PSI Questions
What are the 3 steps to the Cost Approach?
1. Eliminating the cost of improvement replacement 2. Estimate and deduct accrued depreciation 3. Add lot value to depreciated value of property
2
A borrower has defaulted on the mortgage. The mortgage contains an acceleration clause. This permits the lender to 1. confiscate the borrower's personal assets. 2. demand immediate payment of the entire note. 3. report the borrower to the Federal Housing Administration. 4. force the borrower to vacate the premises.
2
A broker has brought a ready, willing, and able buyer to a seller. In MOST listing contracts, the broker has earned his commission when 1. any offer is delivered to the seller. 2. the seller accepts the offer. 3. all contingencies are removed. 4. the sale closes.
3
A broker lists a property, with a listing contract allowing subagency and dual agency. One of the broker's salespersons shows the property. The salesperson would be classified as 1. a general agent. 2. a dual agent. 3. a sub-agent of the seller. 4. an agent of the seller.
3
A broker says, while showing a rural property, "This property has the world's purest well water." This would be an example of 1. a verbal water quality report. 2. an assurance that the property is not on the public water system. 3. an expression of opinion, or puffing, which could lead to misrepresentation. 4. a licensee's disclosure of the qualities of the property.
1
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? 1. Agency coupled with an interest. 2. Specific agency. 3. General agency. 4. Exclusive agency.
1
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 1. tell the seller that the buyer will pay more. 2. not disclose that the buyer will pay more to ensure fair treatment of all parties. 3. try to negotiate a fair compromise between what the seller is asking and what the buyer is offering. 4. encourage the seller to delay accepting the offer.
3
A buyer wants to purchase a home for $60,000 with a 15% down payment. The lender charges 2 points. How much money does the buyer need up front to make the purchase? 1. $1,020. 2. $9,510. 3. $10,020. 4. None of the above.
2
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 31st. This is called 1. a buy-sell agreement. 2. an option contract. 3. an installment contract. 4. a vendor's lien interest.
Principle of Competition
A convenience store in a neighborhood is extremely profitable, its success is very likely to bring a competing convenience store into the area. This competition will probably mean lower profits for the first store (as some of its customers begin doing business with the second store), and lower profits will reduce the property's value.
1
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 1. an exclusive agency listing. 2. an exclusive right to sell listing. 3. a net listing. 4. an advance fee listing.
4
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? 1. 30 days. 2. 60 days. 3. 90 days. 4. No notice is required.
2 **deed restriction runs with the land, so to speak**
A deed restriction is applicable to the activities of 1. the current owner only. 2. present and future owners. 3. future owners only. 4. mortgagors.
3
A formal appraisal will ALWAYS be REQUIRED when the 1. seller wants to be sure of the home's value. 2. buyer wants to obtain private mortgage insurance. 3. lender wants to sell the mortgage to the secondary market. 4. agent cannot locate enough comparables to complete a CMA.
1
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 cent, what is the difference between the monthly payments for these two loans? (BE SURE TO USE THE AMORTIZATION TABLE.) 1. $267.40. 2. $341.60. 3. $355.60. 4. None of the above.
3
A judgment has been properly recorded. Any subsequent purchasers, whether they have actually examined the record or not, have been given 1. actual notice. 2. prescriptive notice. 3. constructive notice. 4. exculpatory notice.
3
A lawsuit for inverse condemnation may be brought by 1. the police. 2. the city. 3. a homeowner. 4. the zoning board.
1
A major reason for buying and owning a condominium rather than a detached single-family home is that 1. a condominium tends to be more affordable. 2. a condominium requires no maintenance. 3. a condominium is easier to resell. 4. condominium ownership has more tax advantages.
2
A managing broker can be held responsible for 1. all actions of associated salespersons. 2. all real estate activities of salespersons. 3. only those real estate activities the broker is aware of. 4. no activities of independent contractors.
