California Real Estate Practice Exam

A broker is entitled to one-half of the commission plus all his costs when which of the following occurs?

1. A loan is denied due to the failure of a borrower to disclose pertinent factors relating to his qualifying

2. A loan is not consummated due to failure of a lender to supply funds

3. None of the above

4. Never

The correct answer is: A loan is denied due to the failure of a borrower to disclose pertinent factors relating to his qualifying

The correct answer highlights the specific scenario regarding the broker's entitlement to commission based on circumstances related to loan processing. In California real estate practice, a broker typically earns a commission for facilitating a transaction. However, there are conditions under which a broker may earn a portion of that commission, including reimbursement for costs incurred during the process. When a loan is denied due to a borrower’s failure to disclose pertinent information, the broker may argue that his efforts were wasted and thus may be eligible for a portion of the commission, specifically one-half, along with the costs incurred while pursuing the loan. This situation emphasizes that the broker fulfilled their role in the transaction and that the failure stemmed from the borrower's actions rather than any shortcoming on the broker's part. In contrast, the other options do not provide a valid basis for broker entitlement to commission under California law. If a loan is not consummated due to the lender’s failure to provide funds, it indicates an issue on the part of the lender, not the broker or the borrower. Therefore, the commission structure doesn’t support compensation to the broker under that circumstance. Option "C" suggests that no scenario applies which is misleading as the first option does establish a scenario where the broker can rightfully claim a