Psi training exam
Jake is preparing a Comparative Market Analysis on a 5-year-old vacant two-story, 10,000-square foot office building on a one-acre property. Jake knows that a vacant lot next door of about the same size just sold for $100,000. He also knows that market value for comparable office space today would be $100 per square foot. The owner agrees with Jake that his building has experienced a yearly 3% depreciation of its value. What should Jake recommend as a selling price?
$850,000
A landowner wishes to build a neighborhood grocery store on a busy street in an area zoned for residential use. Which would MOST likely be used to obtain permission for this store?
Conditional use permit or zoning variance.
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?
Counteroffer.
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?
Debit seller $300; credit buyer $300.
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?
Disclose the agency relationship when arranging the showing and disclose material information about the buyer if presenting an offer.
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?
Exclusive agency listing.
A lender will make an 80% loan-to-value loan on a property that is appraised for $72,250 and sells for $73,500. If the buyer has saved $14,450 for a down payment, how much more (if any) will he need in order to make the down payment required under the terms of this loan?
He needs an additional $1,250 in order to make the down payment.
A manufacturer under contract with a broker is seeking a 30,000-square-foot building to house his factory. The broker is showing him one that has only been used as a junk warehouse for the past fifty years. As they look around, near the ceiling they see old brown metal drums seemingly wired into the electrical system. How should the broker proceed?
He should inform the client of the possibility that hazardous chemicals are present and recommend a baseline environmental assessment of the property as a contingency of the purchase.
A broker is developing a checklist to be used by licensees during the time period between writing a contract and closing. Which of the following items should be included in the "Property Inspections" section?
A place to list repairs, who will pay, and when repairs are to be completed.
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?
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?
$1,150
An appraiser MUST be licensed or certified to handle Federally related work on residential property valued at more than
$250,000.
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.
$288
A buyer wants to purchase a home for $60,000. The lender appraises the home for $58,000 and offers to finance it with an 80% loan-to-value loan, charging a loan origination fee of 1.5 points. How much will the buyer's loan origination fee be?
$696.
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.
$800
While touring a new listing a broker detects a very pronounced moldy odor. Upon inspection, the broker finds that all closets located on a particular wall in the vacant residence are extremely moldy. The mold growths are heavy, multi-colored and cover the lower back walls and part of the side walls and flooring of the closets, and the other associates on the tour are experiencing sneezing and watering eyes. The broker has already accepted the listing. What immediate action should the broker take regarding the listing status?
Inform the sellers in writing that there is a possible health hazard that should be inspected and, if necessary remediated, and the listing will be removed from the active list until such action is taken.
A couple are moving to a new city. They have decided to rent temporarily before buying a house to see which part of the city they would like to live in. What type of lease would BEST suit the couple's needs?
Month-to-month lease.
For Federal income tax purposes, which of the following are costs of homeownership that may be deducted from gross income?
Mortgage loan interest, local property taxes, mortgage loan origination fees.
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?
No, because it is appropriate to show any property for which the buyer is qualified.
Which of the following events would AUTOMATICALLY cancel a listing agreement?
Property owner's death.
Which Federal law regulates the advertisement of a lender's credit terms (rates, payment, etc.)?
Regulation Z.
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?
Return them to the purchasers.
Refer to the scenario below. You are hosting an open house. Mr. and Mrs. Charles Martin come into the house. You greet them and show them the house. The Martins tell you the house is exactly what they are looking for and they are very interested in purchasing it. You then give them information showing the various types of financing available with down payment options and projected payments. Mr. Martin tells you they have been working with Mary Hempstead of XX Realty, a competing real estate company. Before leaving, you thank them for coming and give them your business card.The first thing on Monday morning, Mrs. Martin calls and indicates they have tried to reach Mary and cannot. They indicate they have a written buyer's agent agreement with Mary's broker. They are afraid someone else is going to buy the house. Which of the following should you do?Select the best answer.
Tell them to call Mary's supervising broker or branch manager.
A current loan balance is $118,000 on a 30-year loan at 7% interest, with a monthly payment of $831.63 for principal and interest. How much of the next payment will apply to principal reduction?
