PSI Licensing Laws and Regulations 3 — Questions and Answers
Question 1: A real estate license applicant is denied a license due to a prior criminal record. The applicant's best course of action is to:
- Request a formal hearing before the licensing board (Correct answer)
- Reapply immediately with a different application
- File a civil lawsuit against the board for discrimination
- Contact the governor's office to override the decision
Correct answer: Request a formal hearing before the licensing board
Applicants who are denied a license are entitled to request a formal administrative hearing to contest the decision.
Question 2: Which of the following is NOT typically a ground for disciplinary action under real estate license law?
- Representing only one party in a transaction (Correct answer)
- Commingling client funds with personal funds
- Making a false statement on a license application
- Paying an unlicensed person for referrals
Correct answer: Representing only one party in a transaction
Representing only one party is legal and common in real estate; it is the other listed acts that constitute license law violations.
Question 3: A salesperson wants to operate their own real estate company. What must they do first?
- Obtain a broker's license (Correct answer)
- Register as a sole proprietor
- Complete 200 additional hours of education
- Affiliate with a national franchise
Correct answer: Obtain a broker's license
Only a licensed broker can operate an independent real estate brokerage; a salesperson must first upgrade to a broker's license.
Question 4: The primary purpose of state real estate licensing laws is to:
- Protect the public from incompetent and dishonest practitioners (Correct answer)
- Increase state tax revenue from real estate transactions
- Ensure that brokers charge standardized commission rates
- Regulate property values across the state
Correct answer: Protect the public from incompetent and dishonest practitioners
Licensing laws exist primarily as consumer protection measures to ensure practitioners meet minimum standards of competency and ethics.
Question 5: A real estate salesperson leaves Broker A and affiliates with Broker B. Pending transactions from the salesperson's time at Broker A are:
- Handled by Broker A since transactions are tied to the brokerage (Correct answer)
- Transferred automatically to Broker B by law
- Assigned to the salesperson at their new brokerage
- Cancelled because the salesperson changed brokers
Correct answer: Handled by Broker A since transactions are tied to the brokerage
Transactions belong to the brokerage, not the individual salesperson, so pending deals stay with Broker A when the salesperson departs.
Question 6: A licensee is placed on probation by the state licensing board. This means the licensee:
- May continue to practice under conditions set by the board (Correct answer)
- Must cease all real estate activities immediately
- Has had their license permanently revoked
- Is banned from representing sellers for one year
Correct answer: May continue to practice under conditions set by the board
Probation allows the licensee to continue practicing while meeting specific conditions set by the board, such as supervision or education.
Question 7: A consumer files a complaint with the real estate licensing board. What is the board's primary role in this process?
- To investigate whether a license law violation occurred (Correct answer)
- To award damages to the consumer on their behalf
- To mediate a settlement between the consumer and licensee
- To refer the complaint to a civil court automatically
Correct answer: To investigate whether a license law violation occurred
The licensing board's role is regulatory — it investigates violations and imposes professional sanctions, not financial damages.
PSI Licensing Laws and Regulations 3
A real estate license applicant is denied a license due to a prior criminal record.
The applicant's best course of action is to: