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PSI NATIONAL REAL ESTATE EXAM
2024 | ACTUAL EXAM QUESTIONS
AND CORRECT ANSWERS WITH
RATIONALE | ALREADY GRADED A+
Which one of the following types of ownership termination allows each tenant to have a specific, divided portion (partition) of the property exclusively?
- Termination by division
- Termination of co-ownership by partition
- Termination of estate in severalty
- Termination of joint tenancies -------CORRECT ANSWER---------------Termination of co- ownership by partition ****Termination of tenancy in common by partition allows each tenant to have a specific, divided portion of the property exclusively. If the property can't be divided, the court may rule that the property be sold and the proceeds divided by the tenants.** Which of these would void a deed intended to convey property?
- The grantee is not mentally competent.
- The grantee's signature is not acknowledged.
- The grantor is not mentally competent.
- The transfer includes no monetary consideration. -------CORRECT ANSWER--------------
- The grantor is not mentally competent. Desmond has a signed listing agreement with his clients, the Harpers. In exchange for helping the Harpers list, market, and sell their home, the Harpers have agreed to pay Desmond a commission. What type of agreement do Desmond and the Harpers have?
- Bilateral
- Executed
- Mutual
- Unilateral -------CORRECT ANSWER---------------Bilateral
****A contract involving an exchange of promises or other consideration between two parties is a bilateral contract.** Phoebe's gross monthly income is $4,200, and she has $360 in monthly non-housing debt payments. The lender's qualifying ratios are 28% for the housing ratio and 36% for the total DTI ratio. What's the maximum housing payment she can afford?
- $1,
- $1,
- $1,
- $1,512 -------CORRECT ANSWER---------------$1, ****The maximum house payment is the lesser of the amounts calculated using both ratios. DTI: $4,200 x .36 = $1,512. $1,512 - $360 = $1,152. Housing ratio: $4,200 x .28 = $1,176. Phoebe's maximum payment is $1,152.** Which of these is an example of agency coupled with interest?
- A listing agent agrees to accept a commission of 2.5% upon sale of the property.
- A listing agent agrees to split the commission on the sale of a property with a cooperating agent who brings the buyer to the table.
- An agent foregoes buyer agent commission, provided the purchasing developer gives the agent the listings on the developed lots.
- An agent is interested a property the agent has listed. -------CORRECT ANSWER-------- -------An agent foregoes buyer agent commission, provided the purchasing developer gives the agent the listings on the developed lots. ****Agency coupled with interest means the agent holds an estate (or interest) in a property that is the subject of the agency relationship. Forgoing commission now in turn for listings down the road is an example.** Juan has decided to invest his small inheritance in real estate. He is drawn to the fact that he can add a building where there wasn't one previously and immediately increase the value of his investment. Which economic characteristic of real property is this?
- Area preference
- Improvements
- Permanence
- Scarcity -------CORRECT ANSWER---------------Improvements
****The seller is required to pay the for January 1 through May 19. The seller will be credited $1,207, because $1,949 ÷ 365 = $5.34, and $5.34 × 226 days (the number of days the buyer is required to pay) = $1,206.84. That's $1,207 if rounded to the nearest whole dollar.** Thad received multiple offers on his property and is reviewing them with his agent Nora. All of the offers have at least one contingency. Nora recommends that they reject the second offer, because it has a _______ contingency, which is generally the most risky.
- Appraisal
- Financing
- Home sale
- Inspection -------CORRECT ANSWER---------------Home sale ****Home sale contingencies are typically thought of as the riskiest. By accepting a home sale contingency, sellers essentially remove their home from the market and wait for the buyer's current home to sell before their transaction can close.** Upon a life estate holder's death, the estate either reverts to the original owner or to another person the original owner has named, known as a ______.
- Backup
- Holder-in-waiting
- Remainderman
- Reversionary -------CORRECT ANSWER---------------Remainderman ****With an ordinary life estate, the ownership rights to the property either revert to the original owner (reversion), or to another person that the original owner has named (remainderman).** Which of the following is the best example of a tie-in arrangement?
