Form B: 140 practice questions and answers

Correct answer: B. The specified notice was not given to the required recipient

"An inspection report always cancels the contract" is incorrect because the stipulated contract requires a separate written termination notice. "The specified notice was not given to the required recipient" identifies the missing contractual step: notice had to reach the seller in the required form and by the deadline. "The property address is confidential" has no bearing on whether termination notice was properly delivered. "An open-house schedule controls termination" is unrelated to the contractual notice requirement. Change the facts: If the buyer delivered a compliant written notice to the seller before 5 p.m., the notice problem described here would be removed.

What to remember: A termination right must be exercised using the contract's required notice, recipient and deadline.

Check the rule: California DRE, Transfer of Interests: general contract principles.

Study this topicPSI national broker outline V

Correct answer: B. Amendment

"Counteroffer" proposes different terms during negotiations rather than changing this existing agreement by mutual consent. "Amendment" records the agreed change to the binding contract's closing date. "Listing addendum" concerns the brokerage listing rather than amending the buyer-seller purchase agreement. "Quitclaim deed" conveys a stated property interest rather than extending a contractual deadline. Change the facts: If the seller changed the closing date in the buyer's initial offer before accepting it, that response would ordinarily be a counteroffer.

What to remember: A later closing-date extension is a modification of an existing contract.

Check the rule: California DRE, Transfer of Interests: general contract principles.

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Correct answer: D. Dual consent does not itself authorize disclosure of the seller's protected confidence

"The dual agent must always put the buyer first" would give one client an advocacy priority inconsistent with the stipulated dual role. "Consent to dual agency automatically releases every confidence" confuses informed consent to the role with permission to reveal a particular protected confidence. "An accepted offer automatically ends confidentiality" invents an automatic end to confidentiality when an offer is accepted. "Dual consent does not itself authorize disclosure of the seller's protected confidence" preserves the seller's protected minimum-price confidence. The question assumes dual agency is permitted and validly consented to; consent alone does not authorize this disclosure. Change the facts: If the seller expressly authorized disclosure of that minimum, the confidentiality analysis for that information would change. Other duties would remain.

What to remember: Consent to a permitted dual role does not by itself authorize disclosure of a client's protected negotiating information.

Check the rule: California DRE, Agency: general agency principles.

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Correct answer: C. Recorded plat

"Listing photo" shows appearance, not the subdivision's legal parcel layout. "Utility bill" documents service or billing, not the recorded parcel boundaries. "Recorded plat" supplies the map and recording reference used with the lot, block and subdivision name. "Occupancy permit" addresses authorized occupancy rather than the legal lot description. Change the facts: A description made from boundary bearings and distances would instead use metes and bounds.

What to remember: A recorded plat identifies the lot and block within the subdivision.

Check the rule: BLM 2017 Specifications for Descriptions of Land: parcel descriptions and nominal subdivisions.

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Correct answer: A. ADA Title III

"ADA Title III" covers qualifying public accommodations such as the public-facing service office described here. "Eminent-domain law" addresses government acquisition rather than business accessibility. "The Statute of Frauds" concerns enforceability of specified agreements, not disability access. "Probate law" concerns estate administration rather than access to the brokerage. Change the facts: A private dwelling raises a different coverage analysis, including potentially applicable fair housing requirements; Title III office coverage does not make every dwelling a public accommodation.

What to remember: A public-facing real estate office is different from the dwelling itself for ADA analysis.

Check the rule: U.S. Department of Justice, ADA Title III: businesses open to the public.

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Correct answer: A. Assignment

"Assignment" transfers the permitted contractual right. The original buyer's release is not established. "Novation" requires the necessary agreement to substitute and discharge an obligation, which is absent here. "Rescission" would unwind the agreement rather than transfer the purchase right. "Specific performance" is a remedy seeking promised performance, not this transfer of rights. Change the facts: If all required parties agreed to substitute a new obligation and release the first buyer, the facts would support novation.

What to remember: An assignment can transfer rights without releasing the first party from obligations.

Check the rule: California DRE, Transfer of Interests: general contract principles.

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Correct answer: C. The agreed listing compensation is earned

"Every cooperating broker receives a full fee" does not follow because other brokers' compensation rights require their own applicable agreements and conditions. "No compensation can ever be earned on an owner-found sale" ignores the stipulated exclusive-right-to-sell arrangement and absence of an owner-sale exception. "The agreed listing compensation is earned" fits the sale during the listing term under the stated agreement. Compensation is negotiable and the actual terms still matter. "The listing automatically becomes open" does not follow because an owner finding the buyer does not automatically change the listing type. Change the facts: An express owner-sale exception covering this buyer could change the compensation result.

