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PSI NATIONAL EXAM FOR REAL ESTATE
UPDATED QUESTIONS WITH 100% CORRECT ANSWERS
“A written agreement in which a purchaser agrees to buy and a seller agrees to sell is called -
CORRECT ANSWER a contract"
"A statement saying that a person signing the document has done so of his own free will and that
he is the person whose signature appears on the document is a/an - CORRECT ANSWER
acknowledgment" "A summary report of what was found in the public records when the title search is done, beginning with the original owner and giving a chronological list of all recorded instruments including liens
and encumbrances is a - CORRECT ANSWER abstract of title"
"A building which was built before a zoning ordinance was enacted, but is allowed to continue
until the building is torn down or its use is change, is called a - CORRECT ANSWER non-
conforming use"
"The priority of liens with regard to who is paid first in a foreclosure is - CORRECT ANSWER
Property taxes, mechanic's liens, all other mortgages by date recorded" "A type of easement always involving at least two tracts of land and involving ingress and egress is
called a/an - CORRECT ANSWER easement appurtenant"
"A special assessment has been levied for a subdivision to improve the drainage system in the
subdivision. Which homeowner can expect to pay the largest tax, if taxed as front footage? -
CORRECT ANSWER The largest corner lots"
"What is the BEST feature of the metes and bounds method of describing land? - CORRECT
ANSWER It can be used to describe land of any shape."
"The principle that states that the value of an inferior property is increased by being near a better property, and the value of the better property is decreased by being near an inferior property, is
called - CORRECT ANSWER Progression and regression"
"When an appraiser uses more than one of the approaches to value on a single property, the
process by which he combines the results from each is called: - CORRECT ANSWER
reconciliation" "An additional time period in which the borrower can pay a debt and redeem his property is
called - CORRECT ANSWER equitable right of redemption"
"The action which cancels the note when the full debt is paid and defeats any interest the
mortgagee has had in the collateral property is called - CORRECT ANSWER satisfaction of
judgment" "A clause which is found in certain types of mortgages that gives permission for another,
subsequent lender to assume the rights of a first mortgage lien is called a - CORRECT ANSWER
subordination clause" "The right of a title company to receive any damages available to the insured when the title
company has made a payment to settle a claim covered by a policy is called - CORRECT
ANSWER subrogation"
"The selling price of a property would be listed how on the closing statement? - CORRECT
ANSWER debit to the buyer, credit to the seller."
"The function of the FHA loan program is to - CORRECT ANSWER insure loans against the
borrower" "A type of mortgage designed for retirees in which regular monthly payments are made to the borrower based on the equity, and in which the loan is paid from the sale of the property at the
owner's death is a - CORRECT ANSWER reverse mortgage"
"True or False All or part of the gain on the sale of a personal residence is exempt from capital gains tax if
another residence is bought and occupied within 24 months of the sale of the old residence. -
CORRECT ANSWER True"
"The group of lenders who facilitate the buying and selling of mortgages that have been made by the primary mortgage market, by taking over loans that primary lenders have originated is known
as - CORRECT ANSWER Secondary lenders"
"A borrower has defaulted on the mortgage. The mortgage contains an acceleration clause. This
permits the lender to - CORRECT ANSWER demand immediate payment of the entire note"
"The FHA functions MOST like - CORRECT ANSWER an insurance company"
"1. They are used to buy down interest rate.
- They are a function of the marketplace.
