PSI NATIONAL REAL ESTATE EXAM QUESTIONS
COMPLETE WITH 100% CORRECT ANSWERS
Question 1
A buyer and seller enter into a valid sales contract. Before closing, the seller dies.
Which of the following is true?
A. The contract is automatically void.
B. The contract is voidable at the buyer’s option.
C. The contract remains enforceable against the seller’s estate.
D. The contract is terminated and the buyer must renegotiate with heirs.
Correct Answer: C
Rationale: Real estate contracts generally survive the death of a party unless the
contract specifically states otherwise. The seller’s estate is bound to perform, and
the buyer can seek specific performance against the estate.
Question 2
Which of the following is an example of an involuntary lien?
A. Mortgage lien
B. Property tax lien
C. Mechanic’s lien filed by a contractor
D. Both B and C
Correct Answer: D
Rationale: Involuntary liens are created by law or court action without the
owner’s consent. Property tax liens are statutory. Mechanic’s liens are filed by
unpaid contractors but are still involuntary from the owner’s perspective. A
mortgage lien is voluntary.
,Question 3
The primary purpose of a deed is to:
A. Prove ownership history
B. Transfer title from grantor to grantee
C. Satisfy a mortgage
D. Establish the purchase price
Correct Answer: B
Rationale: A deed is the legal instrument that conveys title to real property from
the grantor to the grantee. Title searches and other documents prove ownership
history.
Question 4
A property is appraised using the sales comparison approach. Which adjustment is
MOST likely to be made?
A. Depreciation of improvements
B. Capitalization rate
C. Financing concessions
D. Replacement cost new
Correct Answer: C
Rationale: In the sales comparison approach, adjustments are made for
differences between the subject property and comparables, including seller
financing concessions. Depreciation is used in the cost approach.
Question 5
Under the Truth in Lending Act (Regulation Z), which loan would be subject to the
three-day rescission period?
A. A new purchase money mortgage on a primary residence
B. A refinance of a primary residence with a different lender
,C. A loan for an investment property
D. A reverse mortgage
Correct Answer: B
Rationale: Rescission rights apply to refinances and home equity loans on a
primary residence, but NOT to purchase money mortgages (where the loan is used
to buy the home).
Question 6
A licensee tells a seller “You must list your home with me or you’ll never sell it.”
This is an example of:
A. Puffing
B. Implied agency
C. Economic duress
D. Misrepresentation
Correct Answer: C
Rationale: Economic duress occurs when one party uses improper pressure to
force another into a contract. Threatening a seller that they cannot sell otherwise
removes free will and may void the listing.
Question 7
Which of the following is a legal description?
A. 123 Main Street, Anytown, USA
B. Lot 5, Block 2, Sunny Subdivision, as per plat recorded in Plat Book 3, Page 12
C. The blue house next to the church
D. 0.5 acres near the river
Correct Answer: B
Rationale: A legal description must uniquely identify a parcel. Lot and block from
a recorded plat is a valid legal description. Street addresses are not legal
descriptions.
, Question 8
A buyer gives earnest money to a real estate broker. The broker must:
A. Deposit it in the broker’s personal account until closing
B. Give it directly to the seller
C. Place it in a trust or escrow account within a reasonable time
D. Use it for office expenses until closing
Correct Answer: C
Rationale: Earnest money is a fiduciary fund and must be placed in a separate
trust/escrow account, not mixed with the broker’s operating funds.
Question 9
The term “acceleration clause” in a mortgage allows the lender to:
A. Increase the interest rate
B. Demand full repayment of the loan upon default
C. Speed up the amortization schedule
D. Foreclose without notice
Correct Answer: B
Rationale: An acceleration clause gives the lender the right to declare the entire
unpaid balance due immediately if the borrower defaults.
Question 10
Which of the following is NOT a characteristic of real estate?
A. Immobility
B. Indestructibility
C. Liquidity
D. Uniqueness
Correct Answer: C
Rationale: Real estate is illiquid (not easily converted to cash without time/cost).
