PSI NJ Real Estate Exam, PSI Practice Test (Answered)

Water Rights - Answer- The terms "littoral," "riparian," and "appropriative" refer to A salesperson lists a property with a contract that allows for subagency and dual agency. The salesperson is - Answer- an agent to the broker and a subagent to the principal. Depreciation is calculated based on the - Answer- Cost of the building only. When a property owner uses his home as collateral for a loan and creates a lien in favor of the lender, title is held by the - Answer- mortgagor A competitive market analysis is MOST often used for - Answer- setting a listing price A seller tells the listing agent that her home was treated for termites 10 years ago, so there are no termites now. Before listing the property, the agent should - Answer- tell the seller not to disclose, because the statute of limitations has run out. All of the following are methods to calculate the reproduction or replacement cost of a building EXCEPT the - Answer- straight-line method The buyer is assuming a mortgage presently on the property in the amount of $110,000. What is the adjustment made at closing? - Answer- Credit buyer $110,000; debit seller $110,000. If conditions for purchase are included in a deed and these conditions are violated, what is the penalty? - Answer- Return of the property to the original owner. The purpose of requiring an earnest money deposit in a real estate sales contract is to - Answer- provide evidence of the buyer's intention to carry out the contract. A judgment has been properly recorded. Any subsequent purchasers, whether they have actually examined the record or not, have been given - Answer- constructive notice What type of map is MOST useful for describing the terrain of a very hilly lot? - Answer- contour map The Department of Housing and Urban Development estimates that most private homes built before 1978 contain potentially dangerous levels of lead. Because of this, some Federal agencies, such as FHA, - Answer- Require the buyer to acknowledge disclosure of the presence of any known lead paint. At the time of listing, the seller tells the listing agent they are moving because the neighbor has loud parties every weekend. The agent should - Answer- tell potential buyers about the parties. (Any social information expressed to an agent can be shared) A major reason for buying and owning a condominium rather than a detached single-family home is that - Answer- a condominium tends to be more affordable. A buyer was negotiating the purchase of a house for himself. During a conversation with the seller, the seller agreed to include all kitchen appliances in the sale, and this fact was included in the sales contract. In this situation, if the seller takes the appliances with him, what recourse does the buyer have? - Answer- The buyer may sue the seller for specific performance. A loan which requires the borrower to pay interest only until the maturity date (or due date), and then to pay the entire principal on the maturity date, is called a - Answer- straight (term) loan (AKA term loan) The real estate contract for a specific property for use as an unlicensed whiskey sales operation was forced to terminate. The termination was the result of - Answer- Impossibility of performance. - - (Key word: *Unlicensed* whiskey sales operation). A broker lists a property, with a listing contract allowing subagency and dual agency. One of the broker's salespersons shows the property. The salesperson would be classified as - Answer- a subagent of the seller. — (Think - brokerage is the AGENCY, salesperson is working under the agency) The relationship in which the agent is placed in the position of trust and confidence to the principal is known by the term - Answer- fiduciary An agreement to purchase that has NOT yet closed is - Answer- an executory contract. When compiling a competitive market analysis, a broker would look for comparable properties that - Answer- were located near the property being listed. The power vested in the government to establish legislation to preserve order, protect the public health and safety, and promote the general welfare is known as - Answer- police power If a borrower can afford to make monthly principal and interest payments of $1,000 and the lender will make a 30-year loan at 8-1/2%, how large a loan (rounded to the nearest $100) can this buyer afford? (BE SURE TO USE THE AMORTIZATION TABLE.) - Answer- $130,000 An Environmental Impact Statement (EIS) - Answer- projects the impact on the environment of a proposed project. In an exclusive right-to-sell listing, an owner lists the property for sale with how many brokers? - Answer- One 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 - Answer- the owner withdraws the counteroffer before it is accepted. Antitrust laws prohibit competing brokers from all of the following EXCEPT - Answer- receiving compensation from