PSI Practice Test with Complete Solutions

An exception to title insurance coverage is 1. forged documents. 2. defects found in public newspapers. 3. incorrect records of marital status. 4. defects that clearly appear in the title search. - ANSWER-defects that clearly appear in the title search. A lawsuit for inverse condemnation may be brought by 1. the police. 2. the city. 3. a homeowner. 4. the zoning board. - ANSWER-A Homeowner A landowner wishes to build a neighborhood grocery store on a busy street in an area zoned for residential use. Which of the following would MOST likely be used to obtain permission for this store? 1. Deed amendment. 2. Approval of surrounding property owners. 3. Inclusionary zoning. 4. Conditional use permit or zoning variance. - ANSWER-4. Conditional use permit or zoning variance. A salesperson lists a property with a contract that allows for subagency and dual agency. The salesperson is 1. an independent contractor to the broker and an agent to the principal. 2. an agent to the broker and a subagent to the principal. 3. a subagent to the broker and an agent to the principal. 4. an agent to the broker and an agent to the principal. - ANSWER-2. an agent to the broker and a subagent to the principal. When a listing broker is preparing an Offer to Purchase for a buyer customer, contingencies involving inspections or approval by a third party should 1. have short deadlines. 2. be discouraged by the broker. 3. be stated as briefly as possible. 4. be limited to mortgage arrangements. - ANSWER-1. have short deadlines. An investment property returns 12% of its value or $21,000 annually. What is the value of the property? 1. $100,000 2. $175,000 3. $235,200 4. $252,000 - ANSWER-175,000, (21,000/.12) Earnest money should be deposited into a trust account 1. in a timely manner, according to state laws. 2. upon removal of all contingencies. 3. at the broker's discretion. 4. according to MLS rules. - ANSWER-in a timely manner, according to state laws. Even after an offer has been accepted and is binding, the buyer and seller may still choose to sign mutual release papers rather than proceed to closing. Which of the following circumstances would NOT give either party a justifiable reason to insist on a mutual release? 1. The buyer finds a better property for better terms. 2. A title defect that will take months to clear is discovered. 3. A basement fire causes damage that requires extensive repairs. 4. The buyer is unable to obtain financing that meets the terms of the contract's financing contingency. - ANSWER-1. The buyer finds a better property for better terms. A prospective buyer made an offer to purchase a property. The owner responded with a counteroffer. While the buyer was reviewing the counteroffer, the owner received a better offer. The owner can accept the second offer if 1. it satisfies or exceeds all terms included in the counteroffer. 2. the owner withdraws the counteroffer before it is accepted. 3. the owner gives the first buyer notice that another offer was received and an opportunity to revise the bid. 4. the first buyer is informed, in writing, of the owner's intent to accept another offer. - ANSWER-2. the owner withdraws the counteroffer before it is accepted. A prospective seller asks a salesperson to recommend a listing price for a property. The salesperson should suggest 1. listing the property at the price the owner believes it is worth. 2. listing the property at least 30% above the current mortgage. 3. a competitive market analysis to determine the property's value. 4. setting the price at the value of the most recent sale in the neighborhood. - ANSWER-3. a competitive market analysis to determine the property's value. A seller's statement in a property disclosure document means 1. the owner is disclosing known latent defects. 2. nothing, because the seller will not be responsible for any defects. 3. the property is fully suitable for the uses contemplated by the buyer. 4. the owner creates a warranty that there are no defects in the property. - ANSWER-1. the owner is disclosing known latent defects. A managing broker can be held responsible for 1. all actions of associated salespersons. 2. all real estate activities of salespersons. 3. only those real estate activities the broker is aware of. 4. no activities of independent contractors. - ANSWER-2. all real estate activities of salespersons. A home buyer is obtaining a fully amortized loan in the amount of $140,000. The savings and loan will give him the loan for 15 years at 5% or for 30 years at 6%. To the nearest dollar, what is the difference between the monthly payments for these two loans? (BE SURE TO USE THE AMORTIZATION TABLE.) 1. $74 2. $87 3. $267 4. $342 - ANSWER-3. $267 If all other factors are equal, in which location is a parking lot likely to bring the highest sales price? 1. Residential district zoned for two-story apartments. 2. Business district zoned for a two-story commercial building. 3. Business district zoned for a six-story office building. 4. The price for the parking lot will be the same regardless of area and zoning. - ANSWER-3. Business district zoned for a six-story office building. During the listing presentation, the seller questions the amount of commission to be paid and is told 1. the amount is set by law. 2. everyone charges the same amount. 3. the amount of commission is negotiable. 4. the agent that charges a lower commission will not do as good a job selling the property. - ANSWER-3. the amount of commission is negotiable. A formal appraisal will ALWAYS be REQUIRED when the 1. seller wants to be sure of the home's value. 2. buyer wants to obtain private mortgage insurance.