- A business offers add-on services for its best customers.
- A business requires its clients to also purchase services from another business.
- Competing businesses agree to similar pricing strategies.
- Competing companies agree to not do business with a third. -------CORRECT ANSWER---------------A business requires its clients to also purchase services from another business.
****Tie-in arrangements are antitrust violations that involve predicating one service on the consumer purchasing another from another company.** New Day Corporation's application to build a new mixed-income housing development was denied, because the town of Springfield has halted all new development until after city elections. What did Springfield enact?
- Area variance
- Moratorium
- Special use permit
- Use variance -------CORRECT ANSWER---------------Moratorium To make valid computations of adjustments for the sales comparison approach to value, elements of comparison must be applied in a specific order. Which element is applied first?
- Conditions of sale
- Financing terms and cash equivalency
- Market conditions
- Physical characteristics -------CORRECT ANSWER---------------Financing terms and cash equivalency ****When using the sales comparison approach, appraisers consider elements in a specific order: financing terms and cash equivalency, conditions of sale, market conditions at the time of contract and closing, location, and physical characteristics.** Which of these situations represents the illegal practice of redlining?
- Arlo, a licensee, distributed a flyer in several neighborhoods warning of impending commercial developments that would negatively impact property values.
- Eunice refuses to allow her agent to show her house to families with children.
- Hunter, a mortgage broker, refuses to underwrite mortgage applications from applicants who are buying in specific neighborhoods.
- Jaime is working with Korean clients. He's focusing on homes in Korean communities because he thinks his clients will be more comfortable there. -------CORRECT ANSWER---------------Hunter, a mortgage broker, refuses to underwrite mortgage applications from applicants who are buying in specific neighborhoods.
- Exclusion
- Possession -------CORRECT ANSWER---------------Enjoyment Lawrence is a buyer closing on a home purchase for which he's obtaining financing. He receives a Loan Estimate from his lender. What's the purpose of this document?
- To detail the amount Lawrence needs to bring to closing
- To detail the estimated closing costs for Lawrence's loan
- To disclose the interest rates available on this lender's various loan programs
- To disclose the lender's source of loan funds -------CORRECT ANSWER---------------To detail the estimated closing costs for Lawrence's loan **The Loan Estimate, which the lender must provide within three days of loan application, provides an estimate of mortgage loan costs. Claire rents 1,100 square feet of office space in a new professional building. Her rent payment includes all utilities and property taxes, but she pays separately for custodial services. What kind of lease does Claire have?
- Full-service lease
- Modified gross lease
- Percentage lease
- Triple-net lease -------CORRECT ANSWER---------------Modified gross lease **A modified gross lease typically includes all the nets in the base rent, but not utilities and/or janitorial services. Marlon and Leah are interested in buying a home in a new homeowner opportunity area. The 100-year-old row house was renovated and is like new on the inside. The property taxes decreased by more than $5,000 last year. What's the likely reason for this?
- Introductory rates
- Seller error
- Tax abatement
- Tax reassessment -------CORRECT ANSWER---------------Tax abatement **A tax abatement program will lower the property taxes on a given property for a set amount of time. This is typically in response to some sort of improvement or rehabilitation, or for some new construction properties.
Which of the following is an example of price fixing?
- A brokerage requires all licensees to offer a fair cooperative brokerage fee.
- Three brokerages agree to purchase office supplies together to obtain a bulk discount.
- Twelve brokerages discuss compensation of associated independent contractor licensees.
- Two brokerages determine a standard commission rate. -------CORRECT ANSWER----- ----------Two brokerages determine a standard commission rate. **Collusion must occur on pricing for the public in order for price fixing to occur. Which legislative act prohibits certain types of electronic communication?
- CAN-SPAM
- NO-SPAM
- SPAM-CAN
- SPAM-JAM -------CORRECT ANSWER---------------CAN-SPAM **The Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN- SPAM) prohibits junk email and requires an "unsubscribe" option in any email marketing messages. Tracy is looking in the MLS and sees a listing marked "REO." Which of these statements regarding REOs is correct?
- An REO property is one that the lender is trying to help the owner sell before beginning foreclosure proceedings.
- Banks acquire REOs through failed foreclosure sales or deed in lieu of foreclosure actions.
- REOs are properties that the lender has given permission to sell for less than the loan amount.
- REOs refer to investment properties a bank owns. -------CORRECT ANSWER------------ ---Banks acquire REOs through failed foreclosure sales or deed in lieu of foreclosure actions. **Failed foreclosure sales and deed in lieu of foreclosure actions result in lenders taking title to properties they previously had mortgage loans on. These properties are called real estate owned, or REOs.
Your buyer client Heather just signed a purchase agreement for a $520,000 home. The LTVR is 60%. How much is Heather putting down on the purchase?
- $208,
- $220,
- $300,
- $312,000 -------CORRECT ANSWER---------------$208, **A 60% LTVR means that Heather is financing 60% of her purchase and putting down 40%. Forty percent of $520,000 is $208,000 ($520,000 x 0.40). Your buyers love the 1891 Victorian they have under contract, but they want to get both the water and the paint tested as soon as possible. What are they testing for in both water and paint?
- Asbestos
- Lead
- Mold
- Radon -------CORRECT ANSWER---------------Lead **Both pipes (and thus water) and paint can be a source of lead, as well as dust and soil surrounding the home. Joaquin sold his house for $327,600. He bought it several years ago for $139,900 with a $100,000 loan. The loan balance when he sold it was $73,400. What was Joaquin's equity?
- $114,
- $187,
- $214,
- $254,200 -------CORRECT ANSWER---------------$254, **Joaquin's equity was $254,200. Subtract the loan balance from the market value of the home to find the equity ($327,600 - $73,400). Trina is a licensee at Midtown Homes. Which of these factors indicates that she's classified as an employee?
- She's eligible to participate in the firms 401k retirement plan.
- She's required to belong to the National Association of REALTORS®.
- She works from both her home office and an office the firm provides.
- The brokerage firm supervises her. -------CORRECT ANSWER---------------She's eligible to participate in the firms 401k retirement plan. **The one factor that applies only to employees is Marge's eligibility to participate in the firm's 401k retirement plan. Grant and Adela arrange a $150,000 loan at 4.5% annual interest with their lender. What's their monthly interest amount?
- $550.
- $562.
- $
- $575.75 -------CORRECT ANSWER---------------$562. **Grant and Adela's annual interest amount is $6,750 ($150,000 x 0.045). To get the monthly amount, divide $6,750 by 12. Their monthly interest amount is $562.50. What is the overarching theme addressed by statutory duties in most states?
- Licensees may not take any action that might be detrimental to the client's legal interests.
- Licensees must maintain the client's confidentiality.
- Licensees must make all required disclosures.
- Licensees must properly account for all money and properties entrusted to them ------- CORRECT ANSWER---------------Licensees may not take any action that might be detrimental to the client's legal interests. **The overarching theme of statutory duties is that licensees can't take any action that would adversely impact the client's legal interests. Who is responsible for following up on issues identified in the inspection report to ensure that they are addressed?
- The buyers
- The buyer's agent
- The listing agent
- The sellers -------CORRECT ANSWER---------------The buyer's agent
**Buyers are free to select properties based on demographics as long as licensees don't use demographics as a basis for showing properties. Landlords may refuse to rent to individuals on the basis of creditworthiness. Gene and Alex bought a property that backed up to a neighborhood park. The previous owner mentioned that ever since the park was built eight years ago, the next door neighbor who works at the park has cut through the yard to get to the park rather than going around via the streets, which saves about half a mile. What kind of easement is this?
- Easement by prescription
- Easement in gross
- Express easement
- Visible easement -------CORRECT ANSWER---------------Easement by prescription **Easements by prescription are created through continuous, exclusive, and long-term use of another's property without actual permission. Dean's new business venture is a software services firm where IT professionals handle programming and customer service tasks for a number of business clients. His employees all work at tables in an open office space. Dean most likely has a ________ lease for the office space.
- Gross
- Loft
- Percentage
- Triple net -------CORRECT ANSWER---------------Loft **A loft lease is usually for a large open space that may have few amenities. Shirley's lender discharged the mortgage lien on Shirley's property after processing her final payment. Which clause requires the lender to take this action?
- Acceleration
- Alienation
- Defeasance
- Due-on-sale -------CORRECT ANSWER---------------Defeasance **The defeasance clause means the lender may not pursue the borrower for additional funds when the loan balance is paid in full.
Marketo Building Designs is selling the air rights above its office building. The lot is 450 feet by 350 feet. How would you determine the air lot height in order to calculate the area?
- The area of an air lot can't be calculated because the height is unlimited.
- The city or other governing authority establishes the air lot's height.
- The height of all air lots is 500 feet above the existing structure.
- The height of the air lot is equal to the height of the structure under it. -------CORRECT ANSWER---------------The city or other governing authority establishes the air lot's height. **Because of safety and other concerns, municipalities typically establish the height of air lots in their jurisdictions. A fire destroyed Meredith's house. Meredith contacted her insurance company, and she was shocked to learn her insurance policy didn't fully cover what she paid for the property. How does the insurance company determine the replacement value of her home?
- Its current market value
- The amount it appraised for
- The amount it would cost to completely replace her home
- The original sales price when it was first constructed -------CORRECT ANSWER--------- ------The amount it would cost to completely replace her home **Insurance companies reimburse based on a property's replacement cost, or what it would cost to recreate that property if it had to be completely rebuilt. A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. What is the total amount of interest the borrower will pay over the course of the loan?
- $117,687.
- $250,000.
- $367,687.
- $735,375.60 -------CORRECT ANSWER---------------$117,687.
The state's claim to property when a property owner dies, leaving no will, heirs or creditors, is the power of ______.
- Condemnation
- Eminent domain
- Escheat
- Taking -------CORRECT ANSWER---------------Escheat **The power of escheat allows the state to claim property when the deceased has no heirs or creditors. Ann Marie is a tenant with a triple net lease. Per her lease, she pays for which of the following expenses related to the property?
- Insurance, utilities, maintenance
- Maintenance, insurance, debt service
- Taxes, debt service, lease payment
- Taxes, maintenance, insurance -------CORRECT ANSWER---------------Taxes, maintenance, insurance **When you hear the term "triple net," think of three. There are three letters in the acronym TIM, which stands for taxes, insurance, maintenance. Which of these statements about the homeowner's rights of redemption is true?
- Homeowner right of redemption applies to foreclosures, short sales, and REOs.
- Only foreclosures are subject to homeowner's redemption rights.
- Right of redemption timelines are longer for foreclosures than they are for short sales.
- Rights of redemption with REOs may be less of a problem than with other distressed properties -------CORRECT ANSWER---------------Rights of redemption with REOs may be less of a problem than with other distressed properties **Because of the length of time it takes to process a property after the foreclosure sale, the homeowner's redemption period may have expired before the lender puts the REO on the market. What is done to a landfill that is put out of commission?
- It is capped.
- It is converted to a special purpose landfill.
- It is no longer tested.
- Ventilation pipes are removed. -------CORRECT ANSWER---------------It is capped **When a landfill is put out of commission, it is capped. Clint is interested in making an offer on a house with hardwood floors that will need to be replaced. The hallway is 18' x 6'. The kitchen is 20' x 30'. The living room is 25' x 45'. Two bedrooms are 12' x 16', and the master bedroom is 14' x 20'. If the cost of the flooring is $5.48 per square foot, and the cost of installation is $1.49 per square foot, how much can Clint plan to spend to replace the floors?
- $13,683.
- $16,065.
- $16,309.
- $17,404.09 -------CORRECT ANSWER---------------$17,404. **First, find the area of each room and add them together to get the total square footage. 108 + 600 + 1125 + 192 + 192 + 280 = 2,497 square feet. The total cost of the flooring per sq. ft. is $5.48 + $1.49 = $6.97. 2,497 x $6.97 = $17, 404.09. In general, a person in a position of loyalty and trust is a(n) ______.
- Attorney-in-fact
- Client
- Fiduciary
- Mortgage lender -------CORRECT ANSWER---------------Fiduciary **A fiduciary is someone has been placed in a position of loyalty and trust. A real estate licensee who's working with a client is a fiduciary; mortgage lenders and attorneys-in- fact are also fiduciaries. The Perfect Home brokerage firm was found guilty of running deceptive ads. The Federal Trade Commission might require all of the following EXCEPT ______.
- Letters of apology to all affected consumers
- New ads to correct previous misinformation
- Notification to consumers about deceptive ad claims
- Specific disclosures to consumers -------CORRECT ANSWER---------------Letters of apology to all affected consumers
Jerry and Lewis have entered into a sales contract. They're about three weeks into the transaction, with several terms of the agreement yet to be met. What type of contract do Jerry and Lewis have?
- Executed
- Executory
- Option
- Unilateral -------CORRECT ANSWER---------------Executory **A valid contract that is in progress is an executory contract, which means that one or more terms of the agreement remain undone. A buyer anticipates a house payment of $1,000 per month, with monthly homeowner association fees of $150. The buyer also has a car payment of $400 per month. If the buyer earns a monthly gross income of $5,000, what's the housing ratio?
- 20%
- 23%
- 28%
- 31% -------CORRECT ANSWER---------------23% **The housing ratio is 23%: ($1,000 + $150) / $5,000 = .23 x 100 = 23%. Which entity services rural development loans?
- FNMA
- FSA
- GNMA
- HUD -------CORRECT ANSWER---------------FSA **The Farm Service Agency, an agency of the USDA, administers this program. Belinda is a licensee whose client asked her to draft an addendum containing complicated terms that even Belinda doesn't fully understand. Belinda should ______.
- Avoid unauthorized practice of law
- Hire an attorney
- Refuse to work with this client
- Use legalese -------CORRECT ANSWER---------------Avoid unauthorized practice of law **Licensees must avoid unauthorized practice of law. Drafting contractual paperwork with uncertain terms would be a violation.
A landlord with a strict "no pets" policy won't rent to a woman who uses a service animal to assist with her epilepsy. Which of the following is a true statement about this situation?
- This is discrimination based on disability.
- This is discrimination based on familial status.
- This isn't discriminatory because service animals are restricted to the vision-impaired.
- This isn't discriminatory if the "no pets" policy is universally applied. -------CORRECT ANSWER---------------This is discrimination based on disability. **Service animals assisting any disabled individual must be allowed in any housing or residential situation. They're not classified as pets, so even if there's a "no pets" policy, it wouldn't apply. Which statement most accurately describes the type of notice provided by recording a change of ownership document?
- Recording the deed provides actual notice of the property sale.
- Recording the deed provides constructive notice of the property sale.
- Recording the new owner's title policy serves as constructive notice of the sale.
- Recording the promissory note provides constructive notice of the property sale. ------- CORRECT ANSWER---------------Recording the deed provides constructive notice of the property sale. **Recording a document provides constructive notice; recording the deed provides constructive notice of property ownership. Bo's real estate ad states: "Custom homes for sale with scenic mountain views. Easy financing and low down payments." What else must be included in the ad in order for it to comply with TILA?
- A full disclosure, including the APR and other loan terms
- Nothing
- The number of payments and APR
- The specific down payment amount and APR -------CORRECT ANSWER--------------- Nothing **Under TILA, ads that mention general financing terms, such as "low down payment" or "easy financing," do not require additional disclosure. If Bo had gotten more specific (e.g., "10-year loan with 0% down") he would need to include more information.
