PSI National Practice (2018)

Real property can be converted to personal property by ____.
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Terms in this set (76)
Real property can be converted to personal property by ____.
severance
A contract for the sale of a home has been signed by both parties. This contract will remain executory until

1. acceptance of the buyer's offer is delivered to the buyer.
2. the transaction has closed.
3. all contingencies have been met.
4. the buyer takes possession.
2. the transaction has closed.
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.)
$176,100
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
1. the agreement does not comply with the Statute of Frauds.
A landlord may legally refuse to rent to a prospective tenant if the tenant

1. has a history of serious mental illness.
2. is unable to live alone without assistance.
3. has ever been convicted of using illegal drugs.
4. has ever been convicted of selling illegal drugs.
4. has ever been convicted of selling illegal drugs.
A licensee is listing a property in a known flood plain. The seller flatly denies that the structure and the property have ever been flooded. What is the licensee required to do in this situation?

1. Rely on the face value of seller's statement.
2. Inform the seller of potential legal consequences if this claim is untrue.
3. Inform the seller of the legal obligation to disclose facts regarding flood plains.
4. Refuse to list the property and explain to the seller that all properties in this area flood.
3. Inform the seller of the legal obligation to disclose facts regarding flood plains.
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.
4. Both contracts are valid.
In an exclusive right-to-sell listing, an owner lists the property for sale with how many brokers?
1
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
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

