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CA Finance & appraisal

California real estate finance and appraisal study cards

Use these cards to review deed-of-trust financing, discount points, and the valuation approaches used to price a California home.

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Source-linked learning

Study the rule, not a guess.

For financing, notice the security instrument and who holds title. For appraisal, name the approach before you pick an answer.

Card 01

A California buyer negotiates a fixed-rate residential purchase-money loan secured by the home. Which type of trust deed arrangement is most commonly used to secure the debt in California?

  1. A promissory note held unsecured by the lender
  2. A deed of trust conveying a security interest to a trustee who holds it for the beneficiary
  3. A mortgage that immediately transfers fee title to the lender
  4. A lease-option that gives the lender possessory rights
Reveal answer and explanation

Correct answer: A deed of trust conveying a security interest to a trustee who holds it for the beneficiary

In California, purchase-money financing is customarily secured by a deed of trust. The borrower conveys a security interest in the property to a trustee, who holds it for the beneficiary (the lender); the trust deed is reconveyed when the note is paid off. As a title (deed of trust) state, California does not transfer fee title to the lender at the outset.

California Department of Real Estate — California Real Estate Finance Outline — Deed of trust as the customary California security instrument; roles of trustor, trustee, and beneficiary. Source checked 2026-09-05. Review by 2027-03-01.

Card 02

An appraiser values a California home by comparing it to several similar properties sold recently in the same area. Which valuation approach is being used?

  1. The income approach
  2. The cost approach
  3. The sales comparison approach
  4. The discounted cash-flow approach
Reveal answer and explanation

Correct answer: The sales comparison approach

The sales comparison (market data) approach estimates value by comparing the subject property with recently sold, comparable properties and making adjustments for differences. It is the approach most commonly relied on for the appraisal of single-family homes.

California Department of Real Estate — Appraisal Concepts and Methods — Sales comparison approach as the standard method for comparing recent sales of similar properties. Source checked 2026-09-05. Review by 2027-03-01.

Card 03

A California borrower wants to buy down the interest rate by paying points at closing. If one discount point equals one percent of the loan amount, about how much would one point cost on a $400,000 loan?

  1. $400
  2. $4,000
  3. $40,000
  4. It depends only on the property's assessed tax value
Reveal answer and explanation

Correct answer: $4,000

One discount point is one percent of the loan amount. One percent of $400,000 is $4,000. Paying points typically buys a lower interest rate, and the buyer should weigh the upfront cost against the monthly savings.

California Department of Real Estate — Financing basics and the cost of credit — One discount point equals one percent of the mortgage loan amount. Source checked 2026-09-05. Review by 2027-03-01.