both the buyer and the seller. Without checking the facts, a broker who is the seller's agent tells a buyer that the property taxes in a particular neighborhood are among the lowest in the area. The buyer relies on the broker's statement and makes an offer on a house in the neighborhood. Before closing, it is determined that the taxes are actually among the highest in the area. The buyer could seek to rescind the contract on the basis of - Answer- misrepresentation The sellers have agreed to give the buyers an allowance of $16.95 per square yard to retile the kitchen. If the kitchen is 10 feet x 14 feet, how much will it cost the sellers (to the nearest dollar)? - Answer- $264 Three identical homes in a neighborhood were listed at the same time in a market where demand was constant. According to the law of supply and demand, which would have sold for the lowest price? - Answer- the first sold Which of the following is the first action to take when mold problems are found? - Answer- Identify and remedy the cause of the problems. A borrower has defaulted on the mortgage. The mortgage contains an acceleration clause. This permits the lender to - Answer- demand immediate payment of the entire note. A buyer is getting a fully amortized loan for $220,000. The bank will give the buyer the loan for 15 years at 5 1/2% or for 30 years at 6 1/2%. To the nearest cent, what is the difference between the monthly payments for these two loans? (BE SURE TO USE THE AMORTIZATION TABLE.) - Answer- $409.20 A property management plan may serve different purposes for different owners, and generally has to strike a balance between preservation of the property's value and generation of income. Which of the following owners would MOST likely prefer a property manager who emphasizes maintenance of value over profitability? - Answer- An individual entrepreneur who owns several apartment buildings. A written agreement in which a purchaser agrees to buy and a seller agrees to sell is called - Answer- a contract Errors and Omissions insurance covers the broker for - Answer- Unintentional misrepresentation An example of a contract terminated due to inability to perform would be one in which the - Answer- seller had contracted for sale of the entire property without the knowledge or consent of the other joint tenant. According to the Truth-in-Lending Act, if any "trigger terms" are used in an ad, all of the following disclosures MUST appear in the... - Answer- cash price or amount of the loan, amount of down payment required and number, amount, and frequency of payments. DO NOT NEED TO INCLUDE PREPAYMENT PENALTIES AND REBATES. A deed restriction is applicable to the activities of - Answer- present and future owners. In MOST states, foreclosed property is sold through - Answer- Public Auction A tenant rented an apartment, signing a 15-month lease. After the lease expired, the tenant paid 1 month's rent and got a receipt. What kind of leasehold does the tenant have? - Answer- tenancy at will When preparing a market data estimate of value, which of the following categories of adjustment is NOT essential? - Answer- The original cost of the building. Which of these Federal laws regulates the advertisement of a lender's credit terms (rates, payment, etc.)? - Answer- Regulation Z A couple owns an older home in a neighborhood that is becoming a commercial area. Because of the change in the use of the land, the couple can expect the value of their parcel to increase at some future time. This is an example of the principle of - Answer- anticipation A contract has been drawn which obliges the sellers to convey title to their land to the buyers if the buyers come up with $22,000 on or before December 31st. This is called - Answer- an option contract When a principal authorizes an agent to perform a particular act or transaction, it is an example of a - Answer- Special Agency A charge of violation of Federal Fair Housing laws can be heard by an administrative law judge within the Department of Housing and Urban Development (HUD) or by a Federal district court judge in Federal court. The advantage of a Federal court hearing to the complaining party is that - Answer- There is no dollar limit on damages paid A managing broker can be held responsible for - Answer- all real estate activities of salespersons. When land is conveyed to a trustee, the trustee may - Answer- do whatever is permitted under the trust agreement On January 15, a seller paid $960 in annual property tax for the current calendar year. A buyer is purchasing the house with the closing set for March 1. What will be the seller's credit for the property taxes already paid if the buyer pays for the day of closing? Use a 360-day year and a 30-day month. - Answer- $800 An owner lists her home at a 7% commission rate and wants to net $45,000 after paying the mortgage balance of $68,000 and the broker's commission. To the nearest dollar, what should the selling price be to net her $45,000? 1.)$105,090. 2.) $110,753. 3.) $120,910. 4) None of the above. - Answer- None of the above. During the listing presentation, the seller questions the amount of commission to be paid and is told - Answer- the amount of commission is negotiable. Why was the Jones vs. Mayer decision of 1968 important? - Answer- By upholding the Civil Rights Act of 1866, the Supreme Court removed all exceptions to racial discrimination in housing. A broker supplies the financing for a project to build condominiums with the stipulation that he has the exclusive right to sell the completed condos. What type of agency BEST describes this relationship? - Answer- Agency coupled with an interest A broker says, while showing a rural property, "This property has the world's purest well water." This would be an example of - Answer- an expression of opinion, or puffing, which could lead to misrepresentation. The day after a broker's listing on a house expired, it was listed with another broker and offered in the MLS. Several days later, a third licensee called the first broker and asked for the key to show the home. The broker should inform the caller that - Answer- He is no longer the listing agent. At the closing on June 15, the buyer is assuming a mortgage presently on the property, on which the monthly interest charge is currently $600. The seller has made the payment due on June 1. Assuming a VA mortgage, what is the adjustment made at closing? - Answer- Debit the seller $300, Credit the buyer $300 When is racial discrimination in the rental of rooms or apartments permitted? - Answer- Under no circumstances At the time of harvest, crops that require annual planting are generally considered to be - Answer- Personal Property Under a land contract for deed, who retains fee ownership of the property? - Answer- Vendor Which of the following statements about discount points is FALSE? 1.) They are computed as a percentage of the selling price. 2.) They are used to buy down interest rate. 3.) They are a function of the marketplace. 4.) They are paid by either the buyer or the seller. - Answer- They are computed as a percentage of the selling price. The PRIMARY purpose of zoning ordinances is to - Answer- implement a local master plan. How does a creditor who has obtained a judgment get satisfaction against a debtor who will not pay? - Answer- Writ of execution The economic characteristics of land are - Answer- Scarcity, location, and durability. An easement can be terminated by - Answer- Merger of titles What event would AUTOMATICALLY cancel a listing agreement? - Answer- Property owner's death. Prospective buyers made an offer on a property. The seller did NOT accept, but made a counteroffer. The prospective buyers signed the counteroffer and the real estate agent delivered their acceptance to the seller. In the interim, the same buyers had found another house that they liked better and made an offer on it, which was accepted. Define the contract - Answer- Both contracts are valid. A tenant rented an apartment, signing a 15-month lease. After the lease expired, the tenant paid 1 month's rent and got a receipt. What kind of leasehold goes the tenant have? - Answer- tenancy at will How does a creditor who has obtained a judgement get satisfaction against a debtor who will not pay? - Answer- write of execution Timeshare ownership programs MOST often used in what type of ownership form? - Answer- tenancy in common Real property can be converted to personal property by - Answer- severance Two lots of the same size are sold on a street. The lot on the corner sells for $20,000 more than the lot in the middle of the street. What characteristic MOST likely explains the price difference? - Answer- situs In every real estate transaction, a legal description of the real estate MUST appear in the transaction documents. What kind of legal description should be used in MOST transactions? - Answer- the same one used in prior transfers of the parcel, verified by a surveyor A landowner wishes to build a neighborhood grocery store on a busy street in an area zoned for residential use. What would be MOST likely be used to obtain permission for this store? - Answer- conditional use permit or zoning variance An environmental impact statement typically describes the effects of a proposed project on factors such as - Answer- public health and safety New sidewalks installed only on one particular street will probably be paid for by - Answer- a special assessment A lawsuit for inverse condemnation may be brought by - Answer- the homeowner Although states make specific laws governing water rights and the rights in land that borders water, most states generally follow one of two basic doctrines regarding water rights. Either riparian and littoral rights are automatically conveyed with property, or all water rights are controlled by the