1. unilateral contract in which only Party B has made a promise to perform.
2. unilateral contract in which only Party A has made a promise to perform.
3. bilateral contract which both parties are obliged to perform.
4. void contract.
2. unilateral contract in which only Party A has made a promise to perform.
The buyer is assuming a mortgage presently on the property in the amount of $110,000. What is the adjustment made at closing?Credit buyer $110,000; debit seller $110,000.If conditions for property use are included in a deed and these conditions are violated, what is the most severe potential penalty?A court may order the return of the property to the original owner.A written agreement in which a purchaser agrees to buy and a seller agrees to sell is calleda contractA 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? 1. Lease option. 2. Rental lease. 3. Month-to-month lease. 4. Lease purchase.3. Month-to-month lease.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?$1,150A seller's statement in a property disclosure document means 1. the owner is disclosing known latent defects. 2. nothing, because the seller will not be responsible for any defects. 3. the property is fully suitable for the uses contemplated by the buyer. 4. the owner creates a warranty that there are no defects in the property.1. the owner is disclosing known latent defects.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 1. it is usually less expensive to prepare. 2. state law may require it. 3. it avoids community property considerations. 4. foreclosure is usually simpler and faster.4. foreclosure is usually simpler and faster.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 the tenant have?Tenancy at willAccording 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.4. prepayment penalties and rebates.A buyer was negotiating the purchase of a house for himself. During a conversation with the seller, the seller agreed to include all kitchen appliances in the sale, and this fact was included in the sales contract. In this situation, if the seller takes the appliances with him, what recourse does the buyer have? 1. The buyer has no recourse because he negotiated the sale himself. 2. The buyer may declare the sales contract invalid. 3. The buyer may sue the seller for partial performance. 4. The buyer may sue the seller for specific performance.4. The buyer may sue the seller for specific performance.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 assteeringA broker and the buyers he represents are anxiously awaiting the closing on their new home. The closing is scheduled in 4 days. The buyers inform the broker that they just received revised Loan Estimate and Closing Disclosure forms from the lender, indicating the Annual Percentage Rate on their loan has increased by 0.3%. Based on the TILA-RESPA Integrated Disclosure rule, what action should the broker take in this situation?Confirm with the seller's broker, the lender and the closing entity that the closing must be delayed to allow for a new seven-day waiting period because of the interest rate revision.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 canfile an action for partition against the third owner.Federal Truth-in-Lending laws are also known as 1. the Freedom of Information Act. 2. the Equal Credit Opportunity Act. 3. Regulation Z. 4. Title VIII.3. Regulation Z.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 ifthe owner withdraws the counteroffer before it is accepted.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 shouldadvise her friends this could constitute a violation of Sherman Antitrust Act.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 shouldtell the seller to disclose the termite treatment on the property disclosure.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? 1. Kent must also sign the contract and any deed. 2. The signature of Alex's guardian is required. 3. The buyer cannot legally compel Alex to sell. 4. Both buyer and seller are bound by the contract.3. The buyer cannot legally compel Alex to sell.If all other factors are equal, in which location is a parking lot likely to bring the highest sales price? 1. Residential district zoned for two-story apartments. 2. Business district zoned for a two-story commercial building. 3. Business district zoned for a six-story office building. 4. The price for the parking lot will be the same regardless of area and zoning.3. Business district zoned for a six-story office building.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.$800Under the common law of agency, licensees owe the broker with whom they are associated all of the following duties EXCEPT 1. loyalty. 2. competence. 3. indemnification. 4. full disclosure.3. indemnification.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 1. water is plentiful. 2. water is scarce. 3. waterways are important to commercial traffic. 4. there are severe water pollution problems2. water is scarce.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.2. special agency.Which of the following statements best describes the risk taken by NOT recording a deed? 1. Easements of record would become void. 2. There is no risk as long as the deed has been notarized. 3. The delivery of a deed to a grantee could be invalidated. 4. A subsequent purchaser's recorded deed could take precedence over any unrecorded instrument.4. A subsequent purchaser's recorded deed could take precedence over any unrecorded instrument.A competitive market analysis is MOST often used for 1. estate tax purposes. 2. setting a listing price. 3. divorce proceedings. 4. property tax assessment2. setting a listing price.Ordinances that specify construction standards are 1. building codes. 2. building permits. 3. construction alterations. 4. certificates of occupancy.1. building codes.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? 1. The buyer finds a better property for better terms. 2. A title defect that will take months to clear is discovered. 3. A basement fire causes damage that requires extensive repairs. 4. The buyer is unable to obtain financing that meets the terms of the contract's financing contingency.1. The buyer finds a better property for better terms.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.2. an option contract.A charge of violation of Federal Fair Housing laws can be heard by an administrative law judge within the Department of Housing and Urban Development (HUD) or by a Federal district court judge in Federal court. The advantage of a Federal court hearing to the complaining party is that 1. the case will be more thoroughly reviewed. 2. there is no dollar limit on damages paid. 3. only a district court judge can order that the property be sold to the complaining party. 4. only a district court judge can order jail time for the guilty party.2. there is no dollar limit on damages paid.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 asvoidA 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? 1. There is no obligation because the buyer's agent has a fiduciary duty to the buyer. 2. The buyer's agent will be paid by the buyer and has no obligations to the seller or his agent. 3. The listing broker works for the seller and has no right to any information from the buyer's broker or the buyer. 