NATIONAL PSI BROKER EXAM PREP WITH 100% CORRECT ANSWERS

NATIONAL PSI BROKER EXAM PREP WITH 100% CORRECT ANSWERS "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" "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 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" "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" "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 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 C" "New home warranties cover all of the following EXCEPT A) poor workmanship in the bathroom and bedrooms. B) items considered to be part of the merchantability and habitability of the home. C) structural damage caused by flooding. D) failure of roofing materials in the first year. - Correct Answer C" "A buyer was told by a salesperson that the area she wished to buy a home in was not appropriate for single women. If the buyer wants to pursue a fair housing compliant against the salesperson, she A) has up to four years to file a complaint. B) has up to two years to file in court. C) must first file at the state level and then at a federal level. D) is required to file a lawsuit. - Correct Answer B" "All of the following are protected under federal fair housing laws EXCEPT A) religion and race. B) age and marital status. C) familial status and color. D) national origin and sex. - Correct Answer B" "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" "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 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" "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" "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" "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" "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" "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" "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" 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" "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" "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" "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" "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" "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" "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" "A novation is A) an assignment. B) a new contract. C) an addendum. D) a unilateral agreement. - Correct 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 - Correct 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. - Correct 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 - Correct 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. - Correct 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. - Correct 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. - Correct 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. - Correct 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. - Correct 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. - Correct 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 A) metes and bounds. B) rectangular survey. C) lot, block, and subdivision. D) assessor's parcel number. - Correct Answer A" "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" "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" "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 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" "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" "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" "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" "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" "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 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 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" "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" "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" "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" "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" "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" "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 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 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" "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" "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" "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 listing broker visually inspected the property and found no issues. The seller's property disclosure states that there are no problems. After closing, the buyers 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 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 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 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" "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" "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" "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" "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" "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" "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" "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" "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" "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 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" "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" "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 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" "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 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" "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" "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" "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" "In the appraisal process, the capitalization rate is used by an appraiser to determine which type of value? A) Future value of any type of property B) Past value of a unique and income-producing property C) Present value of an income-producing property D) Probable value of residential property - Correct Answer C" "If the current monthly GRM on a single-family home is 100 with an estimated annual income of $24,000, what is the estimated value of the property? A) $120,000 B) $200,000 C) $240,000 D) $2,400,000 - Correct Answer B" "An appraiser is using the sales comparison approach to estimate the value of a residential home. The appraiser will make positive and negative adjustments to the sold comparables for all of the following factors EXCEPT A) square footage of the sold properties. B) lot size and location of each sold comparable in relation to the subject. C) actual replacement and reproduction cost. D) date of sale of each sold comparable. - Correct Answer C" "The BEST approach for an appraiser trying to determine market value of a shopping center, apartment building, or office building would be the A) replacement approach to value. B) income approach to value. C) sales comparison approach to value. D) summation approach to value. - Correct Answer B" "An active real estate professional must be able to help consumers determine the probable sales price of a real property. A broker's or salesperson's competitive market analysis would be used for all of the following EXCEPT A) setting the loan value. B) determining the listing price. C) assisting sellers and buyers in determining market value. D) estimating the probable sales price. - Correct Answer A" "An appraiser has been asked to determine the value of a church. The appraiser has determined the best approach to value for this property is the cost approach. While completing the process of determining the value, the appraiser will consider all of the following EXCEPT A) reproduction cost of the subject property. B) value of the land under the church. C) adjusted square footage of the subject and comparables. D) current depreciation of the property improvements. - Correct Answer C" "All of the following are true of FHA and VA loans EXCEPT A) there can be no prepayment penalty. B) the loan is assumable by a qualified buyer. C) the loan-to-value (LTV) ratio may typically be higher than that of conventional loans. D) an appraisal is not required. - Correct Answer D" "A state statute has set the maximum interest rate allowed on loans originated within the state. This type of law is known as A) discount points. B) usury law. C) nominal interest rate. D) statute of limitations. - Correct Answer B" "A borrower has applied for a loan and has been told the funds will be held because there is a three-day right of rescission. Which of the following loans would have such a three-day right of rescission? A) Home purchase first position B) Home equity loan C) Purchase of a vacation home D) Construction loan for a new home - Correct Answer B" "A buyer is getting a new loan with a 95% loan-to-value (LTV) ratio. The full amount of money for the new loan that the lender will be able to provide the buyer will be determined by the A) lower of the sales price or appraised value. B) sales price only. C) appraised value only. D) higher of the sales price or appraised value. - Correct Answer A" "A borrower is looking for a loan with a low down payment and does not mind if the loan has a large balloon at payoff. The type of loan that would MOST likely meet this borrower's criteria is A) partially amortized. B) adjustable rate. C) term. D) fully amortized. - Correct Answer C" "Which of the following does the federal RESPA law require the lender to provide to all loan applicants within three days of application? A) HUD-1 settlement form B) Good-faith estimate of all closing costs C) Truth-in-lending statement D) Notice of the three-day rescission right - Correct Answer B" "A borrower is in default on his home loan and has offered to give the lender a deed in lieu of foreclosure. The lender declined the borrower's offer. This is MOST likely because A) the loan to value is too high. B) there is a junior or secondary lien. C) it will take more time and cost more than foreclosing on the property. D) the lender would not get possession or title upon transfer. - Correct Answer B" "Ann has a contract with Ben in which she must perform if Ben decides to go forward. This is what type of contract? A) Unilateral for Ben B) Bilateral for both C) Unilateral for Ann D) Nonbinding - Correct Answer C" "A buyer and a seller have been through several counteroffers on a property and finally reached an agreement that was accepted by all parties. During this stage of the process when the contract has yet to be performed, the status of the contract is A) executory. B) executed. C) voidable. D) unilateral. - Correct Answer A" "The seller has requested that the earnest money be 5% of the purchase price, but the buyer is concerned about giving such a large amount of money, which might not be returned. The purpose of the buyer's earnest money is to A) act as consideration, which is required in all valid contracts. B) give the seller specific performance as a remedy if the buyer fails to get a loan. C) act as liquidated damages if the buyer defaults without meeting contingency requirements. D) give the seller a reason to allow a financing contingency, which states that if the buyer can't get a loan, the seller will always be able to keep the earnest money. - Correct Answer C" "Mutual rescission, when the parties rescind a contract and return all things of value to each