What to remember: An exclusive-right-to-sell clause can cover an owner-found buyer, subject to the agreed exceptions.

Check the rule: California DRE, Agency: general agency principles.

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Correct answer: B. Excess land

"Surplus land" describes extra land that lacks the independent development potential stated here. "Excess land" matches unused land with the stated potential for separate sale and development. "Personal property" is movable property, not this part of the site. "Trade fixture" is typically business equipment installed by a tenant, not extra land. Change the facts: If the extra area could not be independently developed, surplus land would be the more appropriate appraisal term.

What to remember: Excess land can have a separate highest and best use; surplus land generally cannot be separately used that way.

Check the rule: Fannie Mae Appraiser Update, December 2019, page 4: excess versus surplus land.

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Correct answer: D. Regression

"Reconciliation" is the process of weighing value indications rather than this neighborhood influence. "Progression" describes the possible benefit to an inferior property from superior surroundings. "Escheat" is a succession concept unrelated to surrounding property quality. "Regression" describes the possible downward influence of inferior surroundings on the superior property's value. Change the facts: A modest home benefiting from much better neighboring homes illustrates progression.

What to remember: Regression concerns a superior property affected by less valuable surroundings.

Check the rule: California DRE, Appraisal and Valuation: valuation methods.

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Correct answer: B. Apply lawful criteria consistently and document the decisions

"Change criteria after seeing each applicant" describes ad hoc changes tied to seeing individual applicants rather than a consistent documented process. "Apply lawful criteria consistently and document the decisions" is the best stated practice. A changed criterion is not automatically unlawful; the concern is arbitrary or discriminatory treatment. Criteria must themselves be lawful, and legally required accommodations or other lawful exceptions still need consideration. "Prefer applicants who seem culturally compatible" can conceal protected-class preferences rather than apply objective lawful criteria. "Reject applicants because of religion" uses an expressly protected characteristic as a rejection basis in covered housing. Change the facts: If a disability-related reasonable accommodation were required, applying lawful criteria would include evaluating that request rather than mechanically refusing every exception.

What to remember: Apply lawful screening criteria consistently. A neutral-looking rule can still require fair-housing analysis.

Check the rule: HUD fair housing rights and responsibilities.

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Correct answer: B. Use the remedy stated in the contract before its deadline

"Require repairs regardless of the contract" assumes a repair entitlement the question does not grant. "Use the remedy stated in the contract before its deadline" preserves the express inspection remedy if the buyer follows its terms and deadline. As-is wording must be read with the full agreement. "Assume the condition is harmless" ignores the serious unresolved finding. "Rewrite the inspector's report" would alter the evidence rather than exercise the contract's remedy. Change the facts: If the deadline passed without compliant notice and no exception applied, the buyer could not assume the same termination right remained available.

What to remember: An as-is clause and an express inspection contingency must be read together.

Check the rule: California DRE, Transfer of Interests: general contract principles.

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Correct answer: D. Cash to close

"The deposit alone" is only one payment already made, not the final remaining funding requirement. "The sale price alone" is the purchase price before financing, costs and other adjustments. "The loan principal alone" is the borrowing amount rather than the buyer's remaining settlement funds. "Cash to close" is the final amount the buyer must provide under the settlement calculation. It includes more components than down payment, but need not always be numerically larger after credits. Change the facts: With larger applicable credits or a larger deposit, cash to close can fall even when the contract price and loan amount stay unchanged.

What to remember: Down payment excludes many settlement costs included in cash to close.

Check the rule: CFPB, Closing Disclosure explainer.

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Correct answer: B. Encroachment

"Escheat" concerns property passing to the state when applicable succession conditions are met. "Encroachment" identifies the physical fence intrusion. That label alone does not decide removal rights or an adverse-possession claim. "Appraisal" is a value opinion, not the boundary intrusion. "Subordination" changes relative lien priority, not a fence's location. Change the facts: If the parties had granted a valid easement allowing the fence, its legal status would require reading that grant.

What to remember: A physical intrusion over a boundary is different from a recorded right to use land.

Check the rule: California DRE, Title to Real Property: general ownership principles.

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Correct answer: C. Counteroffer

"Acceptance" would require agreement to the offered material terms rather than the changed price. "Option" grants a choice under agreed option terms; a changed purchase price alone does not establish one. "Counteroffer" is the seller's proposal on different material terms. The buyer must agree for a bargain on those terms. "Amendment of an already binding purchase agreement" requires an existing contract. The seller is still responding to the initial offer. Change the facts: If the seller accepted the unchanged offer on time and communicated acceptance as required, acceptance could form the contract.

What to remember: A counteroffer replaces proposed material terms rather than accepting them unchanged.

Check the rule: California DRE, Transfer of Interests: general contract principles.

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Correct answer: C. FCRA adverse-action notice

"No notice because the applicant was approved" ignores that less favorable terms can be adverse action even when the application is approved. "Transfer of the landlord's report account" does not provide the required information to the applicant. "FCRA adverse-action notice" is required when the higher deposit is based in whole or in part on a consumer report. Applicable notice contents and any credit-score requirements must be satisfied. "Automatic lease cancellation" does not automatically follow from report-based adverse action. Change the facts: If the report played no part in the decision, this particular FCRA trigger would not follow from these facts alone; other laws and notice duties would still need review.

What to remember: An adverse-action notice can be required for a higher deposit, even when the applicant is accepted.

Check the rule: FTC, Using Consumer Reports: What Landlords Need to Know.

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Correct answer: D. Two-bedroom unit with step-free entrance

"Perfect for young couples" focuses on preferred occupants and can signal a familial-status preference rather than simply describe the unit. "No children" expresses a familial-status exclusion under the stated covered, nonexempt facts. "Christian home only" expresses a religious occupant restriction. "Two-bedroom unit with step-free entrance" describes the unit's bedrooms and entrance without stating who should live there. The factual description must still be accurate. Change the facts: If the entrance actually had steps, the wording would need correction; a neutral style does not excuse a false property claim.

What to remember: Describe the property’s features rather than a preferred protected category of occupant.

Check the rule: HUD, Housing Discrimination Under the Fair Housing Act.

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Correct answer: D. A builder warranty addresses stated construction coverage, while a home warranty is usually a purchased service contract

"They are always identical" ignores the different documents and coverage they usually provide. "A builder warranty is a lender's title policy" confuses construction coverage with protection of a lender's title interest. "A home warranty transfers title" does not follow because a service contract does not convey ownership. "A builder warranty addresses stated construction coverage, while a home warranty is usually a purchased service contract" distinguishes construction coverage from a commonly purchased service contract. Actual covered items, exclusions, limits and claim procedures must be read. Change the facts: If the service contract excluded the failed appliance, calling it a home warranty would not create coverage for that item.

What to remember: A warranty or service contract is limited by its coverage, exclusions, and conditions.

Check the rule: FTC, Warranties for New Homes: warranties versus service contracts.

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Correct answer: D. All required parties agree that a valid substitute replaces and releases the original obligation

"The contract contains an inspection contingency" concerns a condition of the purchase, not a replacement and discharge of an obligation. "The assignee receives notice of closing" can occur in an assignment without releasing the original obligor. "The assignor keeps a copy" does not determine whether an original obligation is discharged. "All required parties agree that a valid substitute replaces and releases the original obligation" supplies the substitution and release that distinguish novation from an ordinary assignment. Change the facts: If the seller never agreed to release the first buyer, the assignee's promise to perform alone would not establish novation.

What to remember: Novation requires agreement to replace and release an obligation or party.

Check the rule: California DRE, Transfer of Interests: general contract principles.

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Correct answer: C. Promptly notify the appropriate parties and refer the correction to the title professionals and attorneys

"Ignore it because recording cured the problem" incorrectly assumes recording cures an inaccurate legal description. "Draft a replacement deed without telling anyone" has the broker undertake a legal conveyance correction without the necessary professional review or party involvement. "Promptly notify the appropriate parties and refer the correction to the title professionals and attorneys" flags the issue promptly and brings correction and coverage questions to the appropriate qualified professionals. "Promise the buyer that title insurance automatically covers it" promises coverage without reviewing the policy, exclusions, facts or insurer's decision. Change the facts: If the issue appeared before recording, the parties could seek correction of the instrument before submission rather than assume recording would fix it.

What to remember: A broker should flag a title problem without pretending to decide legal coverage or draft a cure.