Straight Line Method
A method of computing depreciation and amortization by dividing the difference between the assets costs and its expected salvage value
2
A prospective buyer made an offer to purchase a 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 1. it satisfies or exceeds all terms included in the counteroffer. 2. the owner withdraws the counteroffer before it is accepted. 3. the owner gives the first buyer notice that another offer was received and an opportunity to revise the bid. 4. the first buyer is informed, in writing, of the owner's intent to accept another offer.
3
A prospective seller asks a salesperson to recommend a listing price for a property. The salesperson should suggest 1. listing the property at the price the owner believes it is worth. 2. listing the property at least 30% above the current mortgage. 3. a competitive market analysis to determine the property's value. 4. setting the price at the value of the most recent sale in the neighborhood.
2
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 1. tell the seller not to disclose, because the statute of limitations has run out. 2. tell the seller to disclose the termite treatment on the property disclosure. 3. talk to neighbors to see if there are termites in the neighborhood. 4. talk to the planning and zoning department for local termite eradication ordinance.
Cost Approach to Value
A sub-category in the Principle of Substitution. The approach involves estimating how much it would cost to replace the property's existing buildings and then adding the estimated value of the site on which they rest. This method involves calculating estimates for buildings and land separately, and then adding those two estimates together.
4
A will has been drawn up leaving the family homestead to the owners' granddaughter. Once that has been done, the owners may 1. not sell the property to anyone else. 2. sell the property only with their granddaugther's agreement. 3. change other aspects of the will but not the provision relating to real estate. 4. make any changes they wish through a codicil or a later will.
3
A written agreement in which a purchaser agrees to buy and a seller agrees to sell is called 1. an agency. 2. an assessment. 3. a contract. 4. a fiduciary obligation.
4
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 1. cash price or amount of the loan. 2. amount of down payment required. 3. number, amount, and frequency of payments. 4. prepayment penalties and rebates.
3
All of the following are characteristics that an appraiser needs to determine an accurate sales comparison for a residential property EXCEPT? 1. property should be in same neighborhood 2. property should have similar characteristics to the comparables 3. conditions of the sale of said property are not important when calculating comparables 4. Sale price of the property, when compared to comparables
4
All of the following are methods to calculate the reproduction or replacement cost of a building EXCEPT the 1. quantity survey method. 2. unit-in-place method. 3. square foot method. 4. straight-line method.
4
An adjustable rate loan should include all of the following elements EXCEPT 1. margin. 2. life-of-the-loan cap. 3. index. 4. negative amortization.
2
An agreement to purchase that has NOT yet closed is 1. an executed agreement. 2. an executory contract. 3. a unilateral contract. 4. voidable.
2
An appraiser MUST be licensed or certified to handle Federally related work on residential property valued at more than 1. $100,000. 2. $250,000. 3. $500,000. 4. $1,000,000.
4
An easement can be terminated by 1. a license. 2. prescription. 3. an express grant. 4. merger of titles.
1
An environmental impact statement typically describes the effects of a proposed project on factors such as 1. public health and safety. 2. zoning regulations. 3. highest and best use of the land. 4. mapping requirements.
3
An example of a fiduciary relationship is one which exists between the listing broker and 1. a prospective buyer. 2. anyone he talks to about real estate. 3. her client. 4. her customer.
4
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? 1. $105,090. 2. $110,753. 3. $120,910. 4. None of the above. ***Solution: Step 1: $45,000 + $68,000 = $113,000 Step 2: 100% - 7% = 93% Step 3: $113,000/ 93% = $121,505.38 (selling price)
4
Antitrust laws prohibit competing brokers from all of the following EXCEPT 1. boycotting other brokers in the marketplace. 2. dividing the market to restrict competition. 3. agreeing to set sales commissions and management rates. 4. receiving compensation from both the buyer and the seller.
Which type(s) of property would an appraiser use with an Income Approach Method?
Apartment Complex
4
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? 1. Credit seller $300; credit buyer $300. 2. Debit seller $300; debit buyer $300. 3. Credit seller $300; debit buyer $300. 4. Debit seller $300; credit buyer $300.
