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PSI PA REAL ESTATE EXAM
QUESTIONS AND ANSWERS (100% PASS)
"An environmental impact statement (IES) - CORRECT ANSWER projects the impact on
environment or proposed project"
"The FHA functions MOST like? - CORRECT ANSWER an insurance company"
"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 - CORRECT ANSWER prepayment penalties and
rebates"
"State laws differ on whether a buyer is entitled to know about? - CORRECT ANSWER a suicide
that occurred in the house last year" "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? - CORRECT ANSWER Disclose the agency relationship when arranging the
showing and disclose material information about the buyer if presenting an offer." "A prospective buyer made an offer to purchase property. The owner responded with a counteroffer. While the buyer was reviewing the counteroffer, the owner received a better offer.
The owner can accept the second offer if? - CORRECT ANSWER the owner withdraws the
counteroffer before it is accepted." "A salesperson in a branch office is sued for damages by a buyer after the salesperson
misrepresents a property. Who has the ultimate responsibility for the salesperson's actions? -
CORRECT ANSWER the supervising broker"
"During the listing presentation, the seller questions the amount of commission to be paid and is
told? - CORRECT ANSWER the amount of commission is negotiable"
"Failure of a real estate agent to comply with Fair Housing practices is punishable by? -
CORRECT ANSWER license revocation and criminal prosecution"
"Which rule-of-thumb formula for estimating property value 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
Gross Net Multiplier (GRM)" "Three identical homes in a neighborhood were listed at the same time in a market where demand was constant. According to the law of supply and demand, which would have sold for the
lowest price? - CORRECT ANSWER The first sold"
"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? - CORRECT ANSWER an exclusive agency listing"
"For Federal income tax purposes, which of the following are costs of homeownership that may
be deducted from gross income? - CORRECT ANSWER Mortgage loan interest, local property
taxes, mortgage loan origination fees"
"What are the reasons lenders include taxes along with principal and interest? - CORRECT
ANSWER because they don't want a tax lien to come about and prolong them from getting their
money"
"Who determines of the commission in a listing contract? - CORRECT ANSWER it is negotiated
between the seller and the salesperson"
"What evaluation does a property manager make on a prospective tenant? - CORRECT
ANSWER ability to pay rent and on time"
"Define the term brokerage - CORRECT ANSWER the business practice of bringing together
the parties in a transaction"
"define functional obsolescence? - CORRECT ANSWER components of a building that are out
of date with contemporary construction standards"
“Severance - CORRECT ANSWER the performance of turning real property into personal
property" "A tenant rented an apartment signing a 15 month lease. After the lease expired, the tenant paid
1 month's rent and got a receipt. What kind of leasehold does this tenant have? - CORRECT
ANSWER Tenancy at will"
"A salesperson lists a property with a contract that allows for subagency and dual agency. The
salesperson is? - CORRECT ANSWER an agent to the broker and a subagent to the principal"
"A realty firm has just entered into an agreement to represent a home builder in the sale of a new subdivision. The firm has located several potential buyers and five homes have been sold to purchasers that the firm's agents have contacted. The realty firm has an agency relationship with
- CORRECT ANSWER the builder" "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" "Under the common law of agency, licensees owe the broker with whom they are associated all
of the following duties EXCEPT? - CORRECT ANSWER indemnification"
"To what party or parties does the broker owe the fiduciary duty of care? - CORRECT ANSWER
the party or parties employing the broker" "An agency relationship between a property owner and a property manager is usually created by?
- CORRECT ANSWER a management agreement" "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? - CORRECT ANSWER tell
the seller that the buyer will pay more" "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? - CORRECT
ANSWER If you feel it is in your best interest, please do so"
"What is the duration of a home warranty's coverage? - CORRECT ANSWER as disclosed in the
contract that offers the warranty"
"A seller's statement is a property disclosure document means? - CORRECT ANSWER the
owner is disclosing known latent defects"
"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? - CORRECT ANSWER require the buyer to acknowledge disclosure of the
presence of any known lead paint" "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? - CORRECT ANSWER tell the
seller to disclose the termite treatment on the property disclosure" "What critical aspect of the property inspection process MUST licensees convey to prospective
buyers? - CORRECT ANSWER Need for inspections to be completed within the time stated in
the contract" "If leased premises become unusable for the purpose state in the lease, the tenant may have the
right not abandon the premises. This action is called? - CORRECT ANSWER constructive
eviction"
"A written agreement in which a purchaser agrees to buying a seller agrees to sell is called? -
CORRECT ANSWER a contract"
"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"
"A contract has been drawn which obliges the sellers to convey title to their land to the buyers if
the buyers come up $22,000 on or before December 31st. This is called? - CORRECT ANSWER
an option contract" "In an exclusive right-to-sell listing, an owner lists the property for sale with how many brokers?
CORRECT ANSWER One"
"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.) - CORRECT ANSWER $176,100"
"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"
"Which restrictive covenant would be considered illegal? - CORRECT ANSWER a convenant
that restricts selected parcels within a defined subdivision"
"In MOST states, foreclosed property is sold through - CORRECT ANSWER public auction"
"Even with title insurance, the policyholder may still suffer losses arising from? - CORRECT
ANSWER land use change due to zoning ordinances"
"To be valid, every deed must? - CORRECT ANSWER be executed by the grantor."
"The buyer is assuming a mortgage presently on the property in the amount of $110,000. What is
the adjustment made at closing? - CORRECT ANSWER Credit buyer $110,00; debit seller
"A major difference between freehold and nonfreehold estates is that all freehold estates? -
CORRECT ANSWER are of indeterminable duration"
"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? - CORRECT ANSWER ile an action for partition against the third owner"
"A property is encumbered by a first mortgage of $60,000 and a second mortgage of $23,500. The property has just been sold at a foreclosure auction to a speculating investor for $88,000. Assume that all costs of the foreclosure sale are included in these balances. Which of the following
statements is FALSE regarding the distribution of funds? - CORRECT ANSWER The second
mortgagee receives nothing unless he forced the foreclosure auction"
"An environmental impact statement typically describes the effects of a proposed project on
factors such as - CORRECT ANSWER public health and safety"
"An escheat occurs when? - CORRECT ANSWER a property owner dies without heirs or a valid
will" "Which of these Federal laws regulates the advertisement of a lender's credit terms (rates,
payment, etc.)? - CORRECT ANSWER Regulation Z"
"An agency relationship between a property owner and a property manager is usually created by
- CORRECT ANSWER a management agreement"
"An exclusive right to sell listing obtained by a broker associate belongs to - CORRECT ANSWER
the employing broker only" "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? - CORRECT ANSWER The buyer
cannot legally compel Alex to sell"
"The Civil Rights Act of 1866 prohibits any type of discrimination based on - CORRECT ANSWER
race" "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 - CORRECT ANSWER misrepresentation"
"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, rounded? - CORRECT ANSWER $225.00"
"Can a sales person give legal advice? - CORRECT ANSWER No"
"PENNSYLVANIA RULE ON REAL ESTATE LICENSE INACTIVITY - CORRECT ANSWER 5 years, then
take another test"
"Define easement by prescription? - CORRECT ANSWER an easement obtained from the
prolonged use of real property"
"Setback requirements - CORRECT ANSWER zoning laws that control such aspects of
ownership"
"examples of police power - CORRECT ANSWER eminent domain, police, escheat"
"estate for years? - CORRECT ANSWER Estate for a fixed period of time"
"estate at sufferance - CORRECT ANSWER also known as holdover lease - tenant stays beyond
end of lease without approval of landlord"
"Define capital gain? - CORRECT ANSWER profit received from the sale of property"
"What has the greatest effect on real estate value? - CORRECT ANSWER demand"
"purchase money mortgage is a debit or a credit to whom? - CORRECT ANSWER debit to seller
credit to buyer"
"condemnation - CORRECT ANSWER the right to legally start"
"eminent domain - CORRECT ANSWER the right of government to take private property for
public use"
"bundle of rights - CORRECT ANSWER disposition, exclusion, enjoyment, possession, control"
"Net lease - CORRECT ANSWER the tenant pays allot some of the operating expenses in
addition to the rent"
"Riparian rights - CORRECT ANSWER stream, creak, river"
"eminent domain - CORRECT ANSWER government takes property for public use"
"what is the main advantage of a 25-35 year mortgage - CORRECT ANSWER increased
purchase power"
"littoral rights - CORRECT ANSWER lakes, seas, oceans"
"avulsion - CORRECT ANSWER the sudden removal soil by an act of nature"
"accretion - CORRECT ANSWER a gradual addition to land from natural causes"
"who pays the transfer tax - CORRECT ANSWER both the buyer and the seller"
"What is the main difference between tendency in common and joint tendency is that with
tendency in common, when a co-owner dies? - CORRECT ANSWER the undivided interest
passes to his heirs" "Although states make specific laws governing water rights and the rights in land that borders water, most states generally follow one of two basic doctrines regarding water rights. Either riparian and littoral rights are automatically conveyed with property, or all water rights are
controlled by the state under the doctrine of? - CORRECT ANSWER prior appropriation"
"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? - CORRECT ANSWER a
mechanic's lien" "A land owner wishes to build a neighborhood grocery store on a busy street in an area zoned for
residential use. What would most likely be used to obtain permission for this store? - CORRECT
ANSWER Conditional use permit or zoning variance"
"When preparing a market data estimate of value, what category of adjustment is NOT essential?
- CORRECT ANSWER the original cost of the building"
"A broker has signed a listing contract for the sale of a home. Which of the following could make
this contract voidable? - CORRECT ANSWER The seller is heavily under the influence of alcohol
at the time of signing" "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" "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? -
CORRECT ANSWER advise her friends this could constitute a violation of Sherman Antitrust
Act." "An owner lists her home at a 7% commission rate and wants to net $45,000 after paying the mortgage balance of $68,000 and the broker's commission. To the nearest dollar, what should
the selling price be to net her $45,000? - CORRECT ANSWER $121,505"
"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? - CORRECT
ANSWER $26,720"
"A property management plan may serve different purposes for different owners, and generally has to strike a balance between preservation of the property's value and generation of income. Which of the following owners would MOST likely prefer a property manager who emphasizes
cash flow or income over the maintenance of value? - CORRECT ANSWER an individual
entrepreneur who ones serval apartment buildings" "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? - CORRECT ANSWER most
homes are larger than the sale home" "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 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? - CORRECT ANSWER Disclose the agency relationship when arranging the
showing and disclose material information about the buyer if presenting an offer"