3. They are paid by either the buyer or the seller. - CORRECT ANSWER discount points"
"When land is conveyed to a trustee, the trustee may - CORRECT ANSWER do whatever is
permitted under the trust agreement" "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 - CORRECT ANSWER the agreement does not comply with the
Statute of Frauds"
"Earnest money should be deposited into a trust account - CORRECT ANSWER in a timely
manner, according to state laws"
"A deed restriction is applicable to the activities of - CORRECT ANSWER all owners, present
and future"
"An easement can be terminated by - CORRECT ANSWER prescription"
"Depreciation is calculated based on the - CORRECT ANSWER cost of the building only"
"Which of the following approaches MOST reliably estimates the sales price of a single-family
residence? - CORRECT ANSWER Market data"
"The escrow officer or closing agent MUST give information regarding the sales price and seller's
social security number to - CORRECT ANSWER IRS"
"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? - CORRECT ANSWER Agency coupled with an interest"
"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? - CORRECT ANSWER $1,150"
"Usury laws were enacted to protect the - CORRECT ANSWER borrower"
"When one of the parties to an agreement fails to perform one of its conditions, that contract is
deemed to be - CORRECT ANSWER breached"
"Which of the following is NOT a consideration in the definition of market value? - CORRECT
ANSWER Buyer and seller must agree to appraised value"
"Ownership of common stock in a corporation gives - CORRECT ANSWER an interest that is
classified as personal property" "At the closing on June 15, the buyer is assuming a mortgage presently on the property, on which the monthly interest charge is currently $600. The seller has made the payment due on June 1. Assuming a VA mortgage, what is the adjustment
made at closing? - CORRECT ANSWER Debit seller $300; credit buyer $300"
"Too much leverage may result in - CORRECT ANSWER negative cash flow"
"A major reason for buying and owning a condominium rather than a detached single-family
home is that - CORRECT ANSWER a condominium tends to be more affordable"
"Regulation Z requires that the borrower be fully informed of all of the following - CORRECT
ANSWER 1. loan fees.
2 .the origination fee.
- the annual percentage rate" "A couple signed a lease on an apartment for a period of 1 year. The lease does NOT contain an automatic renewal clause. The couple plans to move out at the end of the lease rather than renew it. How much notice MUST they give to comply with
the lease term? - CORRECT ANSWER No notice is required"
"An agency relationship between a property owner and a property manager is usually created by
- CORRECT ANSWER management agreement" ". 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. - CORRECT ANSWER $800"
"Which of the following is NOT usually prorated at closing - CORRECT ANSWER Special tax
assessments"
"Which of the following is usually prorated at closing? - CORRECT ANSWER 1. Homeowners
association fees.
- Property taxes.
- Transferred homeowner's insurance."
"In MOST states, foreclosed property is sold through - CORRECT ANSWER public auction"
"A commercial property lost value because a recently constructed highway moved traffic away
from the property. This is an example of - CORRECT ANSWER economic or external
obsolescence"
"A managing broker can be held responsible for - CORRECT ANSWER all real estate activities of
salespersons." "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 - CORRECT ANSWER 1. cash price or amount of the loan
- amount of down payment required
- number, amount, and frequency of payments"
"In an exclusive right-to-sell listing, an owner lists the property for sale with how many brokers -
CORRECT ANSWER One"
"When a principal authorizes an agent to perform a particular act or transaction, it is an example
of a - CORRECT ANSWER special agency"
"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 - CORRECT ANSWER he is no longer the listing agent"
"If conditions for purchase are included in a deed and these conditions are violated, what is the
penalty? - CORRECT ANSWER Return of the property to the original owner"
"Which is true of BOTH special assessments and ad valorem taxes - CORRECT ANSWER
Deliquent payment is grounds for sale of property"
"Why was the Jones vs. Mayer decision of 1968 important? - CORRECT ANSWER By upholding
the Civil Rights Act of 1866, the Supreme Court removed all exceptions to racial discrimination in housing"
"An Environmental Impact Statement (EIS - CORRECT ANSWER projects the impact on the
environment of a proposed project."
"Which of the following BEST illustrates the concept and intent of a buffer zone? - CORRECT
ANSWER Garden apartments located between a single-family residential neighborhood and a
shopping center." "A broker has brought a ready, willing, and able buyer to a seller. In MOST listing contracts, the
broker has earned his commission when - CORRECT ANSWER the seller accepts the offer"
"Which rule-of-thumb version is being offered to an investor who is told that a house renting for $900 a month
should sell for about $90,000? - CORRECT ANSWER GRM"
"A judgment has been properly recorded. Any subsequent purchasers, whether they have actually examined the
record or not, have been given - CORRECT ANSWER constructive notice"
"The buyer wants to make the purchase offer contingent on a complex mortgage arrangement.