2
At the time of harvest, crops that require annual planting are generally considered to be 1. improvements. 2. personal property. 3. real property. 4. appurtenances.
3
At the time of listing, the seller tells the listing agent they are moving because the neighbor has loud parties every weekend. The agent should 1. suggest talking to the neighbor about being quiet. 2. schedule only daytime showings. 3. tell potential buyers about the parties. 4. do not tell anyone about the parties.
Which type(s) of appraisal methods are used when valuating Churches, libraries and public buildings?
Cost Approach Method
1
Depreciation is calculated based on the 1. cost of the building only. 2. value of the land only. 3. total purchase price. 4. assessed valuation.
3
During the listing presentation, the seller questions the amount of commission to be paid and is told 1. the amount is set by law. 2. everyone charges the same amount. 3. the amount of commission is negotiable. 4. the agent that charges a lower commission will not do as good a job selling the property
1
Earnest money should be deposited into a trust account 1. in a timely manner, according to state laws. 2. upon removal of all contingencies. 3. at the broker's discretion. 4. according to MLS rules.
An agent shows a home to a couple and mentions it has a lovely fireplace in the living room. After buying the home, the buyers and agent discover that the "brick fireplace" is nothing more than a decorative fireplace and is not wood burning. What would protect the agent in this situation?
Errors and Omissions Coverage
3
Failure of a real estate agent to comply with Fair Housing practices is punishable by 1. license revocation only. 2. criminal prosecution only. 3. license revocation and criminal prosecution. 4. probation.
4
If conditions for purchase are included in a deed and these conditions are violated, what is the penalty? 1. A court order enforcing compliance. 2. Penalty charges. 3. An injunction against further use of the property. 4. Return of the property to the original owner.
4
In every real estate transaction, a legal description of the real estate MUST appear in the transaction documents. What kind of legal description should be used in MOST transactions? 1. The lot-and-block numbers that appear in the recorded plat. 2. A metes-and-bounds description, verified by a surveyor. 3. A combination of at least two methods for greater accuracy. 4. The same one used in prior transfers of the parcel, verified by a surveyor.
3
In helping a buyer to select a lender, if the buyer believes he has good credit and his income is documentable as a salary and by tax returns, the licensee might recommend a mortgage banker, instead of a mortgage broker, for all of the following reasons EXCEPT 1. closing costs may be lower. 2. loan originator has knowledge of the underwriter's policies. 3. more variety of loan programs available. 4. originator and lender are part of same company.
Which types of properties lend themselves to the Sales Comparison Method?
Older Residential Properties Vacant Land
4
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. 1. $285. 2. $380. 3. $760. 4. None of the above.
Principle of Increasing/ Decreasing Returns
One of the sub-principles of Contribution. Adding things to a remodel that won't increase the resale value of a property, due to it's location.
3
Ownership of common stock in a corporation gives 1. co-ownership in any real property held by that corporation. 2. the right to order the sale of any corporate real estate. 3. an interest that is classified as personal property. 4. assurance that a decline in land values will not affect the value of the stock.
4
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? 1. The contract on the first house is not enforceable. 2. Neither contract is enforceable. 3. Only the first contract is valid. 4. Both contracts are valid.
2
Regulation Z addresses all of the following issues EXCEPT 1. the disclosure of cost of credit. 2. usury. 3. advertising. 4. the buyer's right of rescission.
1
State laws differ on whether a buyer is entitled to know about 1. a suicide that occurred in the house last year. 2. possible lead paint in the property. 3. the flooding of the basement every spring. 4. the fact that the sellers are getting a divorce.
4
Tenants are still in their rental property even though their lease has expired. The landlord has given them written notice to quit and refused to accept rent. They are 1. periodic tenants. 2. tenants by reversion. 3. tenants in common. 4. tenants at sufferance.
2
The Civil Rights Act of 1866 prohibits any type of discrimination based on 1. gender. 2. race. 3. race and gender. 4. religion.