The answer is $143.30. $118,000 × 0.07 = $8,260 interest per year. $8,260 ÷ 12 = $688.33 interest per month. $831.63 monthly payment - $688.33 interest = $143.30 applied to principal.
All of the following are true for buyers using an FHA or VA loan EXCEPT
The answer is FHA will allow a 100% loan-to-value ratio while VA will only allow 97%. The opposite is true; VA loans allow for a 100% loan-to-value ratio, while FHA does not. Both loans typically have a higher loan-to-value ratio than conventional loans and must have an appraisal when originated. In addition, these loans may not have prepayment penalties.
A municipality has authorized the improvement of a particular property in a manner NOT authorized by the zoning ordinance. This is an example of
The answer is a conditional use. Regulators may allow a use that does not strictly comply with zoning regulations. Also called a special use, the use will be allowed as long as certain conditions are adhered to. An example would be a day care.
Real estate is bought and sold on the basis of
The answer is a legal description. Real estate is described by accepted legal descriptions. Plat size and plat and parcel are examples of informal references.
An offer, contract, and deed have which of the following in common?
The answer is a legal description. The offer, contract, and deed must have a legal description in order to identify the property. A street address may or may not be included. The deed has words of conveyance and the offer and contract have a lawful objective.
Discount points are best defined as
The answer is a method a lender can use to increase yield when offering a lower rate. A point is collected up front and is 1% of the loan amount. 3.5 points would be 3.5% of the loan amount. The loan origination fee is the mortgage loan originator's commission.
A borrower wants to obtain a loan that will allow regular payments of principal and interest for five years, with a final balloon payment to pay off the remaining principal balance. This type of loan is called
The answer is a partially amortized loan. A partially amortized loan allows the borrower to make principal and interest payments, with a final balloon payment at the end. A term loan has interest-only payments, a fully amortized loan has no balloon payment, and a reverse mortgage is when the lender pays the borrower.
In a legal description, the terms lot and block relate to
The answer is a recorded subdivision plat map. Lots and blocks are found in subdivisions. Once the developers plat map is approved, the plat is recorded, creating a legal description of each lot in the subdivision.
The clause that appears in both the promissory note and mortgage and allows the lender to call the balance due and payable in full upon default is known as the
The answer is acceleration clause. An acceleration clause allows the lender to call the entire loan due for several clauses including default.
The clause appearing in both the promissory note and the mortgage and that allows the lender to call the balance due and payable in full upon default is known as the
The answer is acceleration clause. An acceleration clause allows the lender to call the entire loan due for several reasons listed in the agreements, including default. The due-on-sale or alienation clause is specific to the sale of the property.
A lender will take certain factors into consideration when deciding whether to grant a borrower a mortgage loan. However, which of the following would be a violation of the Equal Credit Opportunity Act (ECOA)?
The answer is age of the borrower. ECOA prohibits lenders from discriminating against credit applicants on the basis of several factors, including age and marital status.
Appraisals are required for
The answer is all federally related loans. Federally related loans include all loans from federally regulated lenders, including conventional, insured conventional, FHA, and VA loans.
Which of the following BEST describes a capitalization rate?
The answer is annual rate of return an income property will produce. The capitalization rate is the relationship of the net annual income to value. Net annual income ÷ appraised value = capitalization rate. Value = net income ÷ capitalization rate. Using the income approach, the appraiser divides net income by a market-derived cap rate to estimate market value.
A recent zoning amendment has changed the area zoning from commercial to residential. All the commercial buildings within the area will now
The answer is be considered a grandfathered nonconforming use. Nonconforming use, also called grandfathering, allows the property to continue its present use. It usually includes restrictions on future use.
What is an instrument that creates a lien against multiple parcels of real property?
The answer is blanket mortgage. The blanket loan covers multiple properties and often contains a partial release clause to release the lien on one parcel when a certain amount has been paid.
A subordination agreement is used to
The answer is change the priority of mortgages. A subordination agreement is a written agreement between lienholders to change the priority of mortgage, judgment, and other liens.
