above: If even one item is false (or true), you can eliminate these choices.
• Similar-Sounding Words: Principle vs. Principal, Lessor vs. Lessee, etc.
• Jargon (CA-Specific Terms): Mello-Roos, TDS, NHD, Escrow, Probate Sale, 1031 Exchange, HOA/CC&Rs. Know these cold.
• Absolute Words (Always, Never, Only): Real estate laws often have exceptions.
• Red Herrings: Beware of answers that sound correct but don’t actually address the question.

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