NATIONAL PSI BROKER EXAM PREP ANSWERED 100% CORRECTLY| LATEST 2024

NATIONAL PSI BROKER EXAM PREP ANSWERED 100% CORRECTLY| LATEST 2024 "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. - Correct Answer A) The answer is lower of the sales price or appraised value. The loan-to-value (LTV) ratio is determined by the lower of the sales price or appraised value." "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. - Correct Answer D) The answer is the buyer supplying earnest money. Earnest money is tied to the remedies given to the seller if the buyer is in default; it is not consideration and is not required as part of a purchase agreement." 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." "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. - Correct Answer C) The answer is comparables that are no more than six months old. In a changing market, the more recent the comparables, the more likely they are to reflect upward or downward price changes." "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 - Correct Answer B) The answer is principle of supply and demand. The principle of supply and demand states that as fewer properties become available for rent or sale, the price owners can charge will increase." "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 - Correct Answer C) The answer is $400,000. Monthly GRM × monthly income = value. 200 × 2,000 ($24,000 ÷ 12) = $400,000." "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 - Correct Answer The answer is $178,000 Subject Property Comp 1 $181,000 Comp 2 $175,000 2 baths 2 baths no adjustment 2 baths no adjustment 1 fireplace 2 fireplaces - $3,000 No fireplace + $3,000 Adjusted price $178,000 Adjusted price $178,000" "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. - Correct Answer D) The answer is seller carry. All government loans and any sold on the secondary market require an appraisal. A seller-carry loan, or seller financing, may or may not require an appraisal." "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. - Correct Answer D) The answer is the buyer wants a smaller down payment, even though the buyer will have to pay PMI. Buyers are willing to pay PMI (private mortgage insurance) in order to bring a smaller down payment to closing, which will mean a higher monthly payment. PMI protects lenders in case of default." "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. - Correct Answer B) The answer is larger payments and a smaller balloon payment. In a partially amortized loan, the loan payments include a partial payment toward principal. While the payments will be larger, the balloon payment will be smaller, due to some principal payoff. With an interest-only loan, the original principal and the final balloon payment are the same because there was no payment made toward the principal." "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 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 - Correct Answer C) The answer is reverse mortgage. In a reverse mortgage, the lender makes payments to the borrower each month. There are requirements such as age and equity in the property for this type of loan." "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. - Correct Answer C) The answer is the lender will take title subject to any junior liens. The foreclosure process removes all liens, but if a lender takes a deed in lieu of foreclosure, any junior liens are still attached and would become the obligation of the lender. There is no reason to continue the foreclosure process because the lender will become the owner and title policies find encumbrances but do not release them." "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. - Correct Answer D) The answer is possession is received as agreed to in the contract, and title is received upon making the final loan payment. A contract for deed is a type of seller financing in which the seller holds the deed/title until the buyer has made the final payment. The buyer takes possession as defined in the contract, typically upon payment of the down payment, and will receive title when final payment to the seller is made." "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. - Correct Answer A) The answer is the buyer, while under contract, has found a different property heprefers and has asked the seller to terminate so he can purchase the other property. Contingencies allow a buyer time to determine items such as zoning and ability to qualify for a loan. The buyer and the seller can mutually agree to terminate. The buyer cannot terminate unilaterally, without being in default and losing the earnest money, because he wants to buy a different property." "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. - Correct Answer D) The answer is the seller has legal title and the buyer is the equitable owner until title is conveyed at closing. The seller has possession and legal title until the deed is delivered to the buyer conveying title." "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. - Correct Answer C) The answer is mutual rescission of the contract. Mutual rescission is when both parties return to their original state with all things of value, such as earnest money, also returned." "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. - Correct Answer B) The answer is an option agreement. An option is a unilateral agreement that sets the sales price and terms but also gives the buyer the option not to buy the property. If the buyer decides not to buy, an option contract does not allow the seller to sue (recourse). In this case, the seller will keep the buyer's option money." "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. - Correct Answer C) The answer is no, it is voidable by the minor. Contracts with minors entered into by