party, would likely occur in all of the following situations EXCEPT A) the property being destroyed. B) the inspection finding major heating problems. C) the buyer deciding to buy another home. D) financing not being available. - Correct Answer C" "All of the following make a purchase agreement voidable EXCEPT A) the seller being under extreme duress. B) the buyer being a minor. C) the seller misrepresenting the property. D) the buyer signing the contract without reading it. - Correct Answer D" "A buyer and a seller enter into a written binding contract in which the seller agrees to sell at a specific price for a set term. Later the buyer decides not to buy the property and the seller has no recourse against the buyer. The contract is A) an estoppel agreement. B) an option agreement. C) an implied agreement. D) a bilateral agreement. - Correct Answer B" "A property is under a purchase contract with everything but the loan contingency satisfied. The closing is set for the next week. This is known as the A) executory stage with the buyer holding legal title. B) equitable stage with the seller holding equitable title. C) executory stage with the buyer holding equitable title. D) executed stage with seller holding legal title. - Correct Answer C" "The Jones family rented a summer vacation home from Mr. Smith for a period of four years. At the end of the third year, Smith suddenly died, and the property was sold by his heirs. The lease the Jones family holds is A) not affected by the death of Smith or the sale by his heirs. B) terminated upon the sale by the heirs. C) terminated upon the death of Smith. D) up for renegotiation by the new property owner. - Correct Answer A" "Jim has been leasing an apartment from Sally, but his job has just been transferred. Sally has agreed to let Jim out of his lease, and she will sign a new lease with Jim's friend Cindy. This is an example of A) an assignment. B) a novation. C) a rescission. D) an addendum. - Correct Answer B" "The seller received an offer on Tuesday. On Wednesday the seller countered the offer and gave the buyer three days to accept the counteroffer. On Thursday the seller received a much better offer than the first one and decided to accept the new offer. In order to accept the new offer, the seller A) must give the first buyer a novation. B) must first wait the three days until the buyer responds to the counteroffer. C) can accept it without any notice to the first buyer. D) needs to withdraw the counteroffer first. - Correct Answer D" "Any contract that lacks a lawful objective is A) a valid contract. B) a void contract. C) a voidable by the buyer contract. D) an unenforceable by the seller contract. - Correct Answer B" "A listing contract is terminated A) by the death of the salesperson or broker associate who obtained it. B) upon acceptance and communication of acceptance of a purchase agreement. C) by the date specified in the listing contract. D) if the seller decides not to sell the property and gives the listing firm 10 days' notice to terminate. - Correct Answer C" "An appraiser is performing the income approach to estimate the value of a small commercial property. The capitalization rate in the area is 10%, and the property's annual net operating income is $25,000. What is the value of the property? A) $2,152 B) $127,980 C) $250,000 D) None of these - Correct Answer C" "A duplex owner lives in one unit and rents the other for $600 a month, due on the first of the month. The owner sells the property and the closing is scheduled for April 21. How will the rent be prorated if the seller has the day of closing? A) The seller owes the buyer $180. B) The buyer owes the seller $200. C) The seller owes the buyer $400. D) The buyer owes the seller $420. - Correct Answer A" "Since the original purchase, a property appreciated 20% and then sold for $150,000. What was the original purchase price? A) $110,000 B) $125,000 C) $156,000 D) None of these - Correct Answer B" "The net operating income (NOI) is $30,000, and the owner is asking $400,000. What is the capitalization rate for the property? A) 1.2% B) 7.5% C) 13.33% D) 30% - Correct Answer B" "In a purchase agreement, fixtures transfer with the title while personal property must be included to transfer to the buyer. An encumbrance that also automatically transfers with the land is A) a freestanding stove, dishwasher, or refrigerator. B) the tenant's emblements. C) an appurtenant easement. D) trade fixtures currently being used and attached to the property. - Correct Answer C" "The Tower is a new condominium building that offers two pools, a workout room, a wine-tasting room with wine storage for each unit, and two guest suites that owners can rent. These common elements are owned by A) all current owners as joint tenants. B) current and past owners. C) all current owners as tenants in common. D) owners and the owners association. - Correct Answer C" "The grantor has given a property to her sister for the life of her mother with the grantor's son holding a reversionary interest. Upon the death of the mother, how will title be held? A) Fee simple absolute by the sister B) Fee simple absolute by the son C) Life estate for the sister with a remainder interest for the son D) Qualified fee estate for the grantor and a remainder interest for the son - Correct Answer B" "A property was given to the state with the requirement it was to be used only as a governor's mansion. This is known as a A) zoning law. B) special use. C) covenant. D) deed condition. - Correct Answer D" "The owners of the property have taken title as joint tenants. One of the primary advantages to this form of ownership is