4
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, 1. will no longer lend or guarantee loans on these older properties. 2. require evidence of testing for and disclosure of any type of lead contamination before they will lend or guarantee loans on such properties. 3. require funds to be escrowed for lead abatement as a condition of lending or guaranteeing loans on such properties. 4. require the buyer to acknowledge disclosure of the presence of any known lead paint.
4
The FHA functions MOST like 1. a bank or savings and loan association. 2. a mortgage company. 3. an investment group. 4. an insurance company.
2
The PRIMARY purpose of zoning ordinances is to 1. control the quality of building materials. 2. implement a local master plan. 3. establish appropriate boards for appeal. 4. regulate business districts.
1
The Sales Comparison Method is the best method for appraising residential property and involves using comparables. 1. True 2. False
1
The Sales Comparison Method is the most reliable method for appraising raw land 1. True 2. False
1
The buyer is assuming a mortgage presently on the property in the amount of $110,000. What is the adjustment made at closing? 1. Credit buyer $110,000; debit seller $110,000. 2. Credit seller $110,000; debit buyer $110,000. 3. Credit buyer $110,000; no adjustment to seller. 4. Credit seller $110,000; no adjustment to buyer.
2
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 1. include the provision for the mortgage as the buyer requests. 2. suggest the buyer ask a lawyer to furnish the wording. 3. consult the supervising broker for advice. 4. refer the matter to the seller's agent.
1
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 1. he is no longer the listing agent. 2. he will set up an appointment for showing the home. 3. he will leave the key under the door mat. 4. the house is currently off the market.
1
The economic characteristics of land are 1. scarcity, location, and durability. 2. immovability, indestructibility, and uniqueness. 3. latitude and longitude. 4. wooded, barren, and water bearing.
3
The escrow officer or closing agent MUST give information regarding the sales price and seller's social security number to 1. HUD. 2. FIRPTA. 3. IRS. 4. OSS.
3
The gross rent multiplier for a single-family home is calculated by dividing the sales price of the property by 1. the cost per square foot. 2. its gross annual rent. 3. its gross monthly rent. 4. expected rate of return.
Plottage Value
The increment of value that results when two or more lots are combined to produce greater value
Principle of Conformity
The maximum value of land is achieved when there is an acceptable degree of social and economic conformity in the area. Conformity should be reasonable, not carried to an extreme
3
The purpose of laws that provide for property to escheat to the state or county when a landowner dies with no will and no heirs is to 1. save the cost of a judicial claims process. 2. provide an additional source of revenues to the state or county. 3. prevent property from being ownerless. 4. increase the amount of land available for public use.
3
The purpose of requiring an earnest money deposit in a real estate sales contract is to 1. ensure that the broker will receive some compensation if either party defaults. 2. ensure that the seller will not be bothered by offers from buyers who are unable to qualify for appropriate financing. 3. provide evidence of the buyer's intention to carry out the contract. 4. set aside funds to cover the buyer's closing costs and mortgage insurance premiums.
1
The purpose of usury laws is to regulate 1. interest rates charged by lenders. 2. loan origination fees charged by lenders. 3. loan prepayment penalties. 4. lender collusion to fix interest rates.
2
The real estate broker who is listing a house for sale should personally verify 1. whether radon is present in the basement. 2. the number of square feet in the building. 3. that the electrical wiring is up to code. 4. how much the seller originally paid for the property.
2
The real estate contract for a specific property for use as an unlicensed whiskey sales operation was forced to terminate. The termination was the result of 1. operation of law. 2. impossibility of performance. 3. novation. 4. breach of contract.
1
The sellers have agreed to give the buyer a carpet allowance to replace the family room carpet. They will allow $19.95 per square yard for carpet plus $5 per square yard for pad and installation. If the family room is 22'6"x 15', how much will it cost the sellers (to the nearest cent)? 1. $935.63. 2. $939.78. 3. $966.81. 4. None of the above. 22.5 x 15 = 337.5 337.5/9 = 37.5 $19.95 + $5.00 = $24.95 37.5 x $24.95 = $935.63
3
The terms "littoral," "riparian," and "appropriative" refer to 1. land accretion. 2. mineral rights. 3. water rights. 4. appurtenances.