adults are always voidable by the minor." "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. - Correct Answer B) The answer is specific performance remedies should one of the parties default. Listings that are employment agreements do not have specific performance remedies. Specific performance is used in purchase agreements, not in employment agreements." "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. - Correct Answer A) The answer is it isn't in writing. A real estate contract that is not in writing lacks an essential element and is considered to be void, not voidable. Minors, duress, fraud, and misrepresentation always make contracts voidable." "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." "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. - Correct Answer C) The answer is the seller removes the built-in microwave after closing and before giving possession of the property to the buyer. The seller may not remove any fixtures or other real property without first excluding it from the contract. The seller would be in breach." "A novation is A) an assignment. B) a new contract. C) an addendum. D) a unilateral agreement. - Correct Answer B) The answer is a new contract. A novation is a new contract that forms a new agreement and removes the liability of the old agreement from the previous parties. It may be unilateral or bilateral. An assignment releases contract obligations but not liability. Addenda add to the offer." "A couple earns $4,840 per month after taxes and wants to have a mortgage payment that is no more than 25% of their monthly earnings. Using the following amortization table, which interest rate and term will give the couple a payment closest to what they are seeking? A) 5% over 15 years B) 5.75% over 30 years C) 6.25% over 20 years D) 7% over 30 years - Correct Answer C) Has a picture on my phone The answer is 6.25% over 20 years. The first step is to determine the amount of the payment ($4,840 × 0.25 (25%) = $1,210). Using the amortization chart, a loan at 6.25% for 20 years with a payment of $1,206.03 is the closest." "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 - Correct Answer A) The answer is $991.23 debit seller, credit buyer. Taxes paid in arrears are a SOB (seller owes buyer). $2,700 ÷ 365 × 134 = $991.23. Debit the seller, who owes the bill, and credit the buyer, who will pay the bill. Always prorate taxes as given in the question." "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. - Correct Answer A) The answer is $83,000. Equity is determined by the current value minus the current debt. In this case, $185,000 - $102,000 = $83,000 in equity." "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 - Correct Answer C) The answer is $100,000. Straight-line depreciation = property value ÷ useful life of the improvements. $390,000 ÷ 39 = $10,000 per year × 10 years taken = $100,000." "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. - Correct Answer D) The answer is all current unit owners as tenants in common. Common elements in a condominium complex are typically divided into shares, with each unit having a share or shares and owning the common elements with all the other current owners as tenants in common. The homeowners association is part of the association but has no ownership rights." "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. - Correct Answer B) The answer is fixtures must be excluded if the seller is not conveying them, while personal property must be included for the buyer to receive it. Fixtures are real property and convey by deed unless they are excluded by the seller. Trade fixtures and personal property will covey by a bill of sale. Nothing, including a valid deed, guarantees that the title to real property is good." "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. - Correct Answer B) The answer is the easement transfers with the deed as an appurtenance and has been disclosed. Easements automatically transfer in the deed. While ideally it should be listed in the purchase contract, the buyer was given notice in the MLS and title work that the property had an easement, so the buyer may not rescind the contract or sue the seller." "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. - Correct Answer A) The answer is the partners can lose no more than their investment. In a limited partnership, the limited partners can lose no more than what they have invested, and each partner can contribute different amounts to the partnership." "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. - Correct Answer D) The answer is boundaries. Monuments are fixed points used to mark corners and set boundaries. They are used in metes-and-bounds legal descriptions and in surveys to mark the boundaries." "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. - Correct Answer C) The answer is record the plat map with the county. Until the plat map is recorded, the section is still under one legal description. Recording will create individual lots that can be sold. The government creates building codes and issues building permits." "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 A) metes and bounds. B) rectangular survey. C) lot, block, and subdivision. D) assessor's parcel number. - Correct Answer The answer is metes and bounds. The metes-and-bounds method uses a beginning point (the only legal description that will state "starting at"), linear measurement, and compass degrees to describe the perimeter or boundaries of a parcel of land. No other legal description uses a starting point." "The MOST important reason for brokers and salespeople to understand title and ownership issues and the essential elements of contracts and deeds is so they will know A) how commissions are determined and who pays them. B) how to advise buyers and sellers on legal and other issues in contracts and title work. C) what requirements are needed for valid documents and who is required to sign the real estate paperwork. D) what is required to determine clear title and how to prepare closing documents. - Correct Answer C) The answer is what requirements are needed for valid documents and who is required to sign the real estate paperwork. The most important reason brokers and salespeople are trained in contracts, deeds, title, and ownership is so they will know if the documents are valid and who should sign them. Licensees may never give legal advice on real estate issues." "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." "Real estate offers several advantages to investors. Which of the following is NOT an advantage a real estate investor would have? A) Different depreciation rates for residential and commercial properties B) Liquidity of the investment C) Ability to use a 1031 tax-deferred exchange D) Depreciation on personal taxes - Correct Answer B) The answer is liquidity of the investment. A disadvantage of real estate is that it lacks liquidity. The ability to depreciate and use a 1031 exchange are advantages of real estate investments. Real estate depreciation is set at 27.5 years for residential property and 39 years for commercial property. The depreciation deduction can be taken on the investor's personal income taxes." "The main purpose of a conveyance deed in a real estate transaction is to A) guarantee that the title and ownership are valid and good. B) create a recordable document to transfer ownership and create a chain of title. C) act as a record of all the promises made from the grantee to the grantor. D) transfer title from the grantor to the grantee. - Correct Answer D) The answer is transfer title from the grantor to the grantee. The purpose of a deed is to create a written document that transfers title. It is not a requirement in all states that a deed be recorded to be valid, and no document can guarantee ownership. The quitclaim deed has no promises." "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 Residential-1 zoning. The buyer's agent should advise the buyer to A) check to see whether zoning will allow for the business use. B) seek a variance to create a special use for the business. C) apply for a special-use permit for a home office after closing. D) apply for a nonconforming use permit to grandfather in the business use. - Correct Answer A) The answer is check to see whether zoning will allow for the business use. The broker should suggest the buyer verify that the zoning on any property will allow for this type of use." "A retail store in a residential neighborhood is MOST likely an example of A) a zoning variance. B) special use. C) a special commercial permit. D) nonconforming use. - Correct Answer D) The answer is nonconforming use. Commercial use in a residential area is most likely created by nonconforming use. The store was in compliance with zoning when built, but when the zoning was amended, the store no longer complies." "A requirement that all properties use only wood fencing and all garages must be at least 500 square feet would be an example of a A) building code. B) nonconforming use. C) covenant or deed restriction. D) legal zoning law. - Correct Answer C) The answer is covenant or deed restriction. Private controls are most typical in deed condition restrictions that list exact requirements, such as the type of fencing. Building codes and zoning are examples of public controls created through police power. However, these rules are broader in scope than the items listed." "A property owner granted an easement to his neighbor 30 years ago. The owner has the property under contract. At closing, the easement A) will not pass with the deed. B) is listed on the bill of sale. C) passes with title to the property. D) is automatically released. - Correct Answer C) The answer is passes with title to the property. Easements, which must be in writing, are encumbrances that transfer with the land. Unless an easement is released, it will automatically transfer." "A neighborhood has determined that it needs new street lighting and sidewalks. The city has told the residents that it is unable to pay for these improvements with tax dollars. In order to get the work done, the residents could A) have the city's public works department replace the lighting and sidewalks. B) seek a special assessment to cover these public improvements. C) have these costs added to the local property taxes. D) ask their neighbors to seek private financing to cover their share of the costs. - Correct Answer B) The answer is seek a special assessment to cover these public improvements. A special assessment would allow the neighborhood to have the local government complete the improvements and then assess each individual property owner to cover the cost." "The fiduciary obligations of an agent are owed to A) the party who pays the agent. B) the individual that signs a disclosure. C) all parties involved in the transaction. D) the person who employed the agent. - Correct Answer D) The answer is the person who employed the agent. Agents owe their fiduciary obligations to the person who employs them. Agents are often paid by other outside parties, such as the listing brokerage firm." "The seller tells the broker, "If you bring me a buyer, I will pay you a commission." The broker MOST likely has what type of agreement with the seller? A) Unilateral open listing B) Bilateral exclusive right-to-sell listing C) Unilateral exclusive agency listing D) Exclusive buyer representation agreement - Correct Answer A) The answer is unilateral open listing. An open listing is when the seller pays the broker who brings the