25 California Real Estate Practice Questions: Disclosures and Real Estate Practice
Practice of Real Estate and Disclosures is the largest subject area on the California Department of Real Estate (DRE) salesperson examination content outline. DRE's RE 425 examination description lists this area at approximately 25% of the salesperson exam.
Use these original practice questions to review disclosure duties, brokerage conduct, fair housing, advertising, trust funds, supervision, disciplinary issues, and related practice topics.
Disclaimer: Not affiliated with PSI, Pearson VUE, California DRE, NAR, or any state real estate commission. These are original study questions, not actual DRE exam questions.
How to Use These Questions
- Answer all 25 questions before checking the explanations.
- Treat missed questions as topic signals, not just wrong answers.
- Review the official DRE content outline after finishing so you can connect each question to a tested subject area.
Questions
1. Material Fact Disclosure
A listing agent knows that a property had repeated water intrusion in the basement during heavy rains. The seller says, "Do not mention it unless the buyer asks." What should the agent do?
A. Stay silent because the seller controls all disclosures B. Disclose the known material fact to the buyer C. Mention it only after the buyer removes all contingencies D. Ask the buyer's lender whether the issue matters
Answer: B
Explanation: A licensee must not conceal known material facts affecting the property. Seller instructions do not override disclosure duties.
2. Transfer Disclosure Statement
In a California residential resale transaction where a Transfer Disclosure Statement is required, what is the best description of the licensee's role?
A. The licensee guarantees the physical condition of the property B. The licensee completes only the buyer's portion of the form C. The licensee conducts and reports a reasonably competent visual inspection D. The licensee replaces the need for any seller disclosure
Answer: C
Explanation: California disclosure practice commonly tests the licensee's visual inspection and disclosure responsibilities. The licensee is not a property guarantor and does not replace the seller's own disclosure obligations.
3. Natural Hazard Disclosure
Which issue is most directly associated with a Natural Hazard Disclosure?
A. Whether the seller has paid all property taxes B. Whether the property is in a mapped flood, fire, seismic, or similar hazard area C. Whether the buyer's loan has a fixed interest rate D. Whether the listing broker has earned a commission
Answer: B
Explanation: Natural Hazard Disclosure focuses on mapped hazard zones and related environmental or geographic risks, not financing terms or commission issues.
4. Fair Housing Advertising
Which advertisement is most likely to create a fair housing concern?
A. "Two-bedroom condo near transit and shopping" B. "Updated kitchen, assigned parking, and private patio" C. "Perfect building for young professionals only" D. "Single-level home with accessible entry"
Answer: C
Explanation: Advertising that expresses a preference for a type of occupant can create fair housing risk. Property features are generally safer than statements about preferred residents.
5. Trust Fund Handling
A buyer gives an earnest money deposit check to a salesperson. What is the salesperson's safest next step?
A. Hold the check at home until the offer is accepted B. Promptly deliver the check to the responsible broker or follow the broker's trust fund procedure C. Deposit the check into the salesperson's personal account temporarily D. Use the check to pay for the buyer's inspection
Answer: B
Explanation: Salespersons act under broker supervision. Trust funds must be handled according to law and the broker's trust fund procedures, not through a salesperson's personal account.
6. Broker Supervision
Why is broker supervision a recurring California exam topic?
A. Salespersons may operate independently after passing the exam B. Brokers are responsible for supervising licensed activities conducted under their license C. Buyers supervise the salesperson in buyer agency transactions D. DRE supervises every individual transaction before closing
Answer: B
Explanation: A salesperson is licensed to act through a responsible broker. Proper supervision, records, advertising, and transaction review are central brokerage practice issues.
7. Unlicensed Assistant
Which task is most likely appropriate for an unlicensed assistant, assuming the broker's policies and applicable rules are followed?
A. Negotiate the purchase price with a buyer B. Explain the legal effect of a contract clause C. Schedule appointments and provide clerical support D. Independently host an open house and answer agency questions
Answer: C
Explanation: Clerical and administrative support is generally different from licensed activity. Negotiation, legal explanation, and agency counseling require care and typically involve licensed conduct.
8. Truth in Advertising
A salesperson posts a social media ad for a listed property but omits the broker's identity and makes it look like the salesperson is the independent listing company. What is the main risk?
A. The ad may be misleading and may violate advertising rules B. The ad automatically cancels the listing agreement C. The buyer must receive a lower commission D. The seller becomes the salesperson's broker
Answer: A
Explanation: Real estate advertising should not mislead consumers about who is offering brokerage services. Broker identity and accurate representation are common compliance concerns.
9. DRE Discipline
Which situation is most likely to expose a licensee to DRE disciplinary action?
A. Telling a buyer to read all documents carefully B. Keeping complete transaction records C. Misrepresenting a known property defect to induce a sale D. Referring a client to a qualified inspector
Answer: C
Explanation: Misrepresentation and concealment of material facts are serious license law and consumer protection issues.
10. Record Keeping
Why do brokers maintain transaction records?
A. Records help demonstrate compliance and allow review of licensed activity B. Records are optional once escrow closes C. Records are kept only for tax deductions D. Records are the buyer's substitute for title insurance
Answer: A
Explanation: Record keeping supports supervision, compliance, audits, and accountability for licensed real estate activity.
11. Acting as Principal
A licensee buys property for the licensee's own account. What should the licensee remember?
A. A licensee never needs to disclose licensed status when acting personally B. Licensed status and material interests may need to be disclosed when relevant C. DRE rules apply only when a commission is paid D. The licensee becomes exempt from all disclosure obligations
Answer: B
Explanation: California exam topics include disclosure when acting as principal or holding another interest. Licensed status and material interests can matter to the other party's decision.
12. Property Management
A property manager receives tenant security deposits and monthly rents on behalf of an owner. Which practice is most important?
A. Treating all owner and tenant funds as personal income immediately B. Following trust fund handling, accounting, and record procedures C. Avoiding all written management agreements D. Refusing to document rent receipts
Answer: B
Explanation: Property management involves handling funds, records, owner instructions, tenant issues, and legal compliance. Trust fund accounting is a frequent practice concern.
13. Disclosure Timing
Why should required disclosures be delivered early in a transaction?
A. Early disclosure gives the buyer meaningful time to review information before final decisions B. Early disclosure eliminates all contingencies automatically C. Early disclosure prevents the buyer from ordering inspections D. Early disclosure guarantees the property has no defects
Answer: A
Explanation: Disclosures are useful only if the receiving party has a meaningful chance to evaluate them. Disclosure does not guarantee condition or eliminate inspection rights by itself.
14. Inspection Advice
A buyer asks whether a visible ceiling stain is serious. What is the best response from a salesperson who is not a qualified contractor?
A. "It is definitely harmless, so skip inspection." B. "The seller says it is old, so it does not matter." C. "You should consider having an appropriate professional inspect it." D. "I will repair it myself after closing."
Answer: C
Explanation: Licensees should avoid unsupported technical guarantees. Recommending appropriate inspection protects the client and supports informed decision-making.
15. Servicing Diverse Populations
Which conduct best supports fair and professional service to diverse populations?
A. Steering buyers only to neighborhoods where the agent thinks they will fit B. Providing the same objective property information and service standards to all qualified clients C. Refusing to work with buyers who need language assistance D. Asking clients about protected characteristics before showing property
Answer: B
Explanation: Fair service focuses on objective criteria, equal professional treatment, and avoiding steering or discriminatory assumptions.
16. Commission Statements
Which statement about commissions is safest?
A. Commission rates are always fixed by law B. Commission agreements should be handled according to the brokerage relationship and written agreements C. Salespersons may collect commissions directly from any escrow without broker involvement D. A licensee earns a commission by showing a property once
Answer: B
Explanation: Commission issues depend on brokerage agreements, broker supervision, and applicable law. Avoid statements implying fixed rates or independent salesperson collection.
17. Technology and Confidentiality
A salesperson accidentally emails a client's confidential financial document to the wrong buyer. What is the main issue?
A. Technology errors can create confidentiality and professional conduct problems B. Email mistakes are never relevant to real estate practice C. Confidentiality applies only to paper documents D. The client automatically loses all rights in the transaction
Answer: A
Explanation: DRE's outline includes technology as part of practice. Digital tools do not remove duties related to confidentiality, records, and competent practice.
18. Specialty Property
Why might commercial, industrial, or income property require extra care from a salesperson?
A. These properties never involve disclosures B. They may involve specialized valuation, lease, income, zoning, environmental, or operational issues C. They are exempt from all brokerage supervision D. They can be sold only without written agreements
Answer: B
Explanation: Specialty property can involve issues beyond a simple residential resale, including income analysis, leases, environmental concerns, and specialized due diligence.
19. Material Facts and Opinion
Which statement is the best example of a material fact rather than mere sales puffing?
A. "This is the cutest house on the block." B. "This home has the best vibe in town." C. "The roof leaked during the last two winter storms." D. "You will probably love the backyard."
Answer: C
Explanation: A known roof leak is a factual condition that may affect value or desirability. General praise is usually treated differently from specific known property facts.
20. Recovery Fund Concept
The California Real Estate Recovery Fund is best understood as:
A. A fund that guarantees every buyer will make a profit B. A consumer protection mechanism related to certain licensee misconduct losses C. A lender program for first-time homebuyers D. A required savings account for every salesperson
Answer: B
Explanation: DRE's outline includes the California Real Estate Recovery Fund under practice topics. It is tied to consumer protection, not investment profit or mortgage lending.
