The 50 terms below come straight from CalPrep RE's flashcard deck, organized by the same seven topic areas the DRE exam draws from. Definitions are kept exam-focused: what the term means and the detail the test actually asks about.
Topic 1 of 7
DRE Licensing
DRE
California Department of Real Estate — the state agency that issues and regulates real estate licenses, headed by the Real Estate Commissioner.
Commingling
The illegal mixing of client trust funds with the broker's personal or business funds. Grounds for DRE license suspension or revocation.
Conversion (trust funds)
Unauthorized use of client trust funds for personal or business purposes. One of the most serious DRE violations — grounds for immediate revocation.
Real Estate Recovery Fund
A DRE fund that compensates the public for financial losses caused by a licensee's fraud or misconduct. Maximum: $50,000 per transaction.
Employing Broker
The broker with whom a salesperson is affiliated. The salesperson works under the employing broker's supervision and license.
Secret Profit
Any undisclosed financial benefit an agent receives from a transaction. Agents must disclose any personal profit and obtain written consent from the client.
License Suspension vs. Revocation
Suspension: temporary loss of license privileges. Revocation: permanent cancellation of the license. Both are DRE disciplinary actions.
Topic 2 of 7
Agency Law
OLDCAR
The six fiduciary duties owed to a client: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable Care.
Dual Agency
When one agent or brokerage represents both buyer and seller in the same transaction. Requires written informed consent from both parties.
Procuring Cause
The broker whose unbroken chain of efforts directly resulted in the completed sale. Determines who earns the commission when multiple agents are involved.
Exclusive Right to Sell Listing
The broker earns a commission if the property sells during the listing period — even if the seller finds the buyer themselves. The most common listing type.
Open Listing
A non-exclusive listing where multiple brokers may market the property. Only the procuring broker earns a commission. Seller owes nothing if they find their own buyer.
Subagency
When a listing broker authorizes a cooperating broker to act as the seller's agent. The cooperating broker owes fiduciary duties to the seller, not the buyer.
Ministerial Acts
Routine, non-discretionary tasks (scheduling showings, delivering documents) an agent may perform for a non-client without creating an agency relationship.
Topic 3 of 7
Contracts
Statute of Frauds
Real property contracts must be in writing and signed by the party to be charged to be enforceable.
5 Elements of a Valid Contract
Offer, Acceptance, Consideration, Lawful Object, Competent Parties. All five must be present.
Specific Performance
A court order compelling a party to fulfill their contract obligations. Available in real estate because each property is considered unique.
Liquidated Damages (CA Buyer Default)
If both parties initial the clause, the seller may keep the buyer's deposit as damages — capped at 3% of the purchase price.
Novation
Replacing a party or obligation in a contract with a new one, with all parties' consent. Releases the original party from liability.
Contingency
A condition that must be satisfied for a contract to become fully binding. Common ones: inspection, loan approval, appraisal, and sale of the buyer's current home.
Void vs. Voidable Contract
Void: has no legal effect at all (e.g., illegal purpose). Voidable: valid but one party can cancel it (e.g., signed under duress or by a minor).
Escrow
A neutral third party that holds funds and documents until all conditions of the sale are met. Escrow "closes" when title transfers and funds are disbursed.
Topic 4 of 7
Disclosures
Transfer Disclosure Statement (TDS)
A required CA form where sellers of 1–4 residential units disclose known material defects and conditions. Required in virtually all residential sales.
Natural Hazard Disclosure (NHD)
Discloses whether a property is in a flood zone, fire hazard area, earthquake fault zone, or other state-designated hazard zone.
Mello-Roos
A special tax in a Community Facilities District (CFD) that funds public improvements like roads and schools. Must be disclosed to buyers.
Material Fact
Any fact that significantly affects the value or desirability of a property that a reasonable person would want to know before purchasing.
Patent vs. Latent Defect
Patent: visible, discoverable by ordinary inspection. Latent: hidden, not readily visible. Latent defects must be disclosed by seller and listing agent.
Megan's Law Disclosure
All CA residential contracts must include a notice that a database of registered sex offenders is available through the CA Department of Justice.
Stigmatized Property
A property with a negative psychological history (crime, haunting, etc.). CA only requires disclosure of deaths within the past 3 years; AIDS deaths never.
Topic 5 of 7
Property Ownership
Joint Tenancy: Four Unities (TTIP)
Time (acquired together), Title (same deed), Interest (equal shares), Possession (equal right to possess). All four must exist simultaneously.
Community Property (CA)
Property acquired during marriage with community funds. Each spouse owns 50% regardless of who earned the money. Both must consent to sell.
Proposition 13
Limits CA property taxes to 1% of purchase price, with annual assessment increases capped at 2% — until the property is resold.
Bundle of Rights
The rights that come with owning real property: Possession, Use, Enjoyment, Exclusion, and Disposition (PUEED).
Grant Deed vs. Quitclaim Deed
Grant deed: grantor warrants they haven't previously sold the property and there are no undisclosed encumbrances. Quitclaim deed: transfers only what the grantor holds — no warranties.
Eminent Domain
The government's constitutional right to take private property for public use with just compensation. The legal process is called condemnation.
Adverse Possession (CA)
Acquiring title by open, notorious, hostile, continuous, exclusive use of another's land for 5 years — while paying property taxes.
Topic 6 of 7
Real Estate Finance
Promissory Note vs. Deed of Trust
Promissory note: the personal promise to repay the debt. Deed of trust: the pledge of property as collateral. The note is the debt; the deed of trust secures it.
Non-Judicial Foreclosure (CA)
Trustee's sale — Notice of Default → 3-month reinstatement period → Notice of Trustee's Sale (21 days) → Auction. No court involvement required.
Loan-to-Value (LTV)
Loan Amount ÷ Appraised Value. At 80% LTV the borrower puts 20% down. Conventional loans above 80% LTV typically require PMI.
Capitalization Rate (Cap Rate)
NOI ÷ Property Value. Used to evaluate income property. A higher cap rate = higher return but typically higher risk.
PITI
Principal, Interest, Taxes, and Insurance — the four components of a full monthly mortgage payment. Lenders qualify borrowers based on total PITI.
Due-on-Sale Clause
A loan provision requiring full repayment when the property is sold or transferred. Prevents the buyer from assuming the loan without lender approval.
Amortization
Paying off a loan through regular installment payments of principal and interest. Early payments are mostly interest; later payments shift toward principal.
Topic 7 of 7
Fair Housing
Steering
Directing buyers toward or away from neighborhoods based on race, religion, or other protected class characteristics. Illegal under federal and CA law.
Blockbusting
Inducing homeowners to sell by implying that members of a protected class are moving in and property values will fall. Illegal under the Fair Housing Act.
Redlining
Refusing financial or real estate services to residents of specific geographic areas based on the racial or ethnic composition of the neighborhood. Illegal.
Unruh Civil Rights Act
CA Civil Code §51 — prohibits discrimination by all business establishments. Adds sexual orientation, marital status, source of income, and more beyond federal classes.
Familial Status
A protected class covering households with children under 18, pregnant women, and those in the process of obtaining legal custody of a minor.
Disparate Impact
A neutral policy that disproportionately harms a protected class. Can constitute a fair housing violation even without discriminatory intent.
Mrs. Murphy Exemption
Federal FHA exemption allowing owner-occupants of buildings with 4 or fewer units to discriminate in renting. California's Unruh Act still applies.
Keep Going
50 Down. The Exam Draws From Hundreds.
These 50 give you the highest-value core, but the exam's vocabulary pool runs deeper — and recognition under time pressure is a different skill than reading a list. That's what spaced-repetition flashcards are for: the terms you miss keep coming back until they stick.