buyer. The contract is unilateral because the seller is the only party obligated to act." "In a jurisdiction using the common laws of agency to govern real estate activity, a broker who represents both the seller and the buyer as a dual agent A) may treat both parties as customers. B) must have a signed disclosure and consent from both parties. C) should tell the sellers they must sell "as is" so a disclosure is not required. D) should tell the buyer she must offer full price so there is no conflict. - Correct Answer B) The answer is must have a signed disclosure and consent from both parties. Dual agency requires the seller and the buyer to both acknowledge that one broker is working with both parties as a dual agent." "Because of the trust and money received in the process of selling real property, most agreements signed by the buyer and the seller that are used to hire the brokerage firm are A) exclusive agency agreements. B) fiduciary agreements. C) special agency agreements. D) implied agency agreements. - Correct Answer B) The answer is fiduciary agreements. Agency agreements are created by written fiduciary agreements. Exclusive agency is a type of fiduciary agreement. Implied agency is created by actions, and the agreement will determine whether the agent will be a special, general, or universal agent." "An agent working under an exclusive right-to-sell agreement owes the principal several fiduciary obligations. All of the following are fiduciary obligations of an agent EXCEPT A) the agent must use reasonable skill and care in selling the principal's property. B) the agent is obligated to disclose all material facts even if the principal asks the agent not to. C) the agent is obligated to be loyal to the principal and place the principal's interests ahead of the agent's own interests. D) the principal is obligated to pay the agent a certain amount of consideration in order for a valid listing contract to be formed. - Correct Answer D) The answer is the principal is obligated to pay the agent a certain amount of consideration in order for a valid listing contract to be formed. The fiduciary obligations are obedience, loyalty, disclosure, confidentiality, accounting, and reasonable skill and care (use the memory aid OLD CAR). Consideration in the form of payment is not required in any contract or agreement." "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 seller asked a broker how the commission the broker requested was determined. The BEST response would be for the broker to tell the seller that commissions are A) negotiable and based on the work being done. B) set by the local real estate commission based on volume and sales activity. C) set by local boards of REALTORS® first and then by the broker. D) set by the brokerage firm in conjunction with other firms. - Correct Answer A) The answer is negotiable and based on the work being done. Commissions are always negotiable." "A listing contract shows personal property items, including an antique set of fireplace tools that the seller has stated he might consider selling with the property. The purchase contract does not mention the tools but lists the buyer keeping the washer and dryer. At closing, the fireplace tools will A) be conveyed to the buyer using a bill of sale. B) be automatically conveyed by the deed. C) remain the property of the seller. D) be left for the buyer because the seller listed them on the MLS sheet. - Correct Answer C) The answer is remain the property of the seller. Personal property is first listed in the executory contract and then conveyed by a bill of sale at closing. Because this personal property was not negotiated in the contract, the seller can take it." "The seller of a property going into foreclosure has told the broker that the seller is very motivated to sell and will consider all offers. The broker should A) tell any buyers or buyers' agents to make offers lower than the listing price. B) say nothing unless the seller gives the broker written notice to disclose motivation. C) put "motivated seller" on the MLS listing and all other advertising. D) lower the listing price in the MLS to generate more offers. - Correct Answer B) The answer is say nothing unless the seller gives the broker written notice to disclose motivation. Unless the broker has written permission to disclose motivation, the fiduciary obligation of confidentiality requires the broker to stay silent. The broker may not tell others to bring lower offers, advertise "motivated seller," or lower the listing price without the seller's written permission." "The broker is selling an investment property she has owned for many years. She listed the property and put it in the MLS. If an interested buyer calls to inquire about the property, the broker A) has no obligation to disclose her ownership until closing. B) should first get the buyer's name and contact information so she can set a showing. C) will be required to disclose her ownership to the buyer if the buyer decides to make an offer. D) should disclose she is the owner and agent for the property before further discussion. - Correct Answer D) The answer is should disclose she is the owner and agent for the property before further discussion. When the broker is the owner/agent for the property, she is obligated to disclose this before proceeding further with any buyers." "A listing agent for bank foreclosure hears that a buyer has expressed interest. At the first meeting, the buyer states, "I am very interested in the property." Under the common law of agency, what is the disclosure obligation of the listing agent to the buyer? A) Disclose that the listing agent is an agent for the seller and the buyer as a customer should not tell the listing agent anything the buyer does not want told to