Colorado PSI Real Estate Practice Exam 150 QUESTIONS AND CORRECT
ANSWERS WITH RATIONALES COVERING THE RECENT TESTED
QUESTIONS PERFECT FOR A+ GRADE
1. What is the primary purpose of the Colorado Real Estate Commission (CREC)?
A. Conduct property appraisals
B. Regulate and license real estate professionals
C. Finance real estate transactions
D. Provide mortgage loans
Rationale: CREC oversees licensing, enforces regulations, and ensures professional standards.
2. A listing agreement that automatically terminates after a set date is called:
A. Open listing
B. Exclusive right-to-sell listing
C. Net listing
D. Oral listing
Rationale: Exclusive right-to-sell listings specify a definite end date.
3. Which type of property ownership includes the right of survivorship?
A. Tenancy in common
B. Joint tenancy
C. Leasehold
D. Fee simple absolute
Rationale: Joint tenants have equal shares, and surviving owners inherit automatically.
4. The document that conveys title from a seller to a buyer is called:
A. Lease
B. Mortgage
C. Deed
D. Promissory note
Rationale: A deed legally transfers ownership.
5. In Colorado, who is responsible for disclosing known material defects in a property?
A. Buyer
, B. Seller
C. Broker only
D. Lender
Rationale: Sellers must disclose material facts affecting value or safety.
6. A “contingency” in a contract refers to:
A. A penalty clause
B. A condition that must be met for the contract to be binding
C. An automatic extension
D. A financing option
Rationale: Contingencies protect parties until certain events occur.
7. The maximum amount of commission a broker may earn is:
A. Fixed by law
B. Determined by MLS
C. Negotiable between broker and client
D. Set by CREC
Rationale: Commissions are contractual and negotiable in Colorado.
8. A property manager collecting rent for a landlord is acting as:
A. Trustee
B. Fiduciary
C. Escrow agent
D. Principal
Rationale: A fiduciary acts in the best interest of another party.
9. A loan in which the interest rate changes over time is called:
A. Fixed-rate mortgage
B. Adjustable-rate mortgage (ARM)
C. Balloon mortgage
D. Reverse mortgage
Rationale: ARMs have rates that adjust periodically based on an index.
,10. Which of the following is an example of functional obsolescence?
A. Roof leak
B. Outdated kitchen layout
C. Termite damage
D. Flooding
Rationale: Functional obsolescence is a loss of value due to design or style issues.
11. A property with multiple units leased separately is classified as:
A. Single-family home
B. Multi-family property
C. Condominium
D. Cooperative
Rationale: Multi-family properties generate income from multiple tenants.
12. What type of loan allows the borrower to pay only interest for a set period?
A. Fixed-rate mortgage
B. Interest-only mortgage
C. Adjustable-rate mortgage
D. Balloon mortgage
Rationale: Interest-only loans require principal payment later or at maturity.
13. The value of a property based on the cost to replace it minus depreciation is called:
A. Market value
B. Cost approach value
C. Income approach
D. Comparative market analysis
Rationale: Cost approach considers replacement cost less depreciation.
14. A licensee acting as a dual agent must:
A. Represent only the buyer
B. Represent only the seller
C. Obtain written consent from both parties
D. Disclose nothing
, Rationale: Dual agency requires informed consent due to conflicting interests.
15. In Colorado, the statute of frauds requires that:
A. All contracts are oral
B. Certain contracts must be in writing to be enforceable
C. All deeds be notarized only
D. Brokers record all contracts
Rationale: Written agreements prevent disputes in real estate transactions.
16. A property purchased for investment income is classified as:
A. Residential
B. Industrial
C. Income property
D. Agricultural
Rationale: Income properties generate cash flow through rent or leasing.
17. What type of agency relationship is created when a broker represents both buyer and
seller?
A. Single agency
B. Dual agency
C. Subagency
D. Transaction brokerage
Rationale: Dual agency occurs when one broker represents both sides with disclosure.
18. A property sold “as-is” indicates:
A. The seller must repair defects
B. No disclosures required
C. Buyer accepts property with existing conditions
D. Seller guarantees marketable title
Rationale: “As-is” means the buyer assumes responsibility for defects.
