Unit 6 Licensing & Math Chapters 14-15

Chapter 14 Licensing, Education & Associations

I.

II.

Bureau of Real Estate (formerly Department of Real

Estate) Enforces professionals and the real estate laws
a. Purpose Protect consumers, and real estate profession
i. Create barrier to entry into profession???
b. Real Estate Commissioner Leader of Bureau of Real
Estate Duties:
i. Business policy for the Bureau
ii. Apprise Governor
iii. Recommend policy changes to legislature
iv. Regulate sales of subdivisions
v. Checking qualifications of applicants
vi. Investigating complaints against licensees
vii. Investigating complaints against those without
license
c. Maximum fine Commissioner can bring is $20K
against a broker for having unlicensed persons
soliciting borrowers or negotiating loans
Real Estate License Requirements
a. When is a license required (any person actively
involved in real estate transaction at the service of
another (i.e. not self) in the expectation of receiving a
commission
i. Sells or offers to sell, buys or offers to buy, and
solicits buyers or sellers
ii. Solicits or obtains listings
iii. Negotiates the purchase, sale or exchange of real
property or business opportunities
iv. Leases or rents, collects rents, or negotiates the
sale , purchase or exchange of leases.

v. Assists in the purchase of leases on lands owned

by state or local government
vi. Negotiates loans, collects payments, or performs
services for borrowers or lenders
b. When is license not required
i. Employees of lending institutions
ii. Lenders making federally insured or guaranteed
loans
iii. Certain agricultural associations
iv. Licensed personal property brokers
v. Cemetary authorities
vi. Collectors of loans made on real property
vii. Certain clerical help
viii. For self
1. the owner
2. holding Power of Attorney for owner
3. An attorney at law acting on behalf of the
owner
4. a receiver or court appointee
5. a trustee, selling under a deed of trust
c. Obtaining the 4-year sales person license Requires
qualify for and pass a written exam. After passing
exam, submit application
i. Requirements:
1. At least 18 to get license (may be younger to
take exam)
2. Proof of legal residence in United States
(out-of state applicants have special
requirements)
3. Honesty/character (looks at criminal history
4. Education Successfully complete 3
college level classes: (1) Principles; (2)
Practice & one of the following:
a. Legal aspects of real estate
b. Real estate appraisal

c.
d.
e.
f.

Real estate finance

Property management
Escrows
Mortgage Loan Brokering and
Lending
g. Real Estate Office Administration
h. Computer Applications in Real Estate
i. Real Estate Economics
j. Business Law
k. Accounting
l. Common Interest Development
5. Also fingerprints
6. Must apply for license within one year from
exam passing date
d. Obtaining the Brokers License Needed if want to
operate a real estate office
i. Requirements:
1. 18 years old
2. Proof of Legal Presence in U.S.
3. Special Out of State applicant requirements
4. Have had previous experience (two years or
certain college education (major or minor in
real estate)
EDUCATION IN LIEU OF EXPERIENCE
Major or Minor in Real Estate
An applicant with a degree from an accredited four year college or university which included a major or
minor in real estate may be exempt from the two-year salesperson experience requirement. This may
be verified by submitting a copy of the transcript showing the degree earned.
Courses completed or degrees earned through foreign institutions of higher learning must be
evaluated by a foreign credentials evaluation service approved by BRE. See Examination Applicant
Foreign Education Information (RE 223) for further information.

Experience Requirements
Members of the California State Bar are statutorily exempt from the college-level course requirements.
Evidence of admission to practice Law in California must be furnished, such as a photocopy of both
sides of a California State Bar membership card. However, members of the California State Bar would

still need to demonstrate that they have satisfied the two years full-time licensed salesperson
experience requirement or have at least two years real estate related experience while practicing law
in California. Members of the State Bar of California using equivalent experience should submit a RE
227 Equivalent Experience Verification form outlying this experience along with their broker exam or
broker exam/license combination application.