The buyer's agent Who is drawing up the contract should - CORRECT ANSWER suggest the
buyer ask a lawyer to furnish the wording"
- the amount of square footage
- the location of the property"
"If all other factors are equal, in which location is a parking lot likely to bring the highest sales -
CORRECT ANSWER business district zoned for a six-story office building"
"Parcels A, B, and C are located side by side and owned by three different owners. A is worth $20,000, B is worth $27,000, and C is worth $16,000 for a total of $63,000. A developer believes that if all three can be purchased, the larger parcel would be worth $85,000. By assembling these under one owner they would be worth $22,000 more than their individual values. This
demonstrates which principle of value? - CORRECT ANSWER plottage"
"A loan which requires the borrower to pay interest only until the maturity date (or due date),
and then pay the entire principal on the maturity date, is called a - CORRECT ANSWER term
loan" "The real estate licensee who accepts an undisclosed fee for referring a buyer to a specific title
company may be in violation of - CORRECT ANSWER RESPA"
"Which of the following events would AUTOMATICALLY cancel a listing agreement? - CORRECT
ANSWER property owners death"
"Another term for the owner of a property listed with your firm is the - CORRECT ANSWER
client" "A contract has been drawn which obliges the sellers to convey title to their land to the buyers if
the buyers come up with $22,000 on or before December 31. This is called - CORRECT
ANSWER an option contract"
"An agreement to purchase that has NOT yet closed is - CORRECT ANSWER an executory
contract" "When someone has living heirs but dies without leaving a will, the estate is distributed according
to the - CORRECT ANSWER statue of descent"
"The Civil Rights Act of 1866 prohibits any type of discrimination based on - CORRECT ANSWER
race"
"An agent shows a home to a couple and mentions that it has a lovely fireplace in the living room. After buying the home, the buyers and agent discover that the brick fireplace is just a decorative fireplace and is not "wood burning." Which of the following would BEST protect the agent from
financial loss? - CORRECT ANSWER E&O coverage"
"The sellers have agreed to give the buyers an allowance of $16.95 per square yard to retile the kitchen. If the kitchen is 10 feet x 14 feet, how much will it cost the sellers (to the nearest dollar)?
CORRECT ANSWER $264"
"The economic characteristics of land are - CORRECT ANSWER scarcity, location, and
durability" "A homeowner is willing to let his neighbor park an RV in his backyard. He does NOT want to make the permission permanent in case he dislikes others who might move next door in the future.
What should he give his neighbor? - CORRECT ANSWER A license"
"Which of these Federal laws regulates the advertisement of a lender's credit terms (rates,
payment, etc.)? - CORRECT ANSWER Regulation Z"
"Which of the following may be considered prima facie evidence of discrimination by a broker? -
CORRECT ANSWER Failure to display the equal housing opportunity poster at the broker's
place of business" "An agency relationship based on a formal agreement between the parties, either written or
verbal, is - CORRECT ANSWER express agency"
"An agency relationship based on the actions of the parties is - CORRECT ANSWER implied
agency"
"An agent has a fiduciary relationship with the - CORRECT ANSWER client or principle"
"The type of agency that exists between the real estate agent and his client is usually - CORRECT
ANSWER special agency"
"In Louisiana, the law states that, unless there is a written agreement to the contrary, the agent
represents - CORRECT ANSWER the person he is with"
"When the commission is shared between the listing broker and the selling broker, this is known
as: - CORRECT ANSWER broker cooperation"
"If an agent is working as an independent contractor for the broker: - CORRECT ANSWER the
agent is responsible for paying his own Social Security and income taxes"
"A hidden structural defect that would not be discovered by ordinary inspection - CORRECT
ANSWER latent defect"
"Which of the following is an agent required to disclose to a potential buyer? - CORRECT
ANSWER the property contains asbestos insulation"
"Which of the following is NOT a valid reason for terminating an agency relationship - CORRECT
ANSWER The seller decides he would rather sell the house himself"
"Which duty is easiest to perform as a dual agent? - CORRECT ANSWER disclosure"
"The agent owes only honesty and truthfulness to the - CORRECT ANSWER customer"
"A salesperson working with a co-operating broker has a fiduciary relationship to all EXCEPT: -
CORRECT ANSWER the buyer"
"The agent who is appointed by the broker to represent a particular client is known as the -
CORRECT ANSWER designated agent"
"A protection clauses in a listing allows for - CORRECT ANSWER payment of the commission if
the buyer was secured by the broker even if the sale takes place after the expiration of the contract"
"An express contract must be - CORRECT ANSWER written or spoken"
"If a contract is not legal and is not binding on either party it is said to be - CORRECT ANSWER
void"
"A contract in which only one party is obligated is called a - CORRECT ANSWER unilateral
contract."
