Free PSI Knowledge Exam Questions and Answers — Questions and Answers
Question 1: Rents in MOST market areas are based on:
- a tenant's union
- supply and demand factors (Correct answer)
- the local apartment owner's association
- department of housing (HUD)
Correct answer: supply and demand factors
Rents in most market areas are primarily determined by the fundamental economic principles of supply and demand. When the demand for rental properties is high and the supply is low, rents tend to increase. Conversely, if supply exceeds demand, rents may decrease, reflecting the dynamic balance of the local housing market.
Question 2: A contract that gives another the right to hold real property but not title is:
- a lease (Correct answer)
- a quitclaim deed
- a bill of sale
- a dedication
Correct answer: a lease
A lease is a contract that grants a tenant the right to possess and use real property for a specified period, but it does not transfer ownership (title) of the property. The landlord retains title, while the tenant gains exclusive possession and the right to quiet enjoyment. This arrangement allows for the temporary transfer of property use without conveying permanent ownership.
Question 3: The rent for a building with nine units is as follows: Three apartments will cost you $550, three apartments will cost you $600, and three apartments will cost you $650. There are 4% empty rooms, $2,400 in extra income, and $5,000 in annual costs. How much should the buyer pay for this property if the capitalization rate is 9%?
- $717,866
- $661,244 (Correct answer)
- $773,422
- $698,534
Correct answer: $661,244
Divide the net operating income by the capitalization rate.
Question 4: Property managers need to know and understand a lot of different things. When a manager thinks about asbestos, radon, and urea formaldehyde, they should know that all three are:
- produced a result of the natural decay of organic substances
- classified as hazardous substances.
- classified as environmental hazards (Correct answer)
- produced as a result of the natural decay of radioactive substances
Correct answer: classified as environmental hazards
Asbestos, Radon, and Urea Formaldehyde are all dangerous to the environment.
Question 5: When a buyer gives a seller a purchase-money mortgage and the seller take it back:
- the terms and conditions of the mortgage are included in the borrowers first mortgage
- the terms and conditions of the mortgage must be set forth in writing (Correct answer)
- the seller and the buyer may enter into an enforceable oral agreement
- the seller agrees to collect the buyer's payments directly from the lender
Correct answer: the terms and conditions of the mortgage must be set forth in writing
The seller agrees to collect the buyer's payments directly from the lender.
Question 6: When a seller returns a buyer's purchase money mortgage:
- the terms and conditions of the mortgage must be set forth in writing (Correct answer)
- the seller and the buyer may enter into an enforceable oral agreement
- the seller agrees to collect the buyer's payments directly from the lender
- the terms and conditions of the mortgage are included in the borrowers first mortgage
Correct answer: the terms and conditions of the mortgage must be set forth in writing
The terms and conditions, including principle and interest, must be clearly put down in writing in order for the purchase money mortgage to be upheld.
Question 7: A developer gives permission to a local power company to put in transmission lines. This right demonstrates _______.
- easement by prescription
- conditional use permit (Correct answer)
- license
- easement in gross
Correct answer: conditional use permit
A company's right to utilize another's land is an easement in gross.
Question 8: When a person has full control over a piece of land, they are said to:
- a defeasible fee estate
- a life estate
- a fee simple estate (Correct answer)
- a leasehold estate
Correct answer: a fee simple estate
Fee simple or fee simple absolute estate is the highest interest in real estate that the law recognizes.
Question 9: All of these are important parts of a contract, except:
- offer and acceptance
- competent grantor (Correct answer)
- lawful objection
- consideration
Correct answer: competent grantor
Required is a competent grantor.
Question 10: Carbon Monoxide (CO) is NOT the following: Carbon Monoxide (CO) is NOT the following:
- quickly absorbed in the body
- a natural result of combustion
- easy to detect by smell (Correct answer)
- a result of incomplete combustion
Correct answer: easy to detect by smell
Because it's odorless and colorless, CO is hard to smell.
Question 11: How much is a property worth if its gross rent multiplier is 112 and its monthly rent is $600?
- $76,200
- $27,600
- $67,200 (Correct answer)
- $62,700
Correct answer: $67,200
112 x 600 = $67,200 (value of the property)
Question 12: Which law says that any advertisement that talks about mortgage financing terms must include certain information?
- Fair Housing Act
- Real estate settlement procedures act (RESPA)
- Equal Credit Opportunity Act (ECOA)
- Truth in lending act (Correct answer)
Correct answer: Truth in lending act
Mortgage financing trigger phrases are required under the Truth in Lending Act.
Question 13: A mortgage's discount points are calculated as a percentage of:
- the down payment
- the amount borrowed (Correct answer)
- the selling price
- the closing cost
Correct answer: the amount borrowed
Mortgage discount points are calculated as a percentage of the amount borrowed. To reduce the interest rate by one eighth of a percent or one quarter of a percent, you can pay one point, or one percent of the loan amount. Depending on how many points a borrower pays, the lender will offer different rates and payment plans.
Question 14: The price paid for a building was $157,000. The 6% commission paid to the broker was split as follows: 10% to the listing agent and 50% to the selling agent. What was the commission of the listing booker?
- 1124
- 964
- 1064
- 942 (Correct answer)
Correct answer: 942
157,000 X 6% = 9420 <br> 9420 / 10% = 942 (listing booker's commission)
Question 15: A debtor's real and personal property is affected by this lien:
- specific
- General (Correct answer)
- specific
- involuntary
Correct answer: General
A general lien covers all of a debtor's real and personal possessions, unlike a specialized lien.
Question 16: Depreciation, defined as a decrease in value from any cause, is usually classified into three categories. The loss of a property's value due to normal wear and tear is called ______.
- economic obsolesce
- external obsolescence
- physical deterioration (Correct answer)
- functional obsolesce
Correct answer: physical deterioration
Physical deterioration is the loss of value that comes from the wear and tear that buildings go through as they age. Floods, earthquakes, fire, UV rays, wind, etc. can cause physical damage.
Free PSI Knowledge Exam Questions and Answers
Rents in MOST market areas are based on: