National PSI Broker Exam prep Questions With Complete
Solutions
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. Correct Answer A)
The answer is the borrower is at higher risk of defaulting on the
loan. Leverage is using someone else's money; the higher the
leverage, the higher the risk of default. Because leveraging
implies a high LTV, equity does not build faster, and the loan
may require private mortgage insurance (PMI) if there is a small
down payment.
A broker can send the buyer or the seller to a title insurance
company in which he is a partner if he
A)
also provides the buyer or the seller with a list of other title
companies.
B)
,gives the buyer or the seller a written disclosure of the broker's
relationship with the title company.
C)
directs them to another real estate company.
D)
suggests they consult an attorney. Correct Answer B)
The answer is gives the buyer or the seller a written disclosure
of the broker's relationship with the title company. Brokers must
disclose their relationship with the title company in writing.
Once that is done, brokers are under no obligation to do
anything else. They do not need to provide a list of other title
companies or suggest that an attorney be consulted.
A broker is aware that a property near his new listing may have
environmental concerns. In this situation, the environmental
issues
A)
do not need to be disclosed unless they are within the property's
boundaries.
B)
do not need to be disclosed because issues outside the
neighborhood have no impact on value.
C)
need to be disclosed because they can impact the value of the
listing.
D)
need to be disclosed only if they are not obvious and would not
be easy for a buyer to discover. Correct Answer C)
,The answer is need to be disclosed because they can impact the
value of the listing. Environmental issues, both inside and
outside of property boundaries, may impact value and must be
disclosed, no matter how obvious they are.
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 Correct Answer A)
The answer is highest and best use evaluation. An appraiser does
a highest and best use evaluation, which does not appear in a
CMA.
A broker lists a property and begins marketing it. The seller sells
the property to a neighbor and upon closing pays the broker a
full commission. What type of listing agreement did the
brokerage firm have with the seller?
A)
Open
B)
Exclusive agency with a "seller may not sell" contingency
, C)
Exclusive right to sell
D)
Exclusive agency Correct Answer C)
The answer is exclusive right to sell. Only an exclusive right-to-
sell listing allows anyone to sell the property and the broker will
still get paid.
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. Correct Answer B)
The answer is executory contract. Once an offer is accepted, it
becomes an executory (bilateral) contract until all the
contingencies have been met and the contract is closed. Once it
is closed, it is an executed contract.
A buyer and the buyer's agent have looked at several residential
properties. The buyer wants to be able to run her business out of
her home. The buyer has a property under contract that has
Solutions
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. Correct Answer A)
The answer is the borrower is at higher risk of defaulting on the
loan. Leverage is using someone else's money; the higher the
leverage, the higher the risk of default. Because leveraging
implies a high LTV, equity does not build faster, and the loan
may require private mortgage insurance (PMI) if there is a small
down payment.
A broker can send the buyer or the seller to a title insurance
company in which he is a partner if he
A)
also provides the buyer or the seller with a list of other title
companies.
B)
,gives the buyer or the seller a written disclosure of the broker's
relationship with the title company.
C)
directs them to another real estate company.
D)
suggests they consult an attorney. Correct Answer B)
The answer is gives the buyer or the seller a written disclosure
of the broker's relationship with the title company. Brokers must
disclose their relationship with the title company in writing.
Once that is done, brokers are under no obligation to do
anything else. They do not need to provide a list of other title
companies or suggest that an attorney be consulted.
A broker is aware that a property near his new listing may have
environmental concerns. In this situation, the environmental
issues
A)
do not need to be disclosed unless they are within the property's
boundaries.
B)
do not need to be disclosed because issues outside the
neighborhood have no impact on value.
C)
need to be disclosed because they can impact the value of the
listing.
D)
need to be disclosed only if they are not obvious and would not
be easy for a buyer to discover. Correct Answer C)
,The answer is need to be disclosed because they can impact the
value of the listing. Environmental issues, both inside and
outside of property boundaries, may impact value and must be
disclosed, no matter how obvious they are.
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 Correct Answer A)
The answer is highest and best use evaluation. An appraiser does
a highest and best use evaluation, which does not appear in a
CMA.
A broker lists a property and begins marketing it. The seller sells
the property to a neighbor and upon closing pays the broker a
full commission. What type of listing agreement did the
brokerage firm have with the seller?
A)
Open
B)
Exclusive agency with a "seller may not sell" contingency
, C)
Exclusive right to sell
D)
Exclusive agency Correct Answer C)
The answer is exclusive right to sell. Only an exclusive right-to-
sell listing allows anyone to sell the property and the broker will
still get paid.
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. Correct Answer B)
The answer is executory contract. Once an offer is accepted, it
becomes an executory (bilateral) contract until all the
contingencies have been met and the contract is closed. Once it
is closed, it is an executed contract.
A buyer and the buyer's agent have looked at several residential
properties. The buyer wants to be able to run her business out of
her home. The buyer has a property under contract that has