"True or False Novation allows the substitution of one party to the contract with a new party, or the replacement of
a new obligation for an old one - CORRECT ANSWER True"
"The substitution of one party to the contract for another party, or the replacement of a new
obligation for an old one is called - CORRECT ANSWER novation"
"A type of fraud that is committed with no intent to harm, mislead or misrepresent is: -
CORRECT ANSWER constructive fraud"
"Under certain conditions, one party may cancel or terminate a contract. This is known as -
CORRECT ANSWER rescision"
"In the other 49 states a contract must be accompanied by - CORRECT ANSWER
consideration" "When there is an intent to deceive such as lying or intentionally withholding pertinent information,
this is known as - CORRECT ANSWER actual fraud."
"Errors regarding the facts of a contract are called - CORRECT ANSWER mistake of fact."
"The concept that one may lose his legal rights if he inexcusably fails to exercise them within a
reasonable time is known as - CORRECT ANSWER laches"
"This clause insures that the broker will receive a commission if his client buys the house within a
certain time period after the listing agreement has expired. - CORRECT ANSWER Protection
Clause"
"Which type of listing is the best one to ensure the broker a commission? - CORRECT ANSWER
exclusive right to sell listing" "True or False
A lease is both a contract and a conveyance. - CORRECT ANSWER True"
The Purchase Agreement is the basis for the closing statement. - CORRECT ANSWER True"
"A Bill of Sale is used for: - CORRECT ANSWER personal property."
"What type of interest, if any, does a purchaser have in a property he has contracted to buy, but the
sale has not yet been executed? - CORRECT ANSWER equitable title"
"The term that means that the contract must be performed within the time limit specified -
CORRECT ANSWER Time is of the essence"
"In the closing statement, new loan proceeds are listed as - CORRECT ANSWER credit to the
buyer" "A contract is signed for the purchase of a house, but before the sale is closed the seller dies. The
heirs do not wish to sell. The buyer can - CORRECT ANSWER sue for specific performance"
"Another term for "offer and acceptance" is: - CORRECT ANSWER meeting of the minds."
"A contract that is signed by a 16 year old is - CORRECT ANSWER voidable"
"Which of the following is an example of a unilateral contract? - CORRECT ANSWER option"
"A contract is signed between buyer and seller. The contract would become impossible to
perform if - CORRECT ANSWER the house burns down"
"A purchase money mortgage is used in - CORRECT ANSWER owner financing"
"If a property is sold for an illegal purpose, that contract is - CORRECT ANSWER void"
"When one party has substantially performed the terms of the contract, but has not completed every
detail exactly as the contract states, this is known as - CORRECT ANSWER substantial
performance"
"An example of a service contract is - CORRECT ANSWER listing agreement"
"A contract for the sale of a property which does not state the consideration to be paid and is not
signed by the parties would be - CORRECT ANSWER void"
"When does a listing contract terminate? - CORRECT ANSWER upon expiration of the contract
date." "A broker in listing a house, wanted an exclusive right to sell the property for 90 days. The seller
wanted to retain the right to sell the property himself. What type of listing would be best? -
CORRECT ANSWER exclusive agency"
"Procuring cause would not be required in order for a broker to receive a commission in a -
CORRECT ANSWER exclusive right to sell listing"
"A buyer becomes obligated when - CORRECT ANSWER the agent presents him with the
accepted contract" "A purchase agreement is signed for the purchase of a $400,000 house. A deposit of $10,000 is given to the broker and put in his escrow account. A month later, the buyer and seller agree not to
go through with the sale. Which of the following should the agent do? - CORRECT ANSWER
The broker must return the deposit to the buyer."