To find the value of a property using the income approach to value when the net operating income and capitalization rate are known, the appraiser would
The answer is divide the net operating income by the capitalization rate. With the appropriate capitalization rate and the projected annual net operating income, the appraiser can obtain an estimate of value. Net operating income / capitalization rate = value.
Appraisers are responsible for
The answer is estimating value. Appraisers do not make or determine value. After they complete their analysis and consider all the data, they provide an estimate of value.
What is the BEST way for homeowners to determine the market value of their home?
The answer is get an appraisal. The key word here is best. The most accurate way to determine value is to have an appraisal. If that isn't an option, then a CMA is the most appropriate answer.
Increased residential rental rates could result from
The answer is increased mortgage interest rates. If interest rates increase, fewer people can afford to purchase houses. These people then compete in the rental market and increase the demand for rental units, which will increase rental rates.
When are title insurance premiums paid?
The answer is once when the policy is issued. Title insurance insures against past events and is purchased at the time of closing with a single premium paid at closing.
A lender providing a primary 90% LTV conventional loan on a home will probably require all of the following EXCEPT
The answer is private mortgage insurance for the first year only. Private mortgage insurance is required based on the LTV, not for a length of time. Once the LTV is below 80%, the borrower may request that it be removed.
A salesperson or appraiser trying to determine the market value of a property would be seeking the
The answer is probable price the property will bring. Market value is the value that would be paid in an arm's-length transaction between knowledgeable parties.
An appraiser would need to determine accrued depreciation when using
The answer is the cost approach. One of the five steps of the cost approach is to estimate the amount of accrued depreciation (loss in value) resulting from the property's physical deterioration, external depreciation, and functional obsolescence.
The essential elements of value are
The answer is transferability, demand, scarcity, and utility. Remember the memory aid DUST: demand, utility, scarcity, and transferability.
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?
The buyer finds a better property for better terms.
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?
The second mortgagee receives nothing unless he forced the foreclosure auction.
A broker has signed a listing contract for the sale of a home. Which of the following could make this contract voidable?
The seller is heavily under the influence of alcohol at the time of signing.
Refer to the scenario below. You are the supervising broker of a real estate company. On August 1, one of your licensees listed a house owned by an investor client. On August 10, a full-price offer was received from the buyer?s agent, a licensee with a cooperating real estate company, and accepted by the seller. The buyer?s agent indicated that the buyer is a transferee. The sale is to close on September 10, but on September 5, the buyer?s agent informs the seller?s agent that his client is not going to close and wants the earnest money refunded. Your firm is holding the earnest money. Which information is the most critical to be obtained?
Verifying if there is a clause in the purchase agreement regarding the disbursement of earnest money following default.
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
Void.
Refer to the scenario below. You are hosting an open house. Mr. and Mrs. Charles Martin come into the house. You greet them and show them the house. The Martins tell you the house is exactly what they are looking for and they are very interested in purchasing it. You then give them information showing the various types of financing available with down payment options and projected payments. Mr. Martin tells you they have been working with Mary Hempstead of XX Realty, a competing real estate company. Before leaving, you thank them for coming and give them your business card.The Martins come to your office and explain that neither Mary nor her supervising broker are available. They insist you immediately write an offer for the house. How should you proceed?Select the best answer.
Write the offer after trying to contact Mary's broker yourself.
A broker did NOT have a written independent contractor agreement with his salesperson. While showing homes to a family, the salesperson was involved in a car accident in which a child in her car was injured. Could the broker be held liable in this situation, and why?
Yes; the lack of an independent contractor agreement may classify the salesperson an employee and an employer may be held liable for the torts of an employee.
New sidewalks installed only on one particular street will probably be paid for by
a special assessment.
A broker is teaching newly hired salespersons the correct way to complete a listing agreement form. The broker is attempting to show the value of putting the correct property address on the listing. The BEST visual aid to help them learn how to do so accurately would be
a subdivision plat.
The FHA functions MOST like
an insurance company.
Which would generally be included in the Phase I assessment of a parcel where hazardous substances may have been disposed?
an on-site visual inspection
The real estate agency relationship is best described as the
broker's representing the principal.
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
commission sales.
A borrower has defaulted on the mortgage. The mortgage contains an acceleration clause. This permits the lender to
demand immediate payment of the entire note.