21. License Renewal and Education
Why should a salesperson track continuing education and renewal deadlines?
A. License status affects whether the person may lawfully perform licensed activities B. Renewal deadlines apply only to brokers C. Continuing education is never connected to license status D. DRE automatically renews every license with no action
Answer: A
Explanation: Licensing and continuing education requirements are part of DRE's practice outline. A salesperson must maintain proper license status to perform licensed work.
22. Misleading Neighborhood Statements
A buyer asks whether a neighborhood is safe for families like theirs. Which response is most appropriate?
A. Make assumptions based on the buyer's family status and direct them elsewhere B. Provide objective resources and encourage the buyer to investigate factors important to them C. Rank neighborhoods by the agent's preferred resident type D. Refuse to show homes in areas the agent personally dislikes
Answer: B
Explanation: Objective information and buyer-directed research reduce steering and fair housing risk. Agents should avoid assumptions tied to protected characteristics.
23. Reports
A seller provides a prior pest inspection report. What should the listing agent do with relevant known report information?
A. Ignore it because only current reports matter B. Consider whether it contains material information that should be disclosed C. Destroy it before the buyer asks questions D. Tell the buyer reports are never part of real estate practice
Answer: B
Explanation: DRE's outline includes reports, verification, and material facts. Existing reports can contain information relevant to disclosure duties.
24. Agency Supervision and Advertising
A salesperson wants to run paid online ads for another agent's listing. What should happen first?
A. The salesperson should follow broker and listing authorization procedures B. The salesperson can advertise anything without broker oversight C. The salesperson should remove all brokerage identification D. The buyer should approve the ad copy
Answer: A
Explanation: Advertising is part of brokerage practice and supervision. Authorization, accuracy, and broker policies matter before publishing ads.
25. Best Overall Exam Approach
Which study method best matches the breadth of the Practice of Real Estate and Disclosures area?
A. Memorize only one disclosure form B. Study brokerage operations, fair housing, trust funds, advertising, license law, property management, and disclosure duties as connected practice issues C. Skip this area because it is only a minor topic D. Study only math formulas
Answer: B
Explanation: Practice of Real Estate and Disclosures is the largest DRE-listed area for the salesperson exam. It is broad and should be studied as a set of connected professional responsibilities.
Answer Key
| # | Answer | Topic |
|---|---|---|
| 1 | B | Material facts |
| 2 | C | Transfer Disclosure Statement |
| 3 | B | Natural Hazard Disclosure |
| 4 | C | Fair housing advertising |
| 5 | B | Trust funds |
| 6 | B | Broker supervision |
| 7 | C | Unlicensed assistants |
| 8 | A | Truth in advertising |
| 9 | C | DRE discipline |
| 10 | A | Record keeping |
| 11 | B | Acting as principal |
| 12 | B | Property management |
| 13 | A | Disclosure timing |
| 14 | C | Inspections |
| 15 | B | Diverse populations |
| 16 | B | Commissions |
| 17 | A | Technology and confidentiality |
| 18 | B | Specialty property |
| 19 | C | Material facts |
| 20 | B | Recovery Fund |
| 21 | A | License renewal |
| 22 | B | Fair housing and steering |
| 23 | B | Reports |
| 24 | A | Advertising supervision |
| 25 | B | Study strategy |
Score Guide
| Score | What It Means |
|---|---|
| 22-25 | Strong review result. Keep mixing this topic with agency, contracts, and ownership questions. |
| 18-21 | Solid base, but review missed explanations and retake the set later. |
| 14-17 | This topic needs more work before a timed mixed exam. |
| 0-13 | Re-read the DRE content outline and study disclosures, fair housing, trust funds, supervision, and advertising before retesting. |
Related Study Guides
- Practice by topic: California Real Estate Salesperson Practice Questions
- Review the full exam outline: California Real Estate Salesperson Exam Content Outline
- Practice agency questions: 25 California Real Estate Agency Practice Questions
- Practice property ownership questions: 25 California Real Estate Property Ownership Practice Questions
- Practice valuation questions: 25 California Real Estate Valuation Practice Questions
- Practice financing questions: 25 California Real Estate Financing Practice Questions
- Practice transfer questions: 25 California Real Estate Transfer of Property Practice Questions
- Practice contract questions: 25 California Real Estate Contracts Practice Questions
- Review exam-day timing and rules: California Real Estate Salesperson Exam Day Rules
- Review the exam format: California Real Estate Salesperson Exam Format
Sources
- California Department of Real Estate, "Examination Description - RE 425": https://www.dre.ca.gov/files/pdf/forms/re425.pdf
- California Department of Real Estate, "Taking the Exam": https://www.dre.ca.gov/Examinees/TakingExam.html