A) tenants will be allowed to will their shares to their devisees. B) this form allows for unequal shares. C) it cannot be terminated by partition suits. D) title passes to surviving cotenants without going through probate. - Correct Answer D" "The priority of liens is determined by the type of lien and when it was recorded. A property has the following liens: Mortgage to LKJ bank, recorded December 12, 1999 Mortgage to MBH bank, recorded February 3, 2000 Property tax lien, dated May 4, 2001 IRS tax lien, dated June 7, 2000 What is the priority of these liens? A) LKJ bank, MBH bank, IRS taxes, property taxes B) Property taxes, IRS taxes MBH bank, LKJ bank C) Property taxes, LKJ bank, MBH bank, IRS taxes D) Property taxes, IRS taxes, LKJ bank, MBH bank - Correct Answer C" "Income tax laws favor both investors and non-investor property owners. An advantage for an investor in real estate is A) investment properties depreciate at a faster rate than non-investment properties. B) the ability to use a 1031 tax-deferred exchange to defer paying capital gains tax. C) the ability to deduct homeowners insurance and principal payments. D) not having to pay capital gains taxes on investments under $500,000. - Correct Answer B" "The document that summarizes all publicly recorded documents that create the chain of title is known as A) a title report. B) an abstract. C) a mortgagee policy. D) a lis pendens. - Correct Answer B" "All of the following are accurate statements about a standard title insurance policy EXCEPT A) the premium is paid only once, at the time the policy is purchased. B) it covers title defects discovered after closing. C) a past forged deed or errors in public records are covered. D) it covers exceptions and defects found before closing. - Correct Answer D" "A seller has inherited a property and is in the process of selling it. The seller wants to prevent any future claims and liability, so in this case, the best deed for the seller would be a A) special warranty deed. B) general warranty deed. C) trustee's deed. D) quitclaim deed. - Correct Answer D" "The legal concept of validity requires a deed to have several essential elements and meet certain criteria to be considered valid. For a warranty deed to be considered valid and to be recorded, it must have all of the following EXCEPT A) consideration. B) legal description. C) grantee signature. D) words of conveyance. - Correct Answer C" "A buyer wants to build an addition to her home. The addition will require her to build into the setbacks. In order to build, the buyer will need to A) get a special-use permit. B) ask for nonconforming use. C) seek a variance. D) ask for an amendment to the building code. - Correct Answer C" "A neighborhood has received several public improvements, which, by agreement, have been charged to each property owner based on the front footage of their property. Each owner will pay the city when billed. Which is TRUE of the improvements? A) They will be considered appurtenant to each lot. B) They are now fixtures that should be listed in a bill of sale if the property is sold. C) They will need to be listed in the deed if the property is sold. D) They are considered special assessments. - Correct Answer D" "Which of the following is the BEST example of a building code? A) A covenant requiring new houses to have metal roofs B) A requirement defining the type of plumbing fixtures allowed C) Allowing only certain areas to be used for industrial use D) A law requiring all architects and builders to be licensed - Correct Answer B" "Zoning laws such as setbacks and property use are determined at a A) federal level. B) state level. C) federal, state, and local level. D) local level. - Correct Answer D" "A city or town develops a master plan in order to A) control growth and anticipate needs. B) determine what zoning laws apply to each district in the neighborhood. C) establish property tax rates. D) find areas that need special assessments. - Correct Answer A" "A salesperson leaves her current broker to join a new brokerage firm. The listings the salesperson brought to the old firm are A) taken to the new firm. B) renegotiated. C) left with the old firm. D) amended to move to the new firm. - Correct Answer C" "A seller has offered to pay a sales commission to any broker in town who sells his property. The seller will pay only the broker who brings a buyer. In order to be paid by the seller, a broker must A) be the procuring cause of the buyer making the purchase. B) have a signed exclusive agreement. C) not advertise or tell other brokerages. D) offer a co-op to other brokerages. - Correct Answer A" "A slowdown in the market has impacted ABC Realty's profits. The principal broker of ABC Realty gathered a meeting of other principal brokers in the area to discuss commissions and how to improve business. This is A) permissible because they are REALTORS®. B) often done between employing brokers of large companies. C) acceptable as long as the firms sell in different neighborhoods. D) in violation of antitrust laws. - Correct Answer D" "A broker has listed a home with an exclusive-right-to-sell listing contract. The broker is considered to have earned her commission when A) she finds a ready, willing, and able buyer. B) she submits an offer to the seller. C) the seller signs the purchase agreement. D) the closing has taken place. - Correct Answer A" "The buyer's broker and the buyer are doing a walk-through prior to closing. There was a large storm in the area the previous night, and the buyer and the broker found water in the basement. Whom should the buyer's broker inform first of this material fact? A) The listing broker, who