Check the rule: California DRE, Title to Real Property: general ownership principles.

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Correct answer: D. Sparse comparable data and unrecorded renovation

"A large representative sale sample" would generally strengthen the model's market coverage rather than weaken it. "Accurate recent property data" would improve the inputs rather than create the stated weakness. "Stable market conditions" does not by itself create the missing-data problem. "Sparse comparable data and unrecorded renovation" leaves the model with few useful comparisons and missing information about the subject. The concern is input quality and fit, not proof that every AVM is wrong. Change the facts: A recent on-site appraisal with verified renovation details could address evidence the model lacked, although its conclusion still needs support.

What to remember: Weak or sparse inputs limit confidence in a model’s output.

Check the rule: CFPB: automated valuation models use property data and comparable sales.

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Correct answer: D. $231,425

"$280,000" is the original principal, not the current valid payoff. "$230,000" is principal only and omits the additional amount included in the supplied payoff. "$49,425" is not the amount required by the payoff statement. "$231,425" is the valid amount required for settlement on the stated closing date. The payoff can include interest and other permitted charges beyond principal. Change the facts: A new closing date can require an updated payoff. Do not reuse the old figure without checking its validity and any stated daily interest.

What to remember: A dated payoff can include accrued interest and other amounts beyond principal balance.

Check the rule: CFPB, Closing Disclosure explainer.

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Correct answer: A. Condemnation

"Condemnation" names the legal process for exercising eminent domain. "Escheat" concerns succession when no legally entitled taker exists. "Dedication" usually concerns an owner's setting land aside for public use and its acceptance. "Adverse possession" concerns acquiring rights through possession under the applicable legal requirements. Change the facts: If the owner alleged a taking and initiated the compensation claim, the issue would instead be inverse condemnation.

What to remember: Condemnation is the legal process for exercising eminent domain.

Check the rule: California DRE general teaching: eminent domain and condemnation.

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Correct answer: A. Area preference

"Area preference" describes buyers' preference for one location and its market effect. "Indestructibility" is a physical characteristic concerning land's enduring nature. "Immobility" is the physical fact that the land cannot be moved to a different location. "Nonhomogeneity" is physical uniqueness, not the demand preference asked about. Change the facts: If the question asked why a parcel cannot be relocated, immobility would fit.

What to remember: Situs concerns location’s economic effect; it is not another word for building size.

Check the rule: California DRE, Appraisal and Valuation: valuation methods.

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Correct answer: C. It evaluates verified repayment ability, credit, funds, collateral, and program eligibility

"It examines only the list price" ignores borrower, property and program evidence beyond asking price. "It guarantees that property value will rise" promises a future result that underwriting cannot guarantee. "It evaluates verified repayment ability, credit, funds, collateral, and program eligibility" describes the lender's review of the borrower, collateral and transaction under the applicable program. "It is performed by the listing broker" confuses the broker's transaction role with the lender's credit decision. Change the facts: A preliminary estimate based on unverified information is not the same as completed underwriting approval.

What to remember: Underwriting assesses the borrower, collateral, and loan against lending criteria.

Check the rule: California DRE, Real Estate Finance: notes and security instruments.

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Correct answer: A. Addendum

"Addendum" adds terms as part of the original agreement's formation, which matches the facts. "Amendment" usually changes an already existing agreement rather than accompanying formation as stated here. "Novation" substitutes an obligation with the required intent and agreement, which the facts do not establish. "Rescission" unwinds an agreement rather than adding the financing document. Change the facts: If the parties agreed to change a financing term after forming a binding contract, an amendment would ordinarily describe that later change.

What to remember: Distinguish an accompanying document at formation from a later change to an existing agreement.

Check the rule: California DRE, Transfer of Interests: general contract principles.

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Correct answer: D. An owner-sale exception

"A property address" identifies the property but does not distinguish these listing structures. "The broker's contact information" identifies a service provider rather than reserving an owner's sale right. "A definite term" can appear in either structure and therefore does not supply the distinction. "An owner-sale exception" is the conventional distinction: an exclusive-agency agreement reserves the described owner-sale exception, while an exclusive right to sell ordinarily does not. Change the facts: If an agreement expressly pays the broker even for an owner-found sale and has no applicable exception, that term follows the exclusive-right-to-sell pattern.

What to remember: An exclusive-agency listing commonly retains an owner-sale exception. Read the actual agreement.

Check the