state under the doctrine or prior appropriation. The doctrine of prior appropriation is MOST likely to be followed in states where - Answer- water is scarce When more than one approach to value is applied to a property and different indications of value are produced, how should the final estimate of value be determined? - Answer- reconciliation An appraiser MUST be licensed or certified to handle Federally related work on residential property valued at more than - Answer- $250,000 When preparing a market data estimate of value, which of the following categories of adjustment is NOT essential? a. the amount of square footage b. the location of the property c. the original cost of the building d. the date of sale of the comparables - Answer- the original cost of the building All of the following are methods to calculate the reproduction or replacement cost of a building EXCEPT the a. quantity survey method b. unit-in-place method c. square foot method d. straight-line method - Answer- straight-line method If all other factors are equal, in which location is a parking lot likely to bring the highest sales price? - Answer- business district zoned for a six-story office building Parcels A, B, and C are located side by side and owned by three different owners. A is worth $20,000, B is worth $27,000, and C is worth $16,000 for a total of $63,000. A developer believes that if all three can be purchased, the larger parcel would be worth $85,000. By assembling these under one owner they would be worth $22,000 more than their individual values. This demonstrates which principle of value? - Answer- plottage A prospective seller asks a salesperson to recommend a listing price for a property. The salesperson should suggest - Answer- a competitive market analysis The FHA functions MOST like - Answer- an insurance company A loan which requires the borrower to pay interest only until the maturity date (or due date), and then pay the entire principal on the maturity date, is called a - Answer- term loan Which of the following statements about discount points is FALSE? a. they are computed as a percentage of the selling price b. they are used to buy down interest rate c. they are a function of the marketplace d. they are paid by either the buyer or the seller - Answer- they are computed as a percentage of the selling price When is flood insurance REQUIRED in order to obtain a loan? - Answer- when the property is located in a flood hazard zone Usury laws were enacted to protect the - Answer- borrower A buyer made an offer on a property that was listed at $350,000. She wanted to put $35,000 down and make payments to the seller, allowed the seller to retain title until the principal was paid off. The seller accepted, and the buyer became a - Answer- vendee The Equal Credit Opportunity Act addresses all of the following EXCEPT a. discrimination in lending b. written statements of credit denial c. acceptable factors for borrower analysis d. standardization of interest rates - Answer- standardization of interest rates Under the terms of their listing contract, the owners may sell their house themselves and pay no commission. If their agent sells it, a commission will be due. What kind of listing contract do the owners have? - Answer- exclusive agency listing The real estate licensee who accepts an undisclosed fee for referring a buyer to a specific title company may be in violation of - Answer- RESPA Which of the following events would AUTOMATICALLY cancel a listing agreement? - Answer- property owners death Another term for the owner of a property listed with your firm is the - Answer- client A broker has brought a ready, willing, and able buyer to a seller. In MOST listing contracts, the broker has earned his commission when - Answer- the seller accepts the offer The day after a broker's listing on a house expired, it was listed with another broker and offered in the MLS. Several days later, a third licensee called the first broker and asked for the key to show the home. The broker should inform the called that - Answer- he is no longer the listing agent When a principal authorizes an agent to perform a particular act or transaction, it is an example of what type of agency? - Answer- special agency One common method for controlling the problems created by conflict of interest in dual representation is - Answer- allowing a broker to designate separate salespeople within the company as legal representatives of each of the clients A broker supplies the financing for a project to build condominiums with the stipulation that he has the exclusive right to sell the completed condos. Which type of agency is this - Answer- agency coupled with an interest State laws differ on whether a buyer is entitled to know about - Answer- a suicide that occurred in the house last year The real estate broker who is listing a house for sale should personally verify - Answer- the number of SF in the building A seller tells the listing agent that her home was treated for termites 10 years ago, so there are no termites now. Before listing the property, the agent should a. tell the seller not to disclose, because the statute of limitations has run out b. tell the seller to disclose the termite treatment on the property disclosure c. talk to neighbors to see if there are termites in the neighborhood d. talk to the planning and zoning department for local termite eradication ordinance - Answer- tell the seller to disclose the termite treatment on the property disclosure A seller mentions to his agent that the previous owners of his property may have dumped hazardous waste on the site. Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), who is liable for damages from the dumping prior to the sale of the property? - Answer- seller The Department of Housing and Urban Development estimates that most private homes built before 1978 contain potentially dangerous levels of lead. Because of this, some Federal agencies, such as FHA, require ____ - Answer- the buyer to acknowledge disclosure of the presence of any known lead paint At the time of listing, the seller tells the listing agent they are moving because the neighbor has loud parties every weekend. The agent should - Answer- tell potential buyers about the parties A contract has been drawn which obliges the sellers to convey title to their land to the buyers if the buyers come up with $22,000 on or before December 31. This is called - Answer- an option contract A company agrees to lease a property to be used as a gambling casino. State laws prohibit gambling. This particular contract would be legally defined as - Answer- void The real estate contract for a specific property for use as an unlicensed whiskey sales operation was forced to terminate. The termination was a result of - Answer- impossibility of performance An amount of money, agreed to in writing by buyer and seller, that will serve as full compensation if one party does not live up to a sales contract is called - Answer- liquidated damages A couple signed a lease on an apartment for a period of 1 year. The lease does NOT contain an automatic renewal clause. The couple plans to move out at the end of the lease rather than renew it. How much notice MUST they give to comply with the lease term? - Answer- no notice required The escrow officer or closing agent MUST give information regarding the sales price and seller's social security number to - Answer- IRS A judgement has been properly recorded. Any subsequent purchasers, whether they have actually examined the record or not, have been given is? - Answer- constructive notice For Federal income tax purposes, what are the costs of homeownership that may be deducted from gross income? - Answer- mortgage loan interest, local property taxes, mortgage loan origination fees At the closing on June 15, the buyer is assuming a mortgage presently on the property, on which the monthly interest charge is currently $600. The seller has made the payment due on June 1. Assuming a VA mortgage, what is the adjustment made at closing? a. credit seller $300, credit buyer $300 b. debit seller $300, debit buyer $300 c. credit seller $300, debit buyer $300 d. debit seller $300, credit buyer $300 - Answer- debit seller $300, credit buyer $300 When someone has living heirs but dies without leaving a will, the estate is distributed according to the - Answer- statue of descent is NOT usually prorated at closing? - Answer- special tax assessments The buyer is assuming a mortgage presently on the property in the amount of $110,000. What is the adjustment made at closing? a. credit buyer $110,000, debit seller $110,000 b. credit seller $110,000, debit buyer $110,000 c. credit buyer $110,000, no adjustment to seller d. credit seller $110,000, no adjustment to buyer - Answer- credit buyer $110,000, debit seller $110,000 The statement "this property has the most beautiful views in the neighborhood" is an example of - Answer- puffing The Civil Rights Act of 1866 prohibits any type of discrimination based on - Answer- race Antitrust laws prohibit competing brokers from all of the following EXCEPT a. boycotting other brokers in the marketplace b. dividing the market to restrict competition c. agreeing to set sales commissions and management rates d. receiving compensation from both the buyer and the seller - Answer- receiving compensation from both the buyer and the seller A real estate brokerage company has developed standardized policies regarding the inventory of properties to be shown to prospective buyers, the company's standards for qualifying buyers, and documentation of all conversations and showings. These policies can help the firm defend itself in the event of an accusation of discrimination, but only if the policies - Answer- require every licensee in the firm to follow them consistently