California Real Estate Exam: 10 Financing & Valuation Questions (2026)
Episode 4 of the Quibank California Real Estate series drills financing (~9%) and valuation (~14%). Ten real practice questions with answers and one-line explanations: the promissory note vs the security instrument, deed of trust parties, acceleration clauses, FHA insurance, judicial vs non-judicial
Transcript
Financing is about 9% of the California real estate exam and valuation about 14. Here are 10 questions across both. Try each one before I answer. Question 1.
In a real estate loan, what does the promissory note do? It is the borrower's personal promise to repay the evidence of the debt. The mortgage or deed of trust is the security. Question 2.
In a deed of trust who holds the bare or naked legal title, the trustee a neutral third party. The three parties are the trustee, the trustee and the beneficiary. Question 3. What does an acceleration clause let a lender do when the borrower defaults?
Demand the entire remaining balance at once. Question 4. Under an FHA loan, what does the FHA actually do? It ensures the lender against loss.
It does not make the loan itself. Question 5. How does judicial foreclosure differ from non-judicial? Judicial is court-supervised and can allow a deficiency judgment for the shortfall.
Non-judicial, by power of sale, usually cannot. Question 6. What does the Federal Real Estate Settlement Procedures Act prohibit? Kickbacks, referral fees and unearned fees among settlement service providers.
Question 7. In the sales comparison approach, what do you adjust? The comparable properties never the subject. If a comparable is better, you subtract from it.
Question 8. Which approach best values a new or special purpose building, like a school or a church? The cost approach. Question 9.
When you compute net operating income for the income approach, which expense do you not deduct? Debt service, that is, the mortgage principle and interest. Question 10. External or economic, obsolescence comes from where?
Causes outside the property, and it is generally incurable by the owner. Quick recap. The note is the debt, the deed of trust is the security, and the trustee holds the naked title. FHA ensures VA guarantees.
And the three approaches to value are sales comparison for homes, cost for special purpose, and income, where value equals net operating income divided by the cap rate. Drill the full California Question Bank, free at dot com. English, Chinese and Spanish with no sign up.