5. Complete the required 8 broker courses:

6. Be honest & Truthful
7. Pass the Brokers examination
ii. Qualifying Experience
1. 2 years full-time experience as Sales Person
2. Part-time, must be completed in 5 years
a. If working full-time at another job,
only 20 hours per week counted
b. Must be at least 10 hours per week to
count
3. BS or BA Degrees requirements have
changed (see above) Author is out-of-date
4. Equivalent Experience:
EQUIVALENT ACTIVITIES IN LIEU OF EXPERIENCE
General Information
A claim of equivalent experience, in lieu of the two years of sales experience required for the broker
examination, may be based on any combination of salesperson experience and equivalent experience,
which, considered as a whole, would satisfy the intent of the law.
An applicant who has not been active as a licensed real estate salesperson may be eligible for the
broker examination, provided Equivalent Experience Verification (RE 227) form(s) showing real
estate-related experience are submitted. The Equivalent Experience Verification form(s) must be
completed in full and must have two verifying signatures on each form.
When submitting the Equivalent Experience Verification (RE 227) form(s), it is important that you
provide sufficient detail to enable the Department to perform an evaluation. The Department may
conduct further inquiry when evaluating equivalent experience.
Regardless of the experience, the eight college-level courses required for a broker's license must be
completed and cannot be waived based on the equivalent experience.

Acceptable Kinds of Equivalent Experience

An applicant may qualify with two years full-time experience, gained within the five-year period
immediately prior to the date of application for the broker examination, in any of the following areas:
1.

Experience as an escrow or title officer or as a loan officer in a capacity directly related to the
financing or conveying of real property.

2.

Experience as a subdivider, contractor, or speculative builder, during which time applicant

performed comprehensive duties relating to the purchase, finance, development, and sale or
lease of real property.

3.

Experience as a real property appraiser.

The above-referenced patterns are designed to assist the applicant in understanding the general types
of equivalent experience which can be used to qualify for the broker examination. Other types of real
estate-related experience will be considered, provided that it satisfies the intent of the law. It should be
noted, however, that claims for equivalency by unlicensed persons for activities which require a real
estate license will not be considered.
NOTE: Care in preparing the claim of qualification and presentation of adequate supporting letters or
certifications will facilitate clearing an application. Do not have verifiers send individual letters separate
from your application submissions. Be accurate as to dates, etc., as incompleteness or inaccuracies
will result in delays and additional correspondence.

iii. Education : 8 courses from list

COURSE REQUIREMENTS
Applicants for a real estate broker license examination must have successfully completed the following
eight statutorily required college-level courses:
1.
2.
3.
4.
5.
6.

Real Estate Practice; and

Legal Aspects of Real Estate; and
Real Estate Finance; and
Real Estate Appraisal; and
Real Estate Economics or Accounting; and
Three courses from the following list:
o Real Estate Principles
o Business Law
o Property Management
o Escrow
o Real Estate Office Administration
o Mortgage Loan Brokering and Lending
o Advanced Legal Aspects of Real Estate
o Advanced Real Estate Finance
o Advanced Real Estate Appraisal
o Computer Applications in Real Estate
o Common Interest Developments

Note: If both Real Estate Economics and Accounting are taken, only two courses from the above
group are required.

e. Renewal of License Every Four Years, but there is

two year grace period before new exams required
f. Continuing education
SALESPERSONS RENEWING FOR THE FIRST TIME
Real estate salespersons who qualified by passing the examination and submitted a license
application prior to 10/1/2007, and are renewing an original license for the first time, must complete
five separate three-hour BRE-approved continuing education courses in Ethics, Agency, Trust Fund
Handling, Fair Housing and Risk Management.
Real estate salespersons who qualified by passing the examination and/or submitted a license
application on or after 10/1/2007, and are renewing an original license for the first time, must complete
45 clock hours of BRE-approved continuing education consisting of:

Five separate three-hour courses in the following subjects: Ethics, Agency, Trust Fund
Handling, Fair Housing, and Risk Management;
A minimum of 18 clock hours of consumer protection courses; and
The remaining clock hours required to complete the 45 hours of continuing education may be
related to either consumer service or consumer protection courses.

