PSI National Real Estate Salesperson Practice Exam 2023

A competitive market analysis is MOST often used for - Answer- setting a listing price. A couple owns an older home in a neighborhood that is becoming a commercial area. Because of the change in the use of the land, the couple can expect the value of their parcel to increase at some future time. This is an example of the principle of - Answer- anticipation. A commercial property lost value because a recently constructed highway moved traffic away from the property. This is an example of - Answer- economic or external obsolescence. According to the principle of progression, a three-bedroom, one-story home is MOST likely to bring the highest sales price if located in a neighborhood in which - Answer- most homes are larger than the sale home. A prospective seller asks a salesperson to recommend a listing price for a property. The salesperson should suggest - Answer- a competitive market analysis to determine the property's value. If all other factors are equal, in which location is a parking lot likely to bring the highest sales price? - Answer- Business district zoned for a six story office building. When the sellers are lending part of the purchase price, they may secure the debt either with a deed of trust or a mortgage. For the seller, one benefit of the deed of trust is that - Answer- foreclosure is usually simpler and faster. Even if a loan applicant's current income seems adequate to qualify for a certain loan, the Equal Credit Opportunity Act allows a lender to refuse the loan as a high risk if the applicant's main source of income is - Answer- commission sales. A broker and the buyers he represents are anxiously awaiting the closing on their new home. The closing is scheduled in 4 days. The buyers inform the broker that they just received revised Loan Estimate and Closing Disclosure forms from the lender, indicating the Annual Percentage Rate on their loan has increased by 0.3%. Based on the TILA-RESPA Integrated Disclosure rule, what action should the broker take in this situation? - Answer- Confirm with the seller's broker, the lender and the closing entity that the closing must be delayed to allow for a new seven-day waiting period because of the interest rate revision. The FHA functions MOST like - Answer- an insurance company. Federal Truth-in-Lending laws are also known as - Answer- Regulation Z. Which of these Federal laws regulates the advertisement of a lender's credit terms (rates, payment, etc.)? - Answer- Regulation Z. A borrower has defaulted on the mortgage. The mortgage contains an acceleration clause. This permits the lender to - Answer- demand immediate payment of the entire note. According to the Truth-in-Lending Act, if any "trigger terms" are used in an ad, all of the following disclosures MUST appear in the ad EXCEPT the - Answer- prepayment penalties and rebates. An owner hired a construction company to build a swimming pool at a new home. The owner failed to pay the bill once the work was completed and the construction company filed a lien to obtain payment of the debt. The encumbrance created is called - Answer- a mechanic's lien. Three people buy a house as tenants in common. Subsequently, two of the owners want to sell, but the third discourages each potential purchaser. The two owners who wish to sell the house can - Answer- file an action for partition against the third owner. A legal easement can be created by any of the following EXCEPT - Answer- merger of the titles. In the sale of property, there is often confusion over whether an item is a fixture or personal property. What is the best way to avoid this confusion? - Answer- Specify questionable items of property in the written sales contract. A judgment has been properly recorded. Any subsequent purchasers, whether they have actually examined the record or not, have been given - Answer- constructive notice. Legal descriptions using the government survey system are NOT generally used in - Answer- the original 13 states. If conditions for property use are included in a deed and these conditions are violated, what is the most severe potential penalty? - Answer- A court may order the return of the property to the original owner. A deed restriction is applicable to the activities of - Answer- present and future owners. An environmental impact statement typically describes the effects of a proposed project on factors such as - Answer- public health and safety. A deed restriction is applicable to the activities of - Answer- all owners, present and future. An exclusive right to sell listing obtained by a broker associate belongs to - Answer- the employing broker only. To what party or parties does the broker owe the fiduciary duty of care? - Answer- the party or parties employing the broker A couple listed their home with a broker. After 2 months, the seller found a buyer, and the sale closed. The seller was not obligated to pay a commission to the broker. This listing was MOST likely - Answer- an exclusive agency listing. A broker, acting as agent for the seller, presents an offer to buy from the broker's former college roommate. The broker knows that the buyer will increase the amount of the offer if the seller turns down the offer. When presenting the offer, the broker should - Answer- tell the seller that the buyer will pay more. A broker supplies the financing for a project to build condominiums with the stipulation that he has the exclusive right to sell the completed condos. Which of the following BEST describes this relationship? - Answer- Agency coupled with an interest. When a principal authorizes an agent to perform a particular act or transaction, it is an example of a - Answer- special agency. A licensee has an agency representation agreement with a buyer. When showing another