COMPLETE WITH 100% CORRECT ANSWERS
Question 1
A buyer and seller enter into a valid sales contract. Before closing, the seller dies.
Which of the following is true?
A. The contract is automatically void.
B. The contract is voidable at the buyer’s option.
C. The contract remains enforceable against the seller’s estate.
D. The contract is terminated and the buyer must renegotiate with heirs.
Correct Answer: C
Rationale: Real estate contracts generally survive the death of a party unless the
contract specifically states otherwise. The seller’s estate is bound to perform, and
the buyer can seek specific performance against the estate.
Question 2
Which of the following is an example of an involuntary lien?
A. Mortgage lien
B. Property tax lien
C. Mechanic’s lien filed by a contractor
D. Both B and C
Correct Answer: D
Rationale: Involuntary liens are created by law or court action without the
owner’s consent. Property tax liens are statutory. Mechanic’s liens are filed by
unpaid contractors but are still involuntary from the owner’s perspective. A
mortgage lien is voluntary.
,Question 3
The primary purpose of a deed is to:
A. Prove ownership history
B. Transfer title from grantor to grantee
C. Satisfy a mortgage
D. Establish the purchase price
Correct Answer: B
Rationale: A deed is the legal instrument that conveys title to real property from
the grantor to the grantee. Title searches and other documents prove ownership
history.
Question 4
A property is appraised using the sales comparison approach. Which adjustment is
MOST likely to be made?
A. Depreciation of improvements
B. Capitalization rate
C. Financing concessions
D. Replacement cost new
Correct Answer: C
Rationale: In the sales comparison approach, adjustments are made for
differences between the subject property and comparables, including seller
financing concessions. Depreciation is used in the cost approach.
Question 5
Under the Truth in Lending Act (Regulation Z), which loan would be subject to the
three-day rescission period?
A. A new purchase money mortgage on a primary residence
B. A refinance of a primary residence with a different lender
,C. A loan for an investment property
D. A reverse mortgage
Correct Answer: B
Rationale: Rescission rights apply to refinances and home equity loans on a
primary residence, but NOT to purchase money mortgages (where the loan is used
to buy the home).
Question 6
A licensee tells a seller “You must list your home with me or you’ll never sell it.”
This is an example of:
A. Puffing
B. Implied agency
C. Economic duress
D. Misrepresentation
Correct Answer: C
Rationale: Economic duress occurs when one party uses improper pressure to
force another into a contract. Threatening a seller that they cannot sell otherwise
removes free will and may void the listing.
Question 7
Which of the following is a legal description?
A. 123 Main Street, Anytown, USA
B. Lot 5, Block 2, Sunny Subdivision, as per plat recorded in Plat Book 3, Page 12
C. The blue house next to the church
D. 0.5 acres near the river
Correct Answer: B
Rationale: A legal description must uniquely identify a parcel. Lot and block from
a recorded plat is a valid legal description. Street addresses are not legal
descriptions.
, Question 8
A buyer gives earnest money to a real estate broker. The broker must:
A. Deposit it in the broker’s personal account until closing
B. Give it directly to the seller
C. Place it in a trust or escrow account within a reasonable time
D. Use it for office expenses until closing
Correct Answer: C
Rationale: Earnest money is a fiduciary fund and must be placed in a separate
trust/escrow account, not mixed with the broker’s operating funds.
Question 9
The term “acceleration clause” in a mortgage allows the lender to:
A. Increase the interest rate
B. Demand full repayment of the loan upon default
C. Speed up the amortization schedule
D. Foreclose without notice
Correct Answer: B
Rationale: An acceleration clause gives the lender the right to declare the entire
unpaid balance due immediately if the borrower defaults.
Question 10
Which of the following is NOT a characteristic of real estate?
A. Immobility
B. Indestructibility
C. Liquidity
D. Uniqueness
Correct Answer: C
Rationale: Real estate is illiquid (not easily converted to cash without time/cost).
