California Real Estate Practice Exam

What must a broker do if he guarantees a yield on an investment?

1. Broker is in violation of California law

2. Broker must post a bond

3. Broker's license is all that is required

4. None of the above

The correct answer is: Broker is in violation of California law

When a broker guarantees a yield on an investment, it typically raises significant concerns regarding compliance with California law and the broker's ethical responsibilities. California real estate law prohibits brokers from making guarantees of profits, including the assurance of a specific yield from real estate investments, as it could be considered misleading or deceptive to the potential investor. Guaranteeing returns can imply a level of certainty that is not possible in the inherently unpredictable nature of real estate investments. This could mislead investors into making decisions based on false assurances, particularly regarding risks and market conditions. Therefore, asserting such guarantees is viewed as a violation of California's regulations, which are designed to protect consumers in the real estate market from potentially fraudulent practices. While the other options mention different requirements, such as bonding or licensing, they do not address the fundamental issue that guaranteeing yields contravenes established laws aimed at ensuring transparency and ethical conduct in the real estate profession. Thus, the requirement focuses primarily on the illegal nature of making such guarantees.