California Real Estate Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Study for the California Real Estate Exam with confidence. Engage with interactive questions designed to enhance your understanding of real estate principles, laws, and practices. Prepare thoroughly for your licensing test and ensure you have the knowledge to succeed in your real estate career!

Practice this question and more.

When a broker uses inside knowledge to buy a house intending to resell it at a higher price, what must they do to legally accomplish this?

Nothing, this action is always illegal.
Inform the seller of their intentions and gain consent.
Only disclose the sale price but not the resale intentions.
Purchase the property anonymously.

The correct answer is: Inform the seller of their intentions and gain consent.

A broker using inside knowledge to buy a house with the intention of reselling it at a higher price is known as insider trading and it is considered illegal. To legally accomplish this, the broker must inform the seller of their intentions and gain consent. Option A is incorrect because insider trading is not always illegal, but it is in this specific scenario. Option C is incorrect because only disclosing the sale price without disclosing the resale intentions does not make it legal. Option D is incorrect because purchasing the property anonymously does not change the fact that it is insider trading, and can also raise suspicions or breach confidentiality agreements. Providing consent from the seller is the only legal and ethical way for a broker to use inside knowledge to buy and resell a property.