SALESPERSONS AND BROKERS - SECOND & SUBSEQUENT RENEWALS

For subsequent renewals, all real estate brokers and salespersons must complete 45 clock hours of
BRE-approved continuing education consisting of:

Either 15 hours of continuing education courses in the following subjects: Ethics, Agency,
Trust Fund Handling, Fair Housing, and Risk Management OR one eight-hour survey course
that covers the five mandatory subjects (Ethics, Agency, Trust Fund Handling, Fair Housing,
and Risk Management);
At least 18 clock hours of consumer protection courses; and
The remaining clock hours required to complete the 45 hours of continuing education may be
related to either consumer service or consumer protection courses.

BROKERS RENEWING FOR THE FIRST TIME

Real estate brokers renewing an original license for the first time must complete 45 clock hours of
BRE-approved continuing education consisting of:

Five separate three-hour courses in the following subjects: Ethics, Agency, Trust Fund
Handling, Fair Housing, and Risk Management;
A minimum of 18 clock hours of consumer protection courses; and
The remaining clock hours required to complete the 45 hours of continuing education may be
related to either consumer service or consumer protection courses.

SALESPERSONS AND BROKERS - SECOND & SUBSEQUENT RENEWALS

For subsequent renewals, all real estate brokers and salespersons must complete 45 clock hours of
BRE-approved continuing education consisting of:

Either 15 hours of continuing education courses in the following subjects: Ethics, Agency,
Trust Fund Handling, Fair Housing, and Risk Management OR one eight-hour survey course
that covers the five mandatory subjects (Ethics, Agency, Trust Fund Handling, Fair Housing,
and Risk Management);
At least 18 clock hours of consumer protection courses; and
The remaining clock hours required to complete the 45 hours of continuing education may be
related to either consumer service or consumer protection courses.

EQUIVALENT ACTIVITY PETITION INFORMATION

Notice: Pursuant to Regulation 3011.4 you may be able to receive continuing education credit for
courses that have not been approved by the BRE for continuing education (CE). Real estate related
course work completed at a college or university, including junior colleges, that are not used to satisfy
the prerequisite courses for the real estate salesperson or broker license may qualify for CE credit.
See RE 332 for more information on the CE Equivalent Activity Petition Process.

g. Other related licenses

i. Prepaid Rental Listing Service (PRLS) Required
when running a business that supplies prospective
tenants with listings of residential real property
for rent or lease while collecting a fee for such
service.
ii. Real Property Securities Dealer (RPSD) (Selling
things such as promissory notes or sales contracts)
III.

Business Opportunity Brokerage (Note: if real property is

involved, note that it must be transferred by deed; personal
property is transferred by a bill of sale) --- The
components---(1) Real Property, (2) Personal Propertyequip and fixtures, (3) Goodwill-reputation and
established sales
a. Business Opportunity Sale
i. 3 documents are needed for personal property
security transactions: (1) Promissory Note (2)

Security agreement (3) compliance with the UCC1 Financing Statement

b. Business opportunity listing
i. What is needed for a business opportunity listing?
1. name of business and owner
2. nature and location of business
3. price and terms of sale
4. encumbrances and items that are to be
assumed by the buyer
5. Leases (if any)
ii. Other important information:
1. Gross income, expenses & net income
2. Area competition
3. Usual business hours and square footage of
business (especially if retail)
4. If current employees are staying, include
salary and existing benefits
iii. When dealing with individuals not experienced in
line of business, important to make sure all
information to make informed decision is made
available.
c. Bulk sales
i. Consists of sale of substantial part of:
1. inventory or
2. other supplies/equipment associated with
business
ii. UCC requires purchasers to warn sellers creditors
that a mojor transfer is taking place
1. Twelve business days prior to transfer,
record with County recorder
2. Twelve business days prior to transfer,
publish notice in newspaper of general
circulation

IV.