19. The bundle of legal rights associated with property ownership includes all EXCEPT:
A. Right to sell
ANSWERS WITH RATIONALES COVERING THE RECENT TESTED
QUESTIONS PERFECT FOR A+ GRADE
1. What is the primary purpose of the Colorado Real Estate Commission (CREC)?
A. Conduct property appraisals
B. Regulate and license real estate professionals
C. Finance real estate transactions
D. Provide mortgage loans
Rationale: CREC oversees licensing, enforces regulations, and ensures professional standards.
2. A listing agreement that automatically terminates after a set date is called:
A. Open listing
B. Exclusive right-to-sell listing
C. Net listing
D. Oral listing
Rationale: Exclusive right-to-sell listings specify a definite end date.
3. Which type of property ownership includes the right of survivorship?
A. Tenancy in common
B. Joint tenancy
C. Leasehold
D. Fee simple absolute
Rationale: Joint tenants have equal shares, and surviving owners inherit automatically.
4. The document that conveys title from a seller to a buyer is called:
A. Lease
B. Mortgage
C. Deed
D. Promissory note
Rationale: A deed legally transfers ownership.
5. In Colorado, who is responsible for disclosing known material defects in a property?
A. Buyer
, B. Seller
C. Broker only
D. Lender
Rationale: Sellers must disclose material facts affecting value or safety.
6. A “contingency” in a contract refers to:
A. A penalty clause
B. A condition that must be met for the contract to be binding
C. An automatic extension
D. A financing option
Rationale: Contingencies protect parties until certain events occur.
7. The maximum amount of commission a broker may earn is:
A. Fixed by law
B. Determined by MLS
C. Negotiable between broker and client
D. Set by CREC
Rationale: Commissions are contractual and negotiable in Colorado.
8. A property manager collecting rent for a landlord is acting as:
A. Trustee
B. Fiduciary
C. Escrow agent
D. Principal
Rationale: A fiduciary acts in the best interest of another party.
9. A loan in which the interest rate changes over time is called:
A. Fixed-rate mortgage
B. Adjustable-rate mortgage (ARM)
C. Balloon mortgage
D. Reverse mortgage
Rationale: ARMs have rates that adjust periodically based on an index.
,10. Which of the following is an example of functional obsolescence?
A. Roof leak
B. Outdated kitchen layout
C. Termite damage
D. Flooding
Rationale: Functional obsolescence is a loss of value due to design or style issues.
11. A property with multiple units leased separately is classified as:
A. Single-family home
B. Multi-family property
C. Condominium
D. Cooperative
Rationale: Multi-family properties generate income from multiple tenants.
12. What type of loan allows the borrower to pay only interest for a set period?
A. Fixed-rate mortgage
B. Interest-only mortgage
C. Adjustable-rate mortgage
D. Balloon mortgage
Rationale: Interest-only loans require principal payment later or at maturity.
13. The value of a property based on the cost to replace it minus depreciation is called:
A. Market value
B. Cost approach value
C. Income approach
D. Comparative market analysis
Rationale: Cost approach considers replacement cost less depreciation.
14. A licensee acting as a dual agent must:
A. Represent only the buyer
B. Represent only the seller
C. Obtain written consent from both parties
D. Disclose nothing
, Rationale: Dual agency requires informed consent due to conflicting interests.
15. In Colorado, the statute of frauds requires that:
A. All contracts are oral
B. Certain contracts must be in writing to be enforceable
C. All deeds be notarized only
D. Brokers record all contracts
Rationale: Written agreements prevent disputes in real estate transactions.
16. A property purchased for investment income is classified as:
A. Residential
B. Industrial
C. Income property
D. Agricultural
Rationale: Income properties generate cash flow through rent or leasing.
17. What type of agency relationship is created when a broker represents both buyer and
seller?
A. Single agency
B. Dual agency
C. Subagency
D. Transaction brokerage
Rationale: Dual agency occurs when one broker represents both sides with disclosure.
18. A property sold “as-is” indicates:
A. The seller must repair defects
B. No disclosures required
C. Buyer accepts property with existing conditions
D. Seller guarantees marketable title
Rationale: “As-is” means the buyer assumes responsibility for defects.
19. The bundle of legal rights associated with property ownership includes all EXCEPT:
A. Right to sell
