PSI NATIONAL REAL ESTATE QUESTIONS WITH CORRECT ANSWERS

A legal description in land that includes language like "the old oak tree" or "the big rock" would be - Answer- Metes and bounds As a licensee is showing a property contiguous to a lake, the licensee notices that the lake has a large amount of algae. The buyer wishes to make an offer. What should the licensee do? - Answer- Encourage the buyer to have an authoritative party investigate the algae growth. All the following are protected classifications except - Answer- Homosexuals As licensees usually work as independent contractors, a broker will have a contract for the independent contractor which (for federal purposes) must outline - Answer- Statement that FICA (taxes) are the associates responsibility In a rescission agreement: - Answer- All parties return to original position and earnest money is refunded Agent A has been working at Brokerage for 4 years. Agent has listed and sold many but desires to try industrial office sales. What is the best course of action for houses Agent A? - Answer- Move license to an industrial/office company and train under them A seller is listing their $350,000 house. They state their property tax bill is $1,110 per year. What should the agent do? - Answer- Verify the information with the county A home warranty will typically provide coverage for which of the following: - Answer- Electrical and plumbing systems The local governments have authority to ensure that properties are being built properly. Under the authority of police power, the government can adapt and implement: - Answer- Construction standards A married couple owns a property together as tenancy in entirety. Which of the following about selling a property as tenancy in entirety is true? - Answer- Both spouses must sign the conveyance What statement is true about asbestos removal - Answer- Encapsulation is the safest tactic An easement is - Answer- The right to use another's land The amount to list a property is best determined by: - Answer- Competitive Market Analysis (CMA) Interest on a security deposit Starts: - Answer- The month the Property Manager receives the security deposit Racial discrimination is allowed: - Answer- NEVER An agent goes door knocking in a subdivision. As part of his presentation, he makes mention of the fact that many families with children are moving into the area and that house prices are rising. He then recommends the owner should sell because he has a nice quiet subdivision of older, mature families that are quiet. Is this discrimination - Answer- Yes- he is blockbusting by playing on the fears of consumers of protected class. The purpose of an Agency Disclosure is: - Answer- To inform the consumer of their representation choices The purpose of Regulation Z is: - Answer- Disclose loan costs interest rates on credit cards, loans, car loans, etc. are established by: - Answer- Usury The ways to terminate an Agency Agreement include all except: - Answer- Unilateral cancellatio Title Insurance covers all matters that are: - Answer- Itemized on the title report A purchaser in the secondary mortgage market is - Answer- Federal National Mortgage Association While performing an analysis of value for listing a house, all of the following would be included in the Market Data Approach except: - Answer- Capitalization A developer of a subdivision does not want "clotheslines" to be installed in the houses in the subdivision. A way for the developer to have control to limit and fine people who want to install clotheslines would be: - Answer- Covenant Seller is selling their property. Their outstanding loan balance is $240,000. The house has a value of $200,000. Assuming the seller pays realty fees, closing fees, state fees, the amount left over is only $180,000 to pay off the loan. What statement - Answer- Lender may pursue the seller for a deficiency judgment of $60,000 A seller has received an offer at 80% of list price. Seller counter offers at 90% of list the response, an offer of 98% of list price comes in from another buyer. The seller wishes to sell to the second buyer. What is true? - Answer- Withdraw the first buyer's counter-offer and then accept the second offer A buyer makes an offer on a property that the seller accepts. While waiting for an inspection, the buyers see another property that they like even better. They draft an offer on that property which is accepted by that seller. What statement about the offers is true? - Answer- Both offers are Valid Offers What should a buyer include in an offer to purchase that gives them the ability to financing is not approved? - Answer- Contingency With regard to the Lead Based Paint requirements under federal law, what is required? - Answer- Buyer has a 10 day period to inspect and/or rescind offer A real estate committee met and decided to simplify real estate in an area by having one commission structure at a low rate for all consumers. Is this legal? - Answer- No-this is price fixing A principal broker can be held responsible for - Answer- All real estate activities of salesperson A commercial property lost value because a recently constructed highway directed traffic away from the property. This is an example of - Answer- Economic or external obsolesce A prospective buyer makes an offer to buy a house. The owner counter-offers. While the buyers are reviewing the counteroffer, the owner receives a better offer. The owner can accept the second offer if... - Answer- The owner withdraws the counteroffer before the first buyer accepts-it The amount of commission is established - Answer- Agreed upon by seller and broker 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- Credit seller $300; debit buyer $300 A couple is moving to a new city. They are renting a house temporarily before buying a house. What type of lease would best suit their needs? - Answer- Month-to-month lease Two buyers bought a house with a $178,000 mortgage. The interest rate is 6 1/2% per annum payable for 30 years. To the nearest dollar, what is their monthly principal and interest payment? (BE SURE TO USE THE AMORTIZATION TABLE.) - Answer- $1,125 A homeowner has negotiated with a neighbor to obtain the permanent right to pass over the northern part of the neighbor's land to gain access to the river. He pays the neighbor $9,000 for the right of access and receives a deed. This is an easement - Answer- Appurtenant FHA functions most like - Answer- Insurance Company 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 An appraisal method that uses adjustments to recent sales to estimate value is the - Answer- sales comparison approach A lender who forecloses on a property and sells it later for less than what was owed has the right to obtain a(n) - Answer- deficiency judgment What is the payment difference on a loan amount of $220,000 with a 15 year, 5.5% interest versus a 30 year at 6.5% (use amortization chart) - Answer- $407 A buyer and seller have a contract which states the buyer can buy the property for $120,000 and close the sale before 12/31/2014. What type of contract exists? - Answer- Option A buyer wants to have a home business in a residential neighborhood. The broker should advise the buyer to - Answer- Check to see whether zoning will allow the business use. Which of the following is a disadvantage to owning real estate? - Answer- Liquidity A broker lists a property and begins marketing it. The seller sells the property to a neighbor and pays the broker a full commission, What type of listing agreement was signed?" - Answer- Exclusive Right to sell A potential buyer was turned down for a mortgage loan because of the high crime rate where the property is located. This is an example of - Answer- Redlining Fair housing law allows seniors to have separate housing if 80 percent of the units are occupied by at least one person age 55 or older. This exemption allows for discrimination based on - Answer- Familial Status A property manager would do all the following except: - Answer- Invest the profits into the building The listing agreement must contain all the following items except - Answer- Statement regarding how to earn commission The renter of a property has recently become disabled and can no longer walk. The tenant needs a ramp to gain access to the property. What must the landlord do? - Answer- Permit tenant to install ramp at their expense The right of an agent to represent a principal is created by - Answer- fiduciary agreements A tenancy in which the lessee remains in possession of the property without the lessor's consent is: - Answer- An estate at sufferance All of the following are true of the holder of a fee simple absolute estate EXCEPT: - Answer- his estate terminates upon death when a borrower wishes to obtain a loan in excess of 80% of the property's value, the lender is likely to require: - Answer- Mortgage default insurance The figure used by the lender in determining the maximum loan it will make the - Answer- purchase price or appraised value, whichever is less In an exclusive right to sell listing, the principal contracts: - Answer- to pay the broker a commission if the property sells during the contract Which of the following Statements BEST identifies the meaning of the term "Recession Contract" - Answer- A return of all parties to their condition before the contract was executed All the following are considered a Common Interest Community EXCEPT - Answer- Apartments An appraiser would be most likely to rely on the cost approach in appraising a - Answer- Church Title insurance premiums are paid - Answer- Once, at the time the policy is issued A seller is selling their house for $300,000. They agreed to pay a commission. How much will the seller net if there are no other costs of selling? - Answer- $279,000 A buyer is purchasing a property for $95,000. The seller has an existing mortgage of $65,750 which the buyer is assuming. The buyer has already deposited a $2,500 earnest money check. The seller agreed to pay a listing commission of 6.5% of the sales price. How much cash will the buyer need at the closing? - Answer- $26,750 Mortgage default insurance - Answer- Is paid by borrower to protect lender If the principal insists that she will not sell her house to black families, the broker must - Answer- Cancel the listing The final appraisal step when the appraiser weighs the three approaches to value is called? - Answer- Reconciliation Which one of the following buys mortgages - Answer- Federal National Mortgage Association (FNMA) The Comprehensive Environmental Response Compensation and Liability Act (CERCLA) created: - Answer- a Superfund to clean up hazardous waste sites The listing broker has done a visual inspection of the property and found no issues. The seller's property disclosure states there are no problems. After closing, the buyer finds long-standing issues with water entering the basement. Who is most likely to be held liable for non-disclosure of this latent material defect? - Answer- The seller, since brokers are not responsible for latent defects the seller does not disclose A broker states "this is the best house in the neighborhood," and the buyer purchases the home. Later the buyer finds out it is not the best house in the neighborhood. Can the buyer sue the broker? - Answer- No, since the broker was clearly puffing When a buyer and a seller enter into a purchase agreement (contract of sale), the legal remedy that each has to force the other transaction is - Answer- specific performance. A licensee when showing property MUST disclose - Answer- material facts of which the licensee is aware In order for a property manager to determine the net operating income for the investor/owner, which fees or expenses are subtracted from the effective gross income? - Answer- Operating expenses The owners of a cooperative apartment and the owners of a condominium apartment both - Answer- pay assessments