2026/2027
PSI National Real Estate Exam
2026/2027 Professional Preparation
Guide with Practice Assessments,
Review Quizzes, and Comprehensive
Licensing Study Content
Question 1
The terms “littoral,” “riparian,” and “appropriative” are MOST commonly associated
with which area of real estate law?
A. Easement rights
B. Water rights
C. Mineral rights
D. Air rights
Correct Answer: B. Water rights
Rationale: Littoral rights concern land bordering lakes and seas, riparian rights
involve land adjacent to flowing water such as rivers and streams, and appropriative
rights relate to the allocation and use of water, especially in areas where water is
scarce. These concepts collectively form the foundation of water rights law. Easement
rights involve permission to use another’s property, mineral rights concern subsurface
resources, and air rights relate to the use of space above land. Therefore, water rights
is the only answer that accurately encompasses all three terms.
Question 2
A salesperson lists a property under a contract that permits both subagency and dual
agency. In this arrangement, the salesperson is BEST described as:
A. An independent contractor to the buyer
B. A principal to the broker
C. An agent of the broker and a subagent of the principal
D. A dual agent for both buyer and seller automatically
Correct Answer: C. An agent of the broker and a subagent of the principal
Rationale: In a traditional brokerage relationship, the broker represents the seller as
the principal agent. Salespersons work under the broker’s supervision and therefore
act as agents of the broker while simultaneously serving as subagents of the seller.
,2026/2027
This creates fiduciary duties flowing to the principal through the broker. The
salesperson does not become an independent contractor to the buyer unless a separate
agency agreement exists, and dual agency requires disclosure and consent from all
parties. Therefore, the salesperson is correctly classified as an agent to the broker and
a subagent to the principal.
Question 3
Depreciation for appraisal purposes is generally calculated based on:
A. The value of the land only
B. The cost of both land and improvements
C. The cost of the building only
D. The original purchase price of the property
Correct Answer: C. The cost of the building only
Rationale: Land is considered indestructible and does not depreciate for appraisal
purposes. Depreciation applies only to improvements such as buildings and structures
because these items deteriorate physically, functionally, or economically over time.
Appraisers therefore calculate depreciation based solely on the cost or value of the
building improvements. Including land value would be incorrect because land retains
its utility and does not suffer wear and tear in the same way structures do.
Question 4
When a homeowner pledges property as collateral for a loan and creates a lien in
favor of the lender, title to the property is held by the:
A. Mortgagee
B. Beneficiary
C. Mortgagor
D. Trustee
Correct Answer: C. Mortgagor
Rationale: In mortgage terminology, the borrower is called the mortgagor, while the
lender is the mortgagee. Under the lien theory used in many states, the borrower
retains legal title to the property while the lender receives only a security interest or
lien. The borrower therefore continues to own the property unless foreclosure occurs.
A trustee is involved in deed of trust states, not standard mortgage arrangements,
making the mortgagor the correct answer.
Question 5
,2026/2027
A competitive market analysis (CMA) is MOST commonly prepared for which
purpose?
A. Determining tax assessments
B. Establishing insurance replacement cost
C. Setting a listing price
D. Calculating depreciation schedules
Correct Answer: C. Setting a listing price
Rationale: A CMA compares recently sold, active, and expired listings with similar
characteristics to estimate a realistic market value for a property. Real estate agents
primarily use it to help sellers establish an appropriate listing price that is competitive
within the current market. It is not a formal appraisal and is not designed for tax
assessment, insurance replacement valuation, or depreciation calculations. Properly
prepared CMAs assist sellers in pricing property accurately to attract buyers and
maximize sale potential.
Question 6
A seller informs the listing agent that the property was treated for termites 10 years
ago and claims there are no current issues. What should the agent advise?
A. The seller should not disclose because the statute of limitations has expired
B. The seller should disclose the prior termite treatment on the property disclosure
form
C. The seller should avoid discussing termites unless asked directly
D. The agent should independently certify the home as termite-free
Correct Answer: B. The seller should disclose the prior termite treatment on the
property disclosure form
Rationale: Real estate professionals have a duty to encourage full disclosure of known
material facts that could affect a buyer’s decision. Even if the termite issue occurred
years earlier, prior infestation and treatment may still be relevant to prospective
buyers. Concealing such information could expose the seller and agent to liability for
misrepresentation or fraud. The agent should therefore recommend disclosure rather
than concealment. The agent should not independently certify the property unless
properly licensed to do so.