3. Twelve business days prior to transfer,

deliver notice (by hand or registered mail) to
County Tax Collector.
iii. What the notice must include:
1. notification that transfer is going to take
place
2. name and any business addresses used by
the seller
3. the location and a description of the property
4. the date and place of transfer
iv. If Bulk Sale requirements not followed, deemed a
fraudulent transfer w/r/t creditors, but is still
valid between buyer and seller
d. California Sales Tax
i. Any tangible Personal Property sold by retailers is
subject to sales tax (excluding food for instance).
A sellers permit allows business owner to buy
for resale without paying sales tax. Escrow
should check to make sure all taxes are forwarded
to State Board of Equalization
Real Estate Law and Regulation
a. Where are they found:
i. In Statute Primarily in CA Business and
Professions Code
ii. Also found in regulations created by
department, now Bureau
b. Enforcement of real estate laws
i. Responsibility falls on Commissioner
1. Can suspend license
2. Can revoke permanently
3. Can deny a license
c. Hearings for License Violations
i. Hearings governed by the Administrative
Procedure Act
ii. Process:

1. The licensee is served with a statement,

Commissioner is called complainant
2. A hearing officer conducts a hearing.
Licensee can be represented by counsel if
s/he chooses.
3. Hearing officer makes finding that may be
rejected or accepted by Commissioner
4. Licensee can then appeal decision to the
courts
5. If license revoked, not eligible for
reinstatement until one year has passed.
d. Licenses: Revoke, Restrict, Suspend for types of
misconduct
i. Child Support obligations If found to have
delinquent child support obligations , then BRE
will issue 150 day license. If not current with
support, they have 150 days to get current or
license is suspended.
V. Common Real Estate Law violations
a. B & P Section 10176: Covers actions by licensee
Acting in a Licensee Capacity
b. B & P Section 10177: Covers actions by licensee not
necessarily acting as (good) licensee
c. Regulations of the Commissioner
VI. Real Estate General Fund
a. All funds collected from license fees and exam fees go
to this fund
i. 80% goes to operating expenses of Bureau of Real
Estate
ii. 8 % goes to Real Estate Education and Research
Fund
iii. 12% goes to Recovery fund If judgment or
arbitration awards made pursuant to fraudulent
acts, etc against licensee then can collect if
reasonable attempts to collect judgment not

successful. Limited to $250,000 per licensee and

$50,000 per occurrence.
VII. Trade and Professional Associations
a. Local associations
i. Membership voluntary
ii. Usually provide multiple listings
iii. Brokers can be full members, sales persons can be
associate members and others in field can be
affiliate member.
iv. Can provide educational material, seminars, etc.
b. California Association of Realtors State division of
National Assn of Realtors Membership voluntary
c. National Association of Realtors
i. Trade names Realtor is a trade name, mis use
is a no-no.
ii. Code of Ethics
d. Realtist Defined Part of National Association of Real
Estate Brokers Focus on democracy in housing
e. National Association of Hispansic Real Estate
Professionals
f. Asian Real Estate Association of America
g. Independent Boards & Various Trade Associations
Based on ethnicity, gender, etc. some by industry type.
h. Other associations
i. Real Estates Instructor and Licensing Associations
j. No Affiliation necessary---All these private
associations membership is voluntary

Chapter 15 Math
Basic, non programmable calculators are permitted for license
exam
I.
Area Measurements
a. Area of a Rectangular lot (one with right angles
Area = Length x width
b. Area of a triangle
Area = of base x height (form right angles)
c. Area of a Circle
Area = Pi x radius x radius
Circumference of circle = Pi x Diameter; Radius = 2
diameters
d. Area of an irregular Lot
Key is to break into recognizable shapes (rectangles,
triangles and circles
e. Volume of Structure = Length x width x height (might
be needed for instance, for air conditioning)
f. Common measurements/conversion numbers:
i. Linear
1. 1 foot = 12 inches
2. 1 yard = 3 feet
3. 1 rod = 16.5 feet
4. 1 mile = 5,280 feet = 1,760 yd = 320 rods
[easy way to remember 440 yd = mile]
ii. Square
1. 1 square foot = 144 square inches
2. 1 sq. yard = 9 sq ft
3. 1 acre = 43,560 sq ft
4. 1 sq mile = 5280 x 5280
iii. Cubic (volume)
1. 1 cu ft = 1,728 cubic inches
2. 1 cu yd = 27 cu feet
iv. Land descriptions
1. Link = 7.92 inches
2. Rod = 25 links

3.
4.
5.
6.