A property owner died, having willed his real property to his two daughters. There is still a chance that they could lose the land for a variety of reasons, but it CANNOT be taken through
escheat.
In an effort to improve his brokerage a broker decides to streamline his handling of escrow/deposit funds. This streamlining can BEST be achieved by
following state law but having as few individuals as possible handle the funds before they are deposited.
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
foreclosure is usually simpler and faster.
A landlord may legally refuse to rent to a prospective tenant if the tenant
has ever been convicted of selling illegal drugs.
When a listing broker is preparing an Offer to Purchase for a buyer customer, contingencies involving inspections or approval by a third party should
have short deadlines.
In the property condition disclosure form under "Asbestos", a broker reviewing an associated licensee's listing sees that the property owner reported that the asbestos siding on his building was not removed but was professionally encapsulated ten years ago. Documentation of this professionally applied process is attached. The broker should
have the listing agent verify the license of the firm that performed the encapsulation process.
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
he is no longer the listing agent.
Earnest money should be deposited into a trust account
in a timely manner, according to state laws.
Under the common law of agency, licensees owe the broker with whom they are associated all of the following duties EXCEPT
indemnification.
Even with title insurance, the policyholder may still suffer losses arising from
land use change due to zoning ordinances.
A formal appraisal will ALWAYS be REQUIRED when the
lender wants to sell the mortgage to the secondary market.
An easement can be terminated by
merger of titles.
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
more variety of loan programs available.
A gross lease can be best defined as one where the tenant pays, as a part of the rent,
no operating expenses of the leased space.
In MOST states, foreclosed property is sold through
public auction.
A broker learns that one of the licensees under his supervision, and the owners of a listed property, have worked out a scheme to withdraw a property from the market whenever a showing is requested by any buyer who seems to be from a foreign country. What is the most important action for the broker to take in this situation?
put the licensee on probation and require her to take a fair housing class.
Antitrust laws prohibit competing brokers from all of the following EXCEPT
receiving compensation from both the buyer and the seller.
Several salespersons have asked a broker for his permission to use a personal web site for real estate advertising of specific properties for sale. Before giving permission the broker should first
review the sites and all proposed advertising for compliance with state laws.
An example of a contract terminated due to inability to perform would be one in which the
seller had contracted for sale of the entire property without the knowledge or consent of the other joint tenant.
A competitive market analysis is MOST often used for
setting a listing price.
A competitive market analysis takes into consideration
square footage of the subject property.
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
steering.
A potential buyer is interested in the residential property of your client. The buyer earns a living by making crafts and selling them from home and caring for children in the late afternoons. In this situation, you should
suggest the buyer check the zoning ordinances.
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
tell the seller that the buyer will pay more.
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
tenants at sufferance.
A broker hires a salesperson as an independent contractor. In order for the salesperson to be considered an independent contractor for federal income tax purposes, the broker's written contract with the salesperson MUST specify
that the salesperson will not be treated as an employee for federal income tax purposes.
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
the agreement does not comply with the Statute of Frauds.
A seller signs a listing agreement with a broker. The seller can cancel the listing at any time without legal liability if
the broker violates the terms of the contract.
A distinguishing characteristic of owning property by land trust is that
the identity of the legal owner is kept confidential.
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
the owner withdraws the counteroffer before it is accepted.
To what party or parties does the broker owe the fiduciary duty of care?
the party or parties employing the broker
MOST closed real estate transactions should be reported to the IRS. REQUIRED information includes seller name(s) and social security number(s) and
the sale price.
A broker has brought a ready, willing, and able buyer to a seller. In MOST listing contracts, the broker has earned his commission when
the seller accepts the offer.
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?
the supervising broker
A contract for the sale of a home has been signed by both parties. This contract will remain executory until
the transaction has closed.
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
unilateral contract in which only Party A has made a promise to perform.
When a home is purchased using an ARM, the monthly loan payment on the mortgage will
vary over the life of the loan depending on fluctuations in the interest rate to which the loan is referenced.
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 prior appropriation. The doctrine of prior appropriation is MOST likely to be followed in states where
water is scarce.