Question 7
Which of the following is NOT a recognized method for estimating the reproduction
or replacement cost of a building?
A. Quantity survey method
B. Unit-in-place method
, 2026/2027
C. Square foot method
D. Straight-line method
Correct Answer: D. Straight-line method
Rationale: The quantity survey, unit-in-place, and square foot methods are all
accepted techniques for estimating construction or replacement costs in appraisal
practice. The straight-line method, however, is used to calculate depreciation by
spreading value loss evenly over an asset’s useful life. Because it measures
depreciation rather than construction cost, it is not considered a cost-estimation
method for replacement or reproduction purposes.
Question 8
A buyer is assuming an existing mortgage balance of $110,000 at closing. What
adjustment should appear on the closing statement?
A. Credit seller $110,000; debit buyer $110,000
B. Credit buyer $110,000; debit seller $110,000
C. Debit buyer only $110,000
D. Credit seller only $110,000
Correct Answer: B. Credit buyer $110,000; debit seller $110,000
Rationale: When a buyer assumes an existing mortgage, the buyer effectively takes
over responsibility for the remaining debt. The seller receives credit because the buyer
is relieving the seller of the mortgage obligation, while the buyer receives a
corresponding debit because the assumed loan becomes the buyer’s responsibility.
This adjustment ensures accurate accounting of obligations transferred during closing.
Question 9
A deed contains conditions regarding the future use of the property. If those
conditions are violated, what may occur?
A. Automatic foreclosure by the lender
B. Cancellation of all liens
C. Return of the property to the original owner
D. Mandatory rezoning of the property
Correct Answer: C. Return of the property to the original owner
Rationale: Certain deed restrictions create a defeasible fee estate, meaning ownership
is conditional. If the conditions are violated, ownership may revert to the grantor or
the grantor’s heirs through a reversionary interest. These conditions are legally
enforceable and may terminate the grantee’s ownership rights. Foreclosure and
rezoning are unrelated to violations of deed conditions.
PSI National Real Estate Exam
2026/2027 Professional Preparation
Guide with Practice Assessments,
Review Quizzes, and Comprehensive
Licensing Study Content
Question 1
The terms “littoral,” “riparian,” and “appropriative” are MOST commonly associated
with which area of real estate law?
A. Easement rights
B. Water rights
C. Mineral rights
D. Air rights
Correct Answer: B. Water rights
Rationale: Littoral rights concern land bordering lakes and seas, riparian rights
involve land adjacent to flowing water such as rivers and streams, and appropriative
rights relate to the allocation and use of water, especially in areas where water is
scarce. These concepts collectively form the foundation of water rights law. Easement
rights involve permission to use another’s property, mineral rights concern subsurface
resources, and air rights relate to the use of space above land. Therefore, water rights
is the only answer that accurately encompasses all three terms.
Question 2
A salesperson lists a property under a contract that permits both subagency and dual
agency. In this arrangement, the salesperson is BEST described as:
A. An independent contractor to the buyer
B. A principal to the broker
C. An agent of the broker and a subagent of the principal
D. A dual agent for both buyer and seller automatically
Correct Answer: C. An agent of the broker and a subagent of the principal
Rationale: In a traditional brokerage relationship, the broker represents the seller as
the principal agent. Salespersons work under the broker’s supervision and therefore
act as agents of the broker while simultaneously serving as subagents of the seller.
,2026/2027
This creates fiduciary duties flowing to the principal through the broker. The
salesperson does not become an independent contractor to the buyer unless a separate
agency agreement exists, and dual agency requires disclosure and consent from all
parties. Therefore, the salesperson is correctly classified as an agent to the broker and
a subagent to the principal.
Question 3
Depreciation for appraisal purposes is generally calculated based on:
A. The value of the land only
B. The cost of both land and improvements
C. The cost of the building only
D. The original purchase price of the property
Correct Answer: C. The cost of the building only
Rationale: Land is considered indestructible and does not depreciate for appraisal
purposes. Depreciation applies only to improvements such as buildings and structures
because these items deteriorate physically, functionally, or economically over time.