should change the seller's property disclosure B) The seller, who will need to decide whether to repair the property or give the buyer a credit at closing C) The title company, so closing can be delayed until a resolution is reached D) The buyer, who will need to decide what steps, if any, to take - Correct Answer D" "The buyer's agent who is representing a buyer in the purchase of a house would need to disclose all of the following facts EXCEPT A) the lender's notice of the buyer's poor credit. B) the roof appears to have leaks. C) the price the buyer is willing to pay. D) the house was used as a meth lab and hasn't been cleaned. - Correct Answer C" "As part of the ethical obligations of a broker listing a property for sale and to help the seller complete all necessary paperwork, the broker is obligated to provide the seller with a A) lead-based paint disclosure. B) seller property disclosure, completed by the broker. C) evaluation of highest and best use. D) competitive market analysis (CMA). - Correct Answer D" "A broker gets a call from her past clients who tell her in confidence that they are about to go into foreclosure and would like her to list the property and bring any offers. The broker should A) tell all the brokers at her sales meeting that the sellers need to sell so they should bring any offers. B) tell a buyer to bring the best offer possible and that she will try to get it accepted. C) tell the buyer's broker to bring in an offer under the listing price because the sellers are motivated. D) advertise the property as "seller motivated, bring all offers." - Correct Answer B" "A seller's agent would be obligated to share with an unrepresented customer that A) all information the customer shares with the agent will also become knowledge of the agent's principal. B) the seller is getting a divorce and is very motivated. C) the property is overpriced and the buyer should offer less than the listing price. D) the property was the site of a murder two years ago. - Correct Answer A" "Which of the following duties would NOT apply to a broker who is not an agent but is facilitating a transaction? A) Submitting all offers to the seller up until closing B) Disclosing all material facts about the transaction to the parties C) Requesting the buyer attach a prequalification letter with the offer D) Acting as an advocate for the parties to the transaction - Correct Answer D" "A seller listed her property with ABC Realty and told the listing broker she will be out of the country for a month but has authorized her brother to sign all documents for her. In this case A) the listing broker will be a special agent while the brother will be a universal agent to the seller. B) the listing broker may accept offers that are equal or greater than the asking price and match the seller's terms. The brother may accept any offer. C) the brother will be acting as a special agent while the listing broker will be a general agent of the seller. D) both the listing broker and the brother will need to be authorized to sign documents for any contracts to be valid. - Correct Answer A" "The seller is renovating the family room but still wants the property shown. On some days, the work creates fumes, so the seller instructs the listing broker to make sure that anyone showing the property speaks with the seller first. The listing broker includes the following statement in the property information: "Call before showing." A buyer's broker calls to schedule a showing and leaves a message on the seller's phone. Upon arriving at the property, the buyer is overcome with fumes from the project. Is the listing broker liable? A) Yes, because the buyer's broker did not call the listing broker B) Yes, because the listing broker did not exercise reasonable care C) No, because the listing broker followed the seller's directions D) No, because the buyer's broker should have followed the showing instructions - Correct Answer B" "Most states have a requirement that the broker and the seller give a written disclosure of material facts to buyers. All of the following are true about the seller's property disclosure EXCEPT A) the broker completes the form, and the seller signs it. B) the seller completes the form and signs it. C) it represents the seller's current knowledge of the property. D) the buyer signs the form to acknowledge receipt of the disclosure. - Correct Answer A" "The seller has just learned that an industrial property, located a mile from the seller's home, might have environmental issues. In completing the property disclosure, the seller A) can ignore the environmental issue because it is not on the seller's property. B) may wait until more information is determined to disclose the issue. C) must determine whether there has been any impact on the property before selling. D) should disclose because the issue might impact the property and future values. - Correct Answer D" "Stigmatized property law and usury law are A) governed by federal and state law. B) created by each state. C) important for sellers only. D) created by police power. - Correct Answer B" "A seller informs the listing broker that a recent plumbing leak has been fixed, although the broker suspects this might not be true. To avoid a claim of misrepresentation, the broker should inform interested buyers that A) the broker relied solely on the seller to make disclosures. B) the house is being sold "as is." C) they should have an expert examine the plumbing. D) the leak has been fixed. - Correct Answer C" "During a property inspection, asbestos wrappings were discovered on the furnace ducts. A better remedy than removal of the asbestos is to A) encapsulate