Chain = 100 links

Mile= 80 chains
Acre = 43,560 sq ft
Township = 36 sections = 36 sq miles =
23,040 acres
7. Section = 1 sq mile = 640 acres
8. 1 circle = 360 degrees
9. 1 degree = 60 minutes
10.
1 minute = 60 seconds
v. Metric conversions
1. Meter = approx 39 inches, or 3 inches more
than yard
2. Liter = slightly larger than quart (1000 cu
centimeters)
3. 100 centimeters in meter, approx 2.5
centimeters in an inch
4. 1 liter of water weighs 1 kilogram (approx
2.5 lbs) (or 1 cubic centimeter of water
weighs one gram)
II. Percentage problems Key to easy understanding is the
Made Paid and Rate
Made = the amount earned (always less than the paid if rate
under 100%)
Paid = the amount invested
Rate = the percentage in the problem
a. Other factor terms
MADE
PAID
RATE %
Return
Investment
Rate of return
Profit
Cost
Rate of Profit
Commission
Price
Commission rate
Net income
Value
Capitalization rate
Interest
Principal
Interest rate
b. Hubers pyramid

Made
/
\
/ M \
/
\
/---- ----\
/
|
\
/ P x R \
Paid/ /______|_____\ Percentage/
Principal
Rate
Percentage to Decimal 100% = 1 whole
Move decimal point 2 places
c. Determining Commissions and Selling Price
i. The commission rate is the percentage times the
selling price to determine the commission
Ex: Sales prices is $250,000, commission rate is
2.7%, then commission = $6,750 [$250,000 x .027]
ii. Splitting commission
Take total commission and multiply by rate (i.e.
$6,750 commission; split 50/50 is $3,375 [6750
x.5]
d. Profit and Loss
i. Key terms
1. Selling Price
2. Cost
3. 1 + %profit
a. i.e. 10% profit on a purchase of
$100,000 is $10,000. To figure out
selling price multiply cost $100,000
times 1.10 or $110,000
4. 1- %loss (same as profit, in reverse
e. Principal and Interest Calculations

i. Typically rely upon a 30 day month (averages to

360 days a year)
ii. Has an additional component, namely time
iii. Ex: How much owed on $100,000 if simple
interest is 8% and the loan is owed after 2 years
$100,000 x .08 x 2 = 16,000 in interest
iv. If borrower paid $5,200 in interest at 10% over 1
year, how much was the loan?
$5,200/.10 = 52,000
v. If borrower paid $15,000 in interest in one year on
a $150,000 loan, what is her rate?
15,000/150,000 = 1/10th or 10%
f. Discount Points
i. Jim and Carol buy a house for $250,000. The
lender requires a 10% down payment, and they
must pay 3 points for the loan. How much does
the loan cost?

III.

IV.

Down payment = $250,000 x .10 or $25,000

Loan = $250,000 - $25,000 or $225,000 [Loan
amount]
Points = $225,000 x .03 or $6,750
Determining Prorations Keep in mind that buyers
ownership starts on the day of closing
a. Rents Usually split over 30 days. If closing occurs on
the 9th of the month and seller is entitled to 8 days rent
of a monthly rent of $1,300 it is:
8/30 times $1,300 or $346.67
b. Property Taxes --- Taxes done same as rent but real
property taxes are broken up into 2 six month
installments
Depreciation for Tax Purposes

a. It covers the diminishing value of a building because

of wear and tear over time (building does not usually
have infinite life)
b. For buildings, straight-line depreciation
c. Dont depreciate land
d. For accounting purposes, there is a salvage value---for
income tax purposes, there is assumed to be $0 as
salvage value
e. IRS sets the length of time for depreciation (27.5 years
for residential property; 39 for commercial properties)
Problem: If you pay $250,000 for a building, and the land is worth
$75,000, what is the annual depreciation?
Value of Building = $250,000 - $75,000 = $175,000
$175,000/39 = $4,487.18
V.

How to Find the Value of a Parcel

a. Simplistic approach = price per acre, times # of acres