PSI PSI Real Estate Agency and Property Management 2 — Questions and Answers
Question 1: Which of the following actions would constitute a breach of the agent's duty of disclosure?
- Telling a buyer about a material defect in the property
- Informing a seller about a buyer's financing contingency
- Hiding a known structural problem from a buyer (Correct answer)
- Revealing the listing price to prospective buyers
Correct answer: Hiding a known structural problem from a buyer
An agent has a duty to disclose all known material facts that could affect a buyer's decision; concealing a structural defect is a breach of that duty.
Question 2: What is the primary purpose of a property management agreement?
- To transfer ownership of the property to the manager
- To define the scope of the manager's authority and responsibilities (Correct answer)
- To establish the sale price of the property
- To create a landlord-tenant relationship
Correct answer: To define the scope of the manager's authority and responsibilities
A property management agreement outlines the duties, authority, compensation, and term of the relationship between the property owner and the property manager.
Question 3: A property manager who collects rents and security deposits must keep these funds in a:
- Personal savings account
- Trust account separate from operating funds (Correct answer)
- Business checking account
- Money market account at the manager's bank
Correct answer: Trust account separate from operating funds
Property managers are legally required to maintain tenant funds in a separate trust (escrow) account to prevent commingling with personal or business funds.
Question 4: Under a gross lease, who is responsible for paying most operating expenses of the property?
- The tenant
- The landlord (Correct answer)
- Both parties equally
- A third-party property manager
Correct answer: The landlord
Under a gross lease, the landlord pays most or all operating expenses (taxes, insurance, maintenance), while the tenant pays a fixed monthly rent.
Question 5: Which type of lease requires the tenant to pay a base rent plus a percentage of their business sales?
- Gross lease
- Net lease
- Percentage lease (Correct answer)
- Ground lease
Correct answer: Percentage lease
A percentage lease is common in retail properties, where the tenant pays a base rent plus a percentage of monthly or annual gross sales to the landlord.
Question 6: When an agent's authority is terminated by operation of law, which of the following events would cause this?
- The principal decides to reduce the commission rate
- The bankruptcy of the principal (Correct answer)
- The agent takes a temporary leave of absence
- The property fails to attract any offers
Correct answer: The bankruptcy of the principal
Agency is terminated by operation of law upon events such as the death or bankruptcy of either party, destruction of the property, or the property becoming illegal.
PSI PSI Real Estate Agency and Property Management 2
Which of the following actions would constitute a breach of the agent's duty of disclosure?