the ducts. B) clean it up using an oil-based cleaner. C) leave it alone until it starts to shed and then remove it. D) spray it with bleach. - Correct Answer A" "Builders of new homes are typically required to give the buyer warranties for all of the following EXCEPT A) merchantability. B) habitability. C) structure. D) equity. - Correct Answer D" "Which of the following would NOT require abatement, mitigation, or cleanup? A) A sealed well B) Radon C) Mold D) Asbestos - Correct Answer A" "A broker who lists a property and knows all the following facts about it would NOT have to disclose which one as a material fact? A) The former owners were known to produce and use methamphetamine. B) The property may have issues that would make it stigmatized. C) The renovated basement was not fully permitted. D) The property may be in a 100-year floodplain. - Correct Answer B" "In order for a brokerage firm to show it is in compliance with fair housing laws, the firm must A) make sure all brokers and salespersons take an annual fair housing course. B) prominently display the equal opportunity poster in the office. C) survey all of its licensees to make sure they are not steering. D) establish territories for all of its licensees to prove equal treatment to all areas of the city. - Correct Answer B" "All of the following are examples of material facts that should be disclosed EXCEPT A) improper drainage. B) leaking roof. C) the past owner had HIV. D) the seller finished the basement without a permit. - Correct Answer C" "During the summer months, a seller's home becomes infested with ants. However, during the rest of the year, there are no apparent problems with ants. The seller A) does not need to disclose because it appears the ants have moved on. B) must hire a pest control specialist to fumigate the home. C) needs to tell the buyer only if the buyer asks about ants. D) must disclose the past problem to the buyer. - Correct Answer D" "The broker reads the assessment roll and finds a special assessment will create a lien on the property after the closing date. The broker A) does not need to do anything because it is not a current lien. B) should tell the seller who will then have to pay the lien before closing. C) should not say anything because it is not material to the transaction. D) is obligated to disclose to the seller and all the parties. - Correct Answer D" "All of the following are true of an independent contractor's written agreement EXCEPT A) the contractor must have the employer withhold Social Security taxes. B) the contractor is expected to pay for her own vacation. C) the contractor may set her own hours. D) the contractor must pay her own withholding and Social Security taxes. - Correct Answer A" "A broker sells a home to an ethnic couple from South America. She then sends out a flyer that states the following: "Property values will be falling. I can help you find a new home in a better neighborhood." The broker is likely engaging in A) redlining. B) steering. C) blockbusting. D) nothing. - Correct Answer C" "All of the following are a violation of fair housing law EXCEPT A) helping a seller sell a home only to married couples without children. B) a landlord refusing to rent to a recovering drug addict. C) homeowners refusing to rent a room in their house to Caucasians. D) a landlord refusing to rent to a convicted drug dealer. - Correct Answer D" "A handicapped tenant moved into a building and wishes to make changes to make the unit more accessible. The landlord may require the tenant to A) get permission for all changes, even reversible ones, in writing. B) pay additional rent because of the changes. C) move to the ground floor when an apartment becomes available there. D) pay for the improvements. - Correct Answer D" "Federal fair housing laws protect all the following people against discrimination EXCEPT A) homosexuals. B) children. C) Baptists. D) Russians. - Correct Answer A" "The Equal Credit Opportunity Act (ECOA) adds which of the following as an additional protected class? A) Homosexuality B) Children C) Students D) Age - Correct Answer D" "The federal Fair Housing Act protects all of the following EXCEPT A) familial status. B) retirement age. C) handicap status. D) national origin. - Correct Answer B" "The listing broker presents a full-price offer that meets all the seller's requirements. The seller rejects the offer because the buyer is of a different ethnic group. Under these circumstances, the broker could A) tell the prospective buyer that the property is no longer available. B) file a complaint and seek the commission as damages. C) ask the real estate commission to investigate. D) obey the seller's request and show the property only to people of the seller's ethnic background. - Correct Answer B" "All of the following are considered commercial property EXCEPT A) an apartment building. B) a parking lot. C) a shopping center. D) a business opportunity. - Correct Answer A" "New homes being built in a subdivision must have an attached front porch and a 6-foot tall wood fence around the backyard. These are examples of A) building codes. B) deed conditions. C) deed restrictions. D) zoning laws. - Correct Answer C" "A tenant pays a base rent plus a percentage of all monthly sales over $20,000. This is an example of what type of lease? A) Residential percentage lease B) Double net lease C) Gross or fixed lease with a sales rider D) Commercial percentage lease - Correct Answer D" "A broker completed a CMA, listed the property, and is advertising it in the MLS. The asking or probable price listed in all advertising is known as the property's A) market price. B) market value.