the seller. B) Tell the buyer the listing agent will automatically be a transaction-broker and will maintain confidentiality for both the buyer and the seller. C) Disclose that the listing agent will be a dual agent and will need to treat both parties the same. D) The listing agent does not need to do anything because the buyer has not written an offer. - Correct Answer A) The answer is disclose that the listing agent is an agent for the seller and the buyer as a customer should not tell the listing agent anything the buyer does not want told to the seller. Unless the listing agent discloses otherwise or, with the buyer, determines the listing agent will act as a dual agent or transaction-broker, the buyer is a customer. The listing agent is obligated to make sure, through disclosure, that the customer does not share confidential information without knowing it will be told to the seller." "A property has had many issues, including water damage, a previous owner's suicide, and a tenant that had AIDS. The current owner's spouse recently died in the home, and the property is now on the market. The seller and the broker have a duty to disclose A) the death and suicide of the previous owners. B) the water damage to the property. C) that a tenant had AIDS. D) all of these. - Correct Answer B) The answer is the water damage to the property. Current water damage would be a material fact; the other items are considered stigmatized issues and are governed by state disclosure laws." "If a property suffered a flood 15 years ago, the seller A) does not have to disclose the flood because the homeowners insurance is responsible for offering flood insurance and will determine if the property qualifies or is in a floodplain. B) can rely on the appraiser to disclose floodplain information; the seller has no obligation to disclose the flood to the buyer. C) should tell the buyer about the flood and that flood maps can be used to determine if the property is in a floodplain. D) should tell the listing broker who will then be obligated to determine if the property is in a floodplain and if the past flood must be disclosed. - Correct Answer C) The answer is should tell the buyer about the flood and that flood maps can be used to determine if the property is in a floodplain. The seller must disclose the flood, and broker will have the same obligation to disclose if the seller reports this to the broker. The appraiser is obligated to determine if the property is in the 100-year floodplain and the buyer can then decide whether to buy flood insurance." "The listing broker visually inspected the property and found no issues. The seller's property disclosure states that there are no problems. After closing, thebuyers find long-standing issues with water entering the basement. Who is MOST likely to be held liable for nondisclosure of this latent material defect? A) The listing broker and the seller, because they must disclose all defects, even latent B) The listing broker, because the listing broker should have had the property inspected C) The seller, because brokers are not responsible for latent defects the seller does not disclose D) The buyers, because they should have had an inspection before they closed; after closing, they own the property and have no recourse - Correct Answer C) The answer is the seller, because brokers are not responsible for latent defects the seller does not disclose. The broker has done what is expected by conducting a visual inspection and obtaining a seller's disclosure, which showed no problems and thus removed the liability from the broker. The seller who covered up the defect would be liable." "The listing broker asked the seller if any of the improvements on the property were done without a permit. The seller responded that the family room addition was not fully permitted but was completed before the current seller's ownership. Are the broker and the seller both responsible for disclosure of this fact? A) No, only the seller will need to disclose it B) Yes, both must disclose this fact if the buyer asks C) No, because the buyer will have title work done, which would find the issue, there is no reason to disclose it D) Yes, this is a material fact that both the seller and the broker must disclose to all potential buyers - Correct Answer D) The answer is yes, this is a material fact that both the seller and the broker must disclose to all potential buyers. Material facts must be disclosed by both the seller and the broker to all potential buyers." "The broker notices that the floor in the bedroom is not flat. There are no cracks in the foundation or other indications of structural issues. The broker should A) recommend to both the seller and the buyer that they have an expert examine the foundation. B) tell the seller that they must sell "as is" so no disclosure would be required. C) demand that the seller have the structure certified. D) tell the seller that it is proper to give the buyer verbal notice of the issue. - Correct Answer A) The answer is recommend to both the seller and the buyer that they have an expert examine the foundation. The broker should always recommend that an expert examine any issues that might be material to the property." "The length and type of coverage for a pre-owned home warranty program is determined by A) each state. B) the warranty contract. C) federal law. D) tradition. - Correct Answer B) The answer is the warranty contract. The warranty contract will determine the length and type of coverage for warranty programs." "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." "Which of the following is TRUE about the federal lead-based paint law? A) It gives the buyer the option to waive the lead-based paint inspection. B) It requires the seller to remove any known lead-based paint. C) It requires the listing broker to give the disclosure to the buyer. D) It requires the seller to inspect the property. - Correct Answer A) The answer is it gives the buyer the option to waive the lead-based paint inspection. The lead-based paint disclosure is the seller's obligation, not the broker's; the seller does not need to inspect, test, or remove lead-based paint. Brokers are obligated to make sure the parties are in compliance." "Typically, a managing broker of a brokerage firm who is responsible for the salespeople under him would be required to do all of the following EXCEPT A) make sure the salespeople are trained and competent to practice real estate. B) attend all closings with every salesperson in the office. C) make sure all salespeople are in compliance with the state license laws. D) supervise all salespeople and review all closing files to make sure they are correct. - Correct Answer B) The answer is attend all closings with every salesperson in the office. Managing brokers do not have to attend closings with all salespeople, but they need to make sure salespeople are supervised, trained, and in compliance with license law, as well making sure closing files, which are the responsibility of the brokerage, are correct." "A buyer with six children was told by a broker that the neighborhood she wanted to view was not suitable for her family because it had very few children. The buyer decided to file a fair housing complaint against the broker and brokerage firm. In this type of case, the first step is for HUD to A) take the broker's license until the hearing is completed. B) request that the real estate commission start an investigation. C) require the buyer to prove that discrimination occurred. D) start an investigation to verify if the complaint is valid. - Correct Answer D) The answer is start an investigation to verify if the complaint is valid. The first step for HUD, or any other regulatory agency, is to determine whether the law was broken and if the complaint is valid. If a broker or a salesperson violated the law, HUD could then file a complaint with the state real estate commission or other regulatory agency to revoke the real estate license." "A potential buyer was turned down for a mortgage loan because of the high crime rate in the area where the property is located. This is an example of A) legal redlining because crime rates can impact value. B) blockbusting by the lender. C) a good business practice because the buyer had children. D) redlining by the lender. - Correct Answer D) The answer is redlining by the lender. Redlining is refusing to loan in an area because of crime rates or the ethnic makeup of the neighborhood. Redlining is never legal." "A new salesperson showing a property has made a number of statements to her buyers. All of the following statements by the salesperson would be considered puffing EXCEPT A) "The best views in the city are in this neighborhood." B) "The finest lake and mountain views in the state are in this neighborhood." C) "This neighborhood has the highest SAT scores." D) "This is the best house in the neighborhood." - Correct Answer C) The answer is "This neighborhood has the highest SAT scores." Puffing is making a statement that is clearly an exaggeration of fact. SAT scores are fact; so if this statement is made, then it must be true, or it is fraudulent and not considered to be puffing." "An apartment building advertises its apartments as "adult only." This advertising is A) legal if each unit has at least one person over 55 living in it. B) illegal and discriminatory against children. C) legal per federal law, but may be illegal per state laws. D) legal if the adults are married. - Correct Answer A) The answer is legal if each unit has at least one person over 55 living in it. Federal law allows senior housing to discriminate based on familial status (to not rent or sell to families with children) if 80% of the units are rented to at least one person over 55 years old." "If a borrower is refused a loan because the borrower is retired and receiving public assistance, the lender is in violation of A) HUD. B) RESPA. C) ECOA. D) FHA. - Correct Answer C) The answer is ECOA. The Equal Credit Opportunity Act (ECOA) adds age and public assistance as protected classes." "The Americans with Disabilities Act (ADA) provides protection to those who A) are age 55 or older. B) are receiving treatment for alcoholism. C) have been convicted of selling drugs. D) have suffered financial hardship because of health costs. - Correct Answer B) The answer is are receiving treatment for alcoholism. Those who are receiving treatment for alcoholism are protected under ADA." "Which of the following is NOT a protected class under federal fair housing law? A) Children B) Marital status C) Religion D) National origin - Correct Answer B) The answer is marital status. Marital status is not protected under federal fair housing law. FReSH CoRN is the memory aid: familial status, race (equal), sex, handicap, color, (opportunity), religion, and national origin." "A family with children was told that they cannot rent a unit in an apartment building. Is this acceptable? A) Yes, if the unit is in a designated senior housing building B) Yes, if the building is for adults only, ages 21 to 65 C) No, it is never acceptable to deny housing to families with children D) No, it is illegal to discriminate based on age under federal fair housing law - Correct Answer A) The answer is yes, if the unit is in a designated senior housing building. Senior housing with 80% of the units having renters or owners over age 55 may discriminate against families with children. The housing must be certified as senior housing." "The Smith family renewed their lease on their single-family home for another year. Mr. Smith has recently become disabled and requested that the landlord allow him to make changes to the property to accommodate his disability. The landlord must A) pay for a ramp and make any other needed changes. B) reduce the rent and make the house accessible. C) allow the tenant to make the changes if he gives the landlord an additional damage deposit to remove the changes if needed. D) allow the tenant to build a ramp and make other changes. - Correct Answer D) The answer is allow the tenant to build a ramp and make other changes. Landlords must allow tenants to make changes to accommodate their disability. Landlords do not have to pay for the changes and can request that tenants remove all changes upon vacating but may not require the tenants to pay an additional damage deposit." "Brokerage firm trust accounts must be a A) demand account. B) certificate of deposit account. C) mutual fund account. D) savings account. - Correct Answer A) The answer is demand account. Demand accounts allow the broker to deposit and withdraw funds without restrictions. Savings, certificates of deposits, and mutual fund accounts often have restrictions on funds and the amount of time they must stay in the account." "The main purpose and function of state laws requiring brokerage firms to have trust accounts is A) to have a safe place to keep commissions belonging to salespeople and funds from buyers and sellers. B) so the state can audit the firm at any time. C) to have a safe place and additional protection for funds that don't belong to the firm. D) to enable the brokerage to keep operations and funds from buyers and sellers in the same account. - Correct Answer c) The answer is to have a safe place and additional protection for funds that don't belong to the firm. Trust accounts hold money from the public and are not allowed to hold the firm's operations funds or earned commissions." "A deed restriction is BEST described as a A) requirement set by a grantor and included in the deed that gives the grantor reversionary rights if the grantee fails to abide by the requirement. B) rule or regulation regarding safe building practices, such as a requirement for structural elements. C) rule set by a developer to help maintain the value of a subdivision. The rule runs with the land and is binding on future owners. D) rule regarding how property can be used (i.e., residential, commercial, agricultural, or industrial). - Correct Answer C) The answer is rule set by a developer to help maintain the value of a subdivision. The rule runs with the land and is binding on future owners. Deed restrictions are typically set by the original subdivision developer and run with the land. The purpose is to help maintain value throughout the subdivision. Requirements set by a grantor are called deed conditions and are used in qualified fee estates. Rules regarding the safety of buildings are building codes and rules regarding how property is used are zoning regulations." "Which of the following would NOT be a requirement under ADA or fair housing laws? A) A landlord must allow disabled tenants to make changes to the property and may not charge the tenants or force them to move. B) The owner of a commercial building could refuse to make changes to the "first come first serve" parking to accommodate a disabled tenant. C) A building with a no-pets policy would have to allow service animals without an additional charge. D) A tenant who makes changes to an apartment to accommodate a disability can be required to return the unit to its original condition upon lease expiration. - Correct Answer B) The answer is the owner of a commercial building could refuse to make changes to the "first come first serve" parking to accommodate a disabled tenant. Under reasonable accommodations, a commercial landlord would be expected to delegate a parking space for a disabled tenant." "A commercial tenant pays a base rent of $1,000 per month plus a percentage of the owner's taxes, maintenance costs, and insurance. This type of lease is known as A) a percentage lease. B) a net lease. C) an index lease. D) a fixed lease. - Correct Answer B) The answer is a net lease. A lease with a base rent plus the tenant paying a percentage of the owner's expenses is known as a net lease. Percentage leases charge rent based on a portion of the tenant's sales, index or variable leases charge rent based upon an economic or other indicator, and fixed or gross leases charge a set rent amount only." "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. - Correct Answer D) The answer is sue the seller for specific performance to force compliance with the agreement. Specific performance is a legal action created by the contract that allows one party, in this case the buyer, to sue the other to comply or perform with the terms of the agreement. The buyer's only remedy is to sue the seller to sell." "A buyer is under contract for a home that is vacant and bank owned. While the buyer and his agent are doing a walk-through inspection, the agent discovers that the recent hail storm caused roof damage. What should be the agent's next step? A) Have the buyer call his insurance agent to see if he is covered B) Tell the buyer not to worry because the agent is sure the bank will repair the roof before closing C) Tell the listing broker to have the roof replaced or the buyer will terminate the contract D) Disclose the issue to the buyer and then to the listing broker - Correct Answer D) The answer is disclose the issue to the buyer and then to the listing broker. The roof damage is a material fact that requires disclosure to all parties. Agents must first report material facts to the party they represent and then to all the other parties in the transaction."