"A contract signed under duress is - CORRECT ANSWER voidable"
"True or False
Handicap status does NOT include illegal drug users. - CORRECT ANSWER True"
"Refusing to make loans or issue insurance policies in certain areas is known as - CORRECT
ANSWER redlining"
"Is a person who is recovered from mental illness protected by the handicap status? - CORRECT
ANSWER Yes."
"True or False
A pregnant woman would be protected under the familial status class - CORRECT ANSWER
True" "Legislation that was specifically designed to provide for a national policy of fair housing was the:
- CORRECT ANSWER Fair Housing Act of 1968."
"Is a person with a mental illness who is completely cured covered by the Civil Rights Act of 1968?
- CORRECT ANSWER yes, because the law covers anyone who is currently mentally ill or recovered." "If HUD issues a charge following an investigation of a discrimination complaint, either the complaint or the respondent would have how many days to choose the option to have HUD,
through its ALJ, hear the case or have a jury trial? - CORRECT ANSWER 20"
"The new 1988 Federal Fair Housing Act went into effect: - CORRECT ANSWER March 12,
"Real property consists of - CORRECT ANSWER 1. land
- improvements
- plants, trees and crops"
"The four physical characteristics of land are - CORRECT ANSWER permanence, immobility,
complexity, and uniqueness"
"The four economic characteristics of land are - CORRECT ANSWER scarcity, modification,
fixity of investment, and situs" "True or False
Riparian rights only apply when more than one property adjoins the same body of water. -
CORRECT ANSWER True"
"Underground water sources such as springs, geysers, and underground streams are known as: -
CORRECT ANSWER Percolating waters"
"True or False
An owner may sell or lease his air rights to another person. - CORRECT ANSWER True"
"Water rights that apply to ocean front and lake front property (lapping water) are - CORRECT
ANSWER Littoral"
"True or False
Land is permanent, immobile, complex and unique. - CORRECT ANSWER True"
"Do mineral rights transfer when the property is sold? - CORRECT ANSWER Yes, unless
specifically retained in the contract."
"Land ownership extends - CORRECT ANSWER From the center of the earth and above the
earth to infinity."
"Water rights that apply to land adjacent to running water are called: - CORRECT ANSWER
Riparian"
"The five categories of real property are - CORRECT ANSWER residential, agricultural,
industrial, commercial, and special purpose" "An item of personal property which has been permanently attached to real property such as a
light fixture or a bathtub is known as a - CORRECT ANSWER Fixture"
"Another name for fructus industriales is - CORRECT ANSWER Emblements"
"The rights associated with ownership of real property are called - CORRECT ANSWER the
"Bundle of Rights"" "Anything man-made that is added to the land such as homes, buildings, fences or sidewalks is
known as - CORRECT ANSWER improvements"
"Farm crops are called: - CORRECT ANSWER emblements"
"A type of ownership which extends for an indefinite length of time and includes some or all of the
rights contained in the Bundle of Rights is called a - CORRECT ANSWER freehold estate"
"A qualification in a fee simple estate which prevents the new owner from performing some
action or activity is known as a - CORRECT ANSWER condition subsequent"
"The person who will own the property after the death of a life estate owner is called - CORRECT
ANSWER remainderman"
"The most complete form of ownership which lasts forever and may be passed on to one's heirs is
called: - CORRECT ANSWER fee simple or fee simple absolute"
