National PSI Exam Prep Questions and Answers

A broker is completing a CMA to determine the potential listing price of a seller's home. Which of the following is NOT part of the final CMA given to the seller? A) Highest and best use evaluation B) Comparable sales analysis C) Adjustments to past sales D) Pictures of comparables - Answer- A Houses in the local area have had an increase in sales price and a decrease in days on the market. A broker who is attempting to determine the current market value for a residential listing would get the BEST estimate of value by using A) a GRM as the primary consideration to determine value. B) the cost approach with reproduction estimates. C) comparables that are no more than six months old. D) comparables that are no more than 12 months old. - Answer- C Rental rates have increased by 2% in the last six months. Which appraisal principle BEST explains this rate increase? A) Principle of substitution B) Principle of supply and demand C) Principle of contribution D) Principle of highest and best use - Answer- B The current monthly GRM in a neighborhood is 200, and the annual income is $24,000. What is the estimated value of a property in this neighborhood? A) $200,000 B) $240,000 C) $400,000 D) $4,800,000 - Answer- C The subject property has two baths and one fireplace. The property across the street sold for $181,000 and has two baths and two fireplaces. The property behind the subject sold for $175,000 and has two baths and no fireplace. In the area, baths are worth $5,000 and fireplaces are worth $3,000. What is the subject property worth? A) $175,000 B) $177,000 C) $178,000 D) $180,000 - Answer- C According to federal government lending regulations, a buyer purchasing a home must have an appraisal for all the following types of financing EXCEPT A) FHA. B) VA. C) loan sold to FNMA. D) seller carry. - Answer- D A buyer chooses a loan with an LTV ratio of 90%, which requires the purchase of PMI, instead of a loan with an 80% LTV, which would not require the insurance. The buyer MOST likely made this choice because A) if the buyer defaults, PMI will protect the buyer by paying off the full loan. B) the buyer will make a larger down payment but have smaller monthly payments, including PMI. C) paying PMI will mean that all mortgage payments and homeowners association fees are deferred in case of default. D) the buyer wants a smaller down payment, even though the buyer will have to pay PMI. - Answer- D A buyer is getting a new mortgage with a 95% loan-to-value ratio. The final loan amount the lender will lend the buyer is determined by the A) lower of the sales price or appraised value. B) higher of the sales price or appraised value. C) sales price only. D) appraised value only. - Answer- A The difference between using a partially amortized loan or an interest-only term loan is that the partially amortized loan would result in A) smaller payments and a smaller balloon payment. B) larger payments and a smaller balloon payment. C) smaller payments and a larger balloon payment. D) larger payments and a larger balloon payment. - Answer- B A borrower is using leverage on a new home loan at 90% loan to value. The disadvantage of this type of leveraging is that A) the borrower is at higher risk of defaulting on the loan. B) it allows the borrower to pay less interest over the life of the loan. C) a larger down payment is required. D) there is rarely any requirement for PMI. - Answer- A A property owner has a large amount of equity in his home but does not want to sell it to gain access to his money. What type of loan could the owner use to access the equity in his home without having to make monthly loan payments? A) Contract for deed B) Purchase money mortgage C) Reverse mortgage D) Growth equity mortgage - Answer- C A lender in first position filed documents to initiate foreclosure on a property. The borrower offered to give the lender a deed in lieu of foreclosure. If the lender accepts the deed in lieu, which of the following is TRUE? A) The lender must continue with the foreclosure. B) Upon receiving the deed, the lender acquires the property free and clear of all liens. C) The lender will take title subject to any junior liens. D) The lender needs to obtain a mortgagee's title policy to clear all liens. - Answer- C A seller has agreed to act as the buyer's bank. The seller and the buyer signed a contract for deed to help the buyer purchase the seller's home. When will the buyer receive possession and title? A) Full rights of possession and full legal title are received upon making the final loan payment. B) Partial legal title and full rights of possession are received at closing. C) Title is received as agreed to in the contract, and possession is received upon making the final loan payment. D) Possession is received as agreed to in the contract, and title is received upon making the final loan payment. - Answer- D A contract for the purchase of real property might be terminated by all of the following EXCEPT A) the buyer, while under contract, has found a different property he prefers and has asked the seller to terminate so he can purchase the other property. B) a buyer sends written notice during the financing contingency; he is terminating the contract due to being unable to qualify for a loan and requests the return of earnest money. C) the buyer has given the seller a large amount of repair items and the seller and the buyer have agreed to mutually rescind the agreement due to inspection issues. D) the buyer found out the property is not zoned to be used as the buyer wishes. The buyer sends a notice to terminate based upon the contract contingency giving the buyer 10 days to verify the property use. - Answer- A Which of the following is TRUE about the executory stage of a contract to purchase real property? A) The seller has possession and equitable title. B) The buyer has legal title and possessory rights once all the contingencies have terminated. C) This stage is for the seller to determine if the buyer's offer is acceptable or if the seller should counteroffer. D) The seller has legal title and the buyer is the equitable owner until title is conveyed at closing. - Answer- D A property is under contract. During the inspection, the buyer finds major structural issues that the seller is unable to correct before closing. The buyer and the seller agree to terminate the contract, which is known as A) a valid contract which has become voidable by both parties. B) specific performance for both parties with no monetary remedy. C) mutual rescission of the contract. D) a void