Natural Hazard Disclosure (NHD) statement required (flood, fire, earthquake zones).
Before you read
Test yourself first: 5 questions
Question 1 of 5
Regarding property-condition disclosures, California has moved away from pure 'caveat emptor' (let the buyer beware) by imposing on sellers and their agents an affirmative duty to:
Answer: A. California has largely replaced caveat emptor with an affirmative duty to disclose known material facts affecting value or desirability that are not readily observable by the buyer. The duty is to disclose, not to repair or warrant.
Question 2 of 5
If a California buyer receives the TDS after signing the purchase agreement (delivered late), the buyer generally has the right to:
Answer: D. When the required disclosures are delivered after the buyer has signed the purchase agreement, the buyer has a statutory right to terminate within a short period after delivery (commonly 3 days if delivered in person and 5 days if delivered by mail).
Question 3 of 5
A fact that California courts and the DRE recognize as a material fact requiring disclosure to a buyer would most likely include:
Answer: D. A known chronic flooding or drainage problem affects value and desirability and is not readily observable, so it is a material fact that must be disclosed. The seller's motivation for moving and similar non-defect facts are generally not required property-condition disclosures.
Question 4 of 5
A broker who receives a buyer's deposit check and is not instructed otherwise must place trust funds into a neutral escrow, the principal's hands, or a trust account within how many days?
Answer: B. California law generally requires a broker to place trust funds into a neutral escrow depository, into the hands of the broker's principal, or into a trust account within three business days following receipt.
Question 5 of 5
A broker who collects a buyer's earnest-money deposit must place those trust funds into a trust account, neutral escrow, or the principal's hands no later than:
Answer: B. Under California trust-fund rules, a broker must deposit trust funds into a trust account, a neutral escrow depository, or into the hands of the principal no later than three business days following receipt. Improper handling of trust funds is a frequent basis for discipline.
Keep the streak going with more questions like these, each with a full rationale.
Must-know rules
- Transfer Disclosure Statement (TDS) required for most residential 1-4 unit sales.
- Natural Hazard Disclosure (NHD) statement required (flood, fire, earthquake zones).
- Trust funds must be deposited within 3 business days of receipt.
- Documentary transfer tax: $0.55 per $500 of consideration.
- Proposition 13: ~1% base property tax, increases capped at ~2% per year.
- Mello-Roos special tax districts must be disclosed to buyers.
- Fair housing: Unruh Civil Rights Act and the California FEHA apply.
CA Disclosures, Escrow & Key Numbers: FAQs
Is CA Disclosures, Escrow & Key Numbers on the real estate exam?
Yes. State License Law is a scored domain on the California real estate licensing exam, and this topic appears in the state license-law portion.
Is this cheat sheet free?
Yes — every page on Cinna RE's resource library is free to read, print and share. The app adds practice questions, mock exams and a readiness score.
Does California test this differently?
California applies its own license law on top of the national portion. This page covers the California rules specifically, which is what the state section of your exam tests.