company's listing, what obligation does the licensee have to the seller and the listing broker at the other company? - Answer- Disclose the agency relationship when arranging the showing and disclose material information about the buyer if presenting an offer. The day after a broker's listing on a house expired, it was listed with another broker and offered in the MLS. Several days later, a third licensee called the first broker and asked for the key to show the home. The broker should inform the caller that - Answer- he is no longer the listing agent. Under the terms of their listing contract, the owners may sell their house themselves and pay no commission. If their agent sells it, a commission will be due. What kind of listing contract do the owners have? - Answer- Exclusive agency listing. Under the common law of agency, licensees owe the broker with whom they are associated all of the following duties EXCEPT - Answer- indemnification. Unrepresented buyers ask the licensee who listed the home whether they should order a property inspection as a part of their due diligence for the purchase of the home. Which of the following would be the most appropriate way for the listing agent to respond? - Answer- If you feel it is in your best interest, please do so. The Department of Housing and Urban Development estimates that most private homes built before 1978 contain potentially dangerous levels of lead. Because of this, some Federal agencies, such as FHA, - Answer- require the buyer to acknowledge disclosure of the presence of any known lead paint. What critical aspect of the property inspection process MUST licensees convey to prospective buyers? - Answer- Need for inspections to be completed within the time stated in the contract. A licensee is listing a property in a known flood plain. The seller flatly denies that the structure and the property have ever been flooded. What is the licensee required to do in this situation? - Answer- Inform the seller of the legal obligation to disclose facts regarding flood plains. A seller tells the listing agent that her home was treated for termites 10 years ago, so there are no termites now. Before listing the property, the agent should - Answer- tell the seller to disclose the termite treatment on the property disclosure. An example of a contract terminated due to inability to perform would be one in which the - Answer- seller had contracted for sale of the entire property without the knowledge or consent of the other joint tenant. The sellers want to accept a purchase offer, but only if the price is raised by $5,000. What should they give the prospective buyer? - Answer- Counteroffer. A broker has signed a listing contract for the sale of a home. Which of the following could make this contract voidable? - Answer- The seller is heavily under the influence of alcohol at the time of signing. While an agent is showing a listed property, the seller and the buyer enter into an oral agreement for the purchase of the home. If a dispute over the terms arises later, the agreement may be unenforceable because - Answer- the agreement does not comply with the Statute of Frauds. Alex, 14, and Kent, 17, inherited a piece of property. The next year, Kent deeded the whole property to Alex, who immediately put it on the market. An adult buyer made a written offer which was accepted by Alex. Which of the following is TRUE? - Answer- The buyer cannot legally compel Alex to sell. A contract for the sale of a home has been signed by both parties. This contract will remain executory until - Answer- the transaction has closed. A mentally disabled person who has been declared incompetent by a judge wishes to enter into a contract. Under what conditions can such a person do so? - Answer- The person appointed by the court to act for the disabled person must contract on his or her behalf. If the terms of a contract indicate that Party A will be obliged to perform her part of the contract only if Party B chooses to take a certain action, then the contract is a - Answer- unilateral contract in which only Party A has made a promise to perform. Even after an offer has been accepted and is binding, the buyer and seller may still choose to sign mutual release papers rather than proceed to closing. Which of the following circumstances would NOT give either party a justifiable reason to insist on a mutual release? - Answer- The buyer finds a better property for better terms. Prospective buyers made an offer on a property. The seller did NOT accept, but made a counteroffer. The prospective buyers signed the counteroffer and the real estate agent delivered their acceptance to the seller. In the interim, the same buyers had found another house that they liked better and made an offer on it, which was accepted. Which of the following is TRUE? - Answer- Both contracts are valid. A written agreement in which a purchaser agrees to buy and a seller agrees to sell is called - Answer- a contract. A seller signs a listing agreement with a broker. The seller can cancel the listing at any time without legal liability if - Answer- the broker violates the terms of the contract. A buyer was negotiating the purchase of a house for himself. During a conversation with the seller, the seller agreed to include all kitchen appliances in the sale, and this fact was included in the sales contract. In this situation, if the seller takes the appliances with him, what recourse does the buyer have? - Answer- The buyer may sue the seller for specific performance. A company agrees to lease a property to be used as a gambling casino. State laws prohibit gambling. This particular contract would be legally defined as - Answer- void. A gross lease can be best defined as one where the tenant pays, as a part of the rent, - Answer- no operating expenses of the leased space. If leased premises become unusable for the purpose state in the lease, the tenant may have the right to abandon the premises. This action is called - Answer- constructive eviction. Even with title insurance, the policyholder may still suffer losses arising from - Answer- land use change due to zoning ordinances. To be valid, every deed must - Answer- be executed by the grantor. Which of the following statements best describes the risk taken by NOT recording a deed? - Answer- A subsequent purchaser's recorded deed could take precedence over any unrecorded instrument. An exception to title insurance coverage is - Answer- defects that clearly appear in the title search. The buyer is assuming a mortgage presently on the property in the amount of $110,000. What is the adjustment made at closing? - Answer- Credit buyer $110,000; debit seller $110,000. MOST closed real estate transactions should be reported to the IRS. REQUIRED information includes seller name(s) and social security number(s) and - Answer- the sale price. A broker represents a group of investors who purchase single family residences when they can be found at very low prices. Their offers are typically made with $500 deposits and cash closings within 7 days of acceptance of the offers. When the last property closed, the investors suggested the broker keep the deposit money to be used for their next purchase, as yet not identified. What must the broker do with these deposit funds? - Answer- Return them to the purchasers. Under the Federal Fair Housing Law, which of the following is considered discriminatory advertising? - Answer- "Catholics preferred." The Civil Rights Act of 1866 prohibits any type of discrimination based on - Answer- race. Salesperson Susan was at the local coffee shop with some agents from other offices. The subject of commissions came up, and agents began to compare their commission rates. Susan should - Answer- advise her friends this could constitute a violation of Sherman Antitrust Act. Failure of a real estate agent to comply with Fair Housing practices is punishable by - Answer- license revocation and criminal prosecution. Antitrust laws prohibit competing brokers from all of the following EXCEPT - Answer- receiving compensation from both the buyer and the seller. Without checking the facts, a broker who is the seller's agent tells a buyer that the property taxes in a particular neighborhood are among the lowest in the area. The buyer relies on the broker's statement and makes an offer on a house in the neighborhood. Before closing, it is determined that the taxes are actually among the highest in the area. The buyer could seek to rescind the contract on the basis of - Answer- misrepresentation. A salesperson qualified a minority couple with two children and defined their price range as between $110,000 and $120,000 for the three-bedroom house they wanted. They asked to look at two listings in a nonminority neighborhood. The salesperson did not show them the properties because they were priced under $90,000 and had only two small bedrooms. Did the salesperson act appropriately and why or why not? - Answer- No, because it is appropriate to show any property for which the buyer is qualified. A landlord may legally refuse to rent to a prospective tenant if the tenant - Answer- has ever been convicted of selling illegal drugs. Earnest money should be deposited into a trust account - Answer- in a timely manner, according to state laws. An equal housing opportunity notice MUST be - Answer- displayed in the brokerage office. If you own a building free and clear that is worth $115,000 and want an annual return of 12%, what net income is needed each month? - Answer- $1,150 A buyer wants to purchase a home for $160,000 with a 15% down payment. The lender charges 2 points. How much money does the buyer need up front to make the purchase? - Answer- $26,720 On January 15, a seller paid $960 in annual property tax for the current calendar year. A buyer is purchasing the house with the closing set for March 1. What will be the seller's credit for the property taxes already paid if the buyer pays for the day of closing? Use a 360-day year and a 30-day month. - Answer- $800 If a borrower can afford to make monthly principal and interest payments of $1,000 and the lender will make a 30-year loan at 5-1/2%, or a 20-year loan at 4-1/2%, what is the largest loan (rounded to the nearest $100) this buyer can afford? (BE SURE TO USE THE AMORTIZATION TABLE.) - Answer- $176,100 An investment property returns 12% of its value or $21,000 annually. What is the value of the property? - Answer- $175,000 On February 1, a seller paid $1,140 in annual property tax for the current calendar year. He sold the house with the closing set for April 1. What will be the seller's credit for the property taxes already paid if the buyer pays for the day of closing? Use a 360-day year and a 30-day month. - Answer- $288 A couple bought a rental house for $195,000. Its assessed value was $180,000. If the tax rate is $1.50 per $100 of assessed value, what is the monthly contribution the lender will REQUIRE for taxes? Round to the nearest cent. - Answer- $225.00 A home buyer is obtaining a fully amortized loan in the amount of $140,000. The savings and loan will give him the loan for 15 years at 5% or for 30 years at 6%. To the nearest dollar, what is the difference between the monthly payments for these two loans? (BE SURE TO USE THE AMORTIZATION TABLE.) - Answer- $267 A minority couple come to a salesperson looking for a house. The salesperson has some properties for which the couple qualify but avoids showing or mentioning these listings. Instead, the salesperson shows only properties in low-priced and integrated neighborhoods. This practice is known as - Answer- steering.