4. Disclose the agency relationship when arranging the showing and disclose material information about the buyer if presenting an offer.4. Disclose the agency relationship when arranging the showing and disclose material information about the buyer if presenting an offer.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.3. lender wants to sell the mortgage to the secondary market.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 divorce1. a suicide that occurred in the house last year.Which of the following real estate contracts is a service contract? 1. a purchase agreement 2. a listing agreement 3. an option contract 4. a mortgage2. a listing agreementIn 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.3. more variety of loan programs available.A borrower has defaulted on the mortgage. The mortgage contains an acceleration clause. This permits the lender todemand immediate payment of the entire note.A licensee has entered into a dual agency agreement. In this situation, it is critical that all parties understand that it is impossible for the licensee to fully perform for either party the traditional common-law agency duty of 1. accounting. 2. care. 3. disclosure. 4. loyalty.4. loyalty.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.1. tell the seller that the buyer will pay more.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? $105,0902. $110,7533. $120,9104. $121,505$121,505All 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. straight-line method.A seller signs a listing agreement with a broker. The seller can cancel the listing at any time without legal liability if 1. an offer has not yet been accepted. 2. an offer has not yet been presented. 3. the broker is given at least 48 hours notice. 4. the broker violates the terms of the contract.4. the broker violates the terms of the contract.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.3. license revocation and criminal prosecution.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 1. puffing. 2. misrepresentation. 3. lack of care and diligence. 4. nothing; property taxes are a matter of public record and it was the buyer's responsibility to check them.2. misrepresentation.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.1. public health and safety.The Civil Rights Act of 1866 prohibits any type of discrimination based on 1. gender. 2. race. 3. race and gender. 4. religion.2. race.A seller mentions to his agent that the previous owners of his property may have dumped hazardous waste on the site. Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), who is liable for damages from the dumping prior to the sale of the property?SellerEarnest 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.1. in a timely manner, according to state laws.When a home is purchased using an ARM, the monthly loan payment on the mortgage will 1. rise slightly in each adjustment period until the cap is reached. 2. be adjusted automatically to ensure that negative amortization does not occur. 3. be based on a very low interest rate to begin with, but will rise to the market rate at the first adjustment. 4. vary over the life of the loan depending on fluctuations in the interest rate to which the loan is referenced.4. vary over the life of the loan depending on fluctuations in the interest rate to which the loan is referenced.MOST closed real estate transactions should be reported to the IRS. REQUIRED information includes seller name(s) and social security number(s) and 1. buyer name(s) and social security number(s). 2. the property financing. 3. the mortgage lender's name and address. 4. the sale price.4. the sale price.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? 1. CMA 2. IRV 3. NOI 4. GRM4. GRMIf leased premises become unusable for the purpose state in the lease, the tenant may have the right to abandon the premises. This action is calledconstructive evictionA 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.In the sale of property, there is often confusion over whether an item is a fixture or personal property. What is the best way to avoid this confusion? 1. Apply the legal tests of a fixture. 2. Apply local court decisions dealing with similar items. 3. Specify questionable items of property in the written sales contract. 4. Use the legal definition of a fixture as any permanently attached item.3. Specify questionable items of property in the written sales contract.To be valid, every deed must 1. contain a warranty. 2. include granting language. 3. be executed by the grantor. 4. be signed by the grantee if there are covenants.3. be executed by the grantor.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.$288An equal housing opportunity notice MUST be 1. displayed in the brokerage office. 2. included in all written advertisements. 3. specified in all listing agreements and offers to purchase. 4. given to all prospective clients.1. displayed in the brokerage office.An investment property returns 12% of its value or $21,000 annually. What is the value of the property?$175,000Even with title insurance, the policyholder may still suffer losses arising from 1. forged documents. 2. incompetent grantors. 3. defects found in recorded public records. 4. land use change due to zoning ordinances.4. land use change due to zoning ordinances.A major difference between freehold and nonfreehold estates is that all freehold estates 1. are of indeterminable duration. 2. terminate upon the death of the person on whose life they are based. 3. are inheritable by the holder's heirs. 4. are estates for a fixed term.1. are of indeterminable duration.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 $300.4. Debit seller $300; credit buyer $300.An example of a contract terminated due to inability to perform would be one in which the 1. purchaser had suffered financial reverses so that she could not make payment as required by the contract. 2. seller had died after the contract became binding but before the closing. 3. seller had contracted for sale of the entire property without the knowledge or consent of the other joint tenant. 4. property had been severely damaged by fire after the contract became binding but before the closing.3. seller had contracted for sale of the entire property without the knowledge or consent of the other joint tenant.An escheat occurs when 1. property is seized to satisfy a tax lien. 2. property is condemned for a necessary public use. 3. a property owner dies without heirs or a valid will. 4. a property owner fails to perform legally required cleanup of toxic waste.3. a property owner dies without heirs or a valid will.A buyer is getting a fully amortized loan for $220,000. The bank will give the buyer the loan for 15 years at 5 1/2% or for 30 years at 6 1/2%. To the nearest dollar, what is the difference between the monthly payments for these two loans? (BE SURE TO USE THE AMORTIZATION TABLE.)$407A 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.A salesperson lists a property with a contract that allows for subagency and dual agency. The salesperson is 1. an independent contractor to the broker and an agent to the principal. 2. an agent to the broker and a subagent to the principal. 3. a subagent to the broker and an agent to the principal. 4. an agent to the broker and an agent to the principal.2. an agent to the broker and a subagent to the principal.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?$26,720