1
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? 1. The first sold. 2. The second sold. 3. The last sold. 4. Cannot tell from the information given.
1
Too much leverage may result in 1. negative cash flow. 2. decreased buying power. 3. lack of liquidity. 4. accelerated depreciation.
1
Under a land contract for deed, who retains fee ownership of the property? 1. Vendor 2. Vendee 3. Grantor 4. Grantee
Principle of Supply & Demand
Values tend to rise as demand increases and supply decreases, and diminish when the reverse is true. ** Sort of like the adage, you can't always get what you want***
2
When a principal authorizes an agent to perform a particular act or transaction, it is an example of a 1. universal agency. 2. special agency. 3. general agency. 4. common agency.
1
When a property owner uses his home as collateral for a loan and creates a lien in favor of the lender, title is held by the 1. mortgagor. 2. lender. 3. mortgagee. 4. beneficiary.
4
When land is conveyed to a trustee, the trustee may 1. divert any profits to other ventures. 2. arbitrarily dispose of the real estate. 3. pledge the property as security for a personal loan. 4. do whatever is permitted under the trust agreement.
1
When one of the parties to an agreement fails to perform one of its conditions, that contract is deemed to be 1. breached. 2. void. 3. executed. 4. canceled.
2
Which is true of BOTH special assessments and ad valorem taxes? 1. Apportionment is based on benefit received. 2. Delinquent payment is grounds for sale of the property. 3. The general public must benefit from the projects funded by the monies. 4. A public hearing is required before a project funded by the monies can be initiated.
2
Which of the following approaches MOST reliably estimates the sales price of a single-family residence? 1. Appreciation. 2. Market data. 3. Cost. 4. Mortgage value.
2
Which of the following events would AUTOMATICALLY cancel a listing agreement? 1. Property owner's marriage. 2. Property owner's death. 3. Salesperson's relocation to another agency. 4. Salesperson's retirement.
3
Which of the following is the first action to take when mold problems are found? 1. Spray the affected areas with bleach. 2. Repaint with waterproofing material. 3. Identify and remedy the cause of the problems. 4. Notify the Environmental Protection Agency promptly.
2
Which of the following may be considered prima facia evidence of discrimination by a broker? 1. Failure to show property in certain neighborhoods. 2. Failure to display the equal housing opportunity poster at the broker's place of business. 3. Failure to keep appointments with minority customers even though the broker was unaware of the minority status. 4. Failure of a minority buyer to qualify for a loan arranged by the broker.
1
Which of the following statements about discount points is FALSE? 1. They are computed as a percentage of the selling price. 2. They are used to buy down interest rate. 3. They are a function of the marketplace. 4. They are paid by either the buyer or the seller.
1
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 1. the agreement does not comply with the Statute of Frauds. 2. oral agreements are never enforceable in court. 3. it is not assignable by novation between the parties. 4. the oral agreement does not include the agent.
Principle of Anticipation
income is expected to be received in the future, based on the addition of new properties in the area.
Principle of Balance
maintains that the maximum value of real estate is achieved when the agents of production—labor, coordination, capital, and land—are in proper balance with each other
Principle of Substitution
no one will pay more for a property than they would have to pay for an equally desirable substitute property . (This is the principle of substitution: if the asking price for a home is more than it would cost to build a new one just like it, no one will buy it.)
Principle of Change
real estate values are constantly in flux, moving up and down in response to changes in the various social, economic, governmental, and environmental forces that affect value.
Quantity Survey Method
the method of estimating building costs by: 1. calculating of all of the physical components in the improvements 2. adding the cost to assemble them 3. including the indirect costs associated with the construction
Principle of Contribution
the value an improvement adds to the overall value of the property