Appraisers therefore calculate depreciation based solely on the cost or value of the
building improvements. Including land value would be incorrect because land retains
its utility and does not suffer wear and tear in the same way structures do.
Question 4
When a homeowner pledges property as collateral for a loan and creates a lien in
favor of the lender, title to the property is held by the:
A. Mortgagee
B. Beneficiary
C. Mortgagor
D. Trustee
Correct Answer: C. Mortgagor
Rationale: In mortgage terminology, the borrower is called the mortgagor, while the
lender is the mortgagee. Under the lien theory used in many states, the borrower
retains legal title to the property while the lender receives only a security interest or
lien. The borrower therefore continues to own the property unless foreclosure occurs.
A trustee is involved in deed of trust states, not standard mortgage arrangements,
making the mortgagor the correct answer.
Question 5
,2026/2027
A competitive market analysis (CMA) is MOST commonly prepared for which
purpose?
A. Determining tax assessments
B. Establishing insurance replacement cost
C. Setting a listing price
D. Calculating depreciation schedules
Correct Answer: C. Setting a listing price
Rationale: A CMA compares recently sold, active, and expired listings with similar
characteristics to estimate a realistic market value for a property. Real estate agents
primarily use it to help sellers establish an appropriate listing price that is competitive
within the current market. It is not a formal appraisal and is not designed for tax
assessment, insurance replacement valuation, or depreciation calculations. Properly
prepared CMAs assist sellers in pricing property accurately to attract buyers and
maximize sale potential.
Question 6
A seller informs the listing agent that the property was treated for termites 10 years
ago and claims there are no current issues. What should the agent advise?
A. The seller should not disclose because the statute of limitations has expired
B. The seller should disclose the prior termite treatment on the property disclosure
form
C. The seller should avoid discussing termites unless asked directly
D. The agent should independently certify the home as termite-free
Correct Answer: B. The seller should disclose the prior termite treatment on the
property disclosure form
Rationale: Real estate professionals have a duty to encourage full disclosure of known
material facts that could affect a buyer’s decision. Even if the termite issue occurred
years earlier, prior infestation and treatment may still be relevant to prospective
buyers. Concealing such information could expose the seller and agent to liability for
misrepresentation or fraud. The agent should therefore recommend disclosure rather
than concealment. The agent should not independently certify the property unless
properly licensed to do so.
Question 7
Which of the following is NOT a recognized method for estimating the reproduction
or replacement cost of a building?
A. Quantity survey method
B. Unit-in-place method
, 2026/2027
C. Square foot method
D. Straight-line method
Correct Answer: D. Straight-line method
Rationale: The quantity survey, unit-in-place, and square foot methods are all
accepted techniques for estimating construction or replacement costs in appraisal
practice. The straight-line method, however, is used to calculate depreciation by
spreading value loss evenly over an asset’s useful life. Because it measures
depreciation rather than construction cost, it is not considered a cost-estimation
method for replacement or reproduction purposes.
Question 8
A buyer is assuming an existing mortgage balance of $110,000 at closing. What
adjustment should appear on the closing statement?
A. Credit seller $110,000; debit buyer $110,000
B. Credit buyer $110,000; debit seller $110,000
C. Debit buyer only $110,000
D. Credit seller only $110,000
Correct Answer: B. Credit buyer $110,000; debit seller $110,000
Rationale: When a buyer assumes an existing mortgage, the buyer effectively takes
over responsibility for the remaining debt. The seller receives credit because the buyer
is relieving the seller of the mortgage obligation, while the buyer receives a
corresponding debit because the assumed loan becomes the buyer’s responsibility.
This adjustment ensures accurate accounting of obligations transferred during closing.
Question 9
A deed contains conditions regarding the future use of the property. If those
conditions are violated, what may occur?
A. Automatic foreclosure by the lender
B. Cancellation of all liens
C. Return of the property to the original owner
D. Mandatory rezoning of the property
Correct Answer: C. Return of the property to the original owner
Rationale: Certain deed restrictions create a defeasible fee estate, meaning ownership
is conditional. If the conditions are violated, ownership may revert to the grantor or
the grantor’s heirs through a reversionary interest. These conditions are legally
enforceable and may terminate the grantee’s ownership rights. Foreclosure and
rezoning are unrelated to violations of deed conditions.