contract with parties in agreement. - Answer- C A buyer has requested that the seller give him a six-month opportunity to purchase the seller's property for $400,000 with 10% down. The buyer has agreed to give the seller $4,000 to hold the offer open for the next six months, with the seller keeping the $4,000 if the buyer decides not to purchase. The contract is A) an open listing agreement. B) an option agreement. C) an implied sales agreement with both parties bound. D) a bilateral agreement with both the buyer and seller bound because there was a payment. - Answer- B A minor has inherited a large old house from her father. The minor sells it to her aunt. Is the purchase contract valid? A) Yes, it is valid and enforceable. B) No, it is void. C) No, it is voidable by the minor. D) No, it is unenforceable by the minor. - Answer- C All of the following are common law requirements for a valid listing agreement EXCEPT A) a definite termination date. B) specific performance remedies should one of the parties default. C) a negotiable commission clause. D) be an expressed written agreement in order to enforce the commission clause. - Answer- B Legal agreements may be valid, void, or voidable, depending on whether they contain all the required essential elements of a contract. All of the following would make a contract voidable EXCEPT A) it isn't in writing. B) a minor has signed the document. C) the buyer is under duress. D) the broker misrepresented the property. - Answer- A A real estate broker must know what items are required to create valid agreements. All of the following are considered to be essential to the validity of a purchase agreement EXCEPT A) acceptance by the offeree and communication of the acceptance to the offeror. B) all parties have the ability and competency to enter into a legal agreement. C) consideration as agreed to between the seller and the buyer. D) the buyer supplying earnest money. - Answer- D A seller decides NOT to sell a property in spite of having an executory contract with a buyer. The buyer's remedy is A) amend the contract and change the terms to get the buyer's earnest money returned. B) file criminal charges to void the agreement. C) liquidated damages to recover the earnest money and force the seller to sell. D) sue the seller for specific performance to force compliance with the agreement. - Answer- D A buyer and a seller enter into a purchase agreement. The agreement includes a contingency that the buyer can terminate the contract if she cannot sell her current home. This type of agreement is an A) executed contract. B) executory contract. C) option contract. D) unilateral contract. - Answer- B All the following actions would be acceptable in a sales transaction EXCEPT A) the buyer waives the lead-based paint inspection. B) the seller excludes transfer of the built-in microwave in the contract. C) the seller removes the built-in microwave after closing and before giving possession of the property to the buyer. D) the buyer receives the earnest money after terminating per the financing contingency. - Answer- C A novation is A) an assignment. B) a new contract. C) an addendum. D) a unilateral agreement. - Answer- B Taxes of $2,700 are paid in arrears from January 1 to December 31. The closing is May 15. Using a 365-day year, actual months, and the buyer having the day of closing, what will be the debit and credit to the seller and the buyer at closing? A) $991.23 debit seller, credit buyer B) $1,012.50 debit seller, credit buyer C) $1,687.50 debit buyer, credit seller D) $1,708.77 debit buyer, credit seller - Answer- A An owner bought her property 20 years ago for $190,000 and put 20% down for a loan value of $152,000. The current loan amount is $102,000 and the property recently appraised for $185,000. The owner has equity of A) $83,000. B) $88,000. C) $185,000. D) $190,000. - Answer- A A property has improvements valued at $390,000. Using straight-line depreciation of 39 years, how much have the improvements depreciated after 10 years? A) $8,000 B) $10,000 C) $100,000 D) $310,000 - Answer- C In a condominium, common elements such as the elevator, pool, and hallways are owned by A) the homeowners association and the current owners as joint tenants. B) each unit owner, who has an undivided share held in severalty. C) all past and present owners as tenants by the entirety. D) all current unit owners as tenants in common. - Answer- D Which of the following is TRUE about the transfer of residential property? A) Trade fixtures and land convey via a deed, while all personal property transfers via a bill of sale. B) Fixtures must be excluded if the seller is not conveying them, while personal property must be included for the buyer to receive it. C) All personal property and fixtures are transferred via the bill of sale. D) The general warranty deed from the seller to the buyer guarantees good title. - Answer- B A property for sale has an easement that the listing broker notes in the MLS. The purchase agreement does not mention the easement, but it appears in the title work. Which of these is TRUE? A) The buyer may rescind the contract because the easement was not fully described. B) The easement transfers with the deed as an appurtenance and has been disclosed. C) The easement will not transfer with the property because it must be listed on the bill of sale to transfer. D) The buyer may sue the seller to clear the title and remove the easement because it was not part of the purchase agreement. - Answer- B XYZ, a limited partnership, was created to invest in commercial rental properties. In this type of partnership, A) the partners can lose no more than their investment. B) all partners have equal say and equal liability. C) each partner must invest at least $15,000 as seed money. D) the general partner is the partner with the largest single investment. - Answer- A As part of land surveys and legal descriptions, monuments are used to establish the property's A) lot size. B) variances. C) zoning rules. D) boundaries. - Answer- D A development company has a large section of land for developing housing. The property has been surveyed, and a plat map was created. The next step the development company should take in order to sell lots is to A) train a sales group to start selling lots. B) issue building permits and develop building codes. C) record the plat map with the county. D) request a certificate of occupancy from the county. - Answer- C A legal description states: "Commencing at the corner of Ridge Street and Maple, then east 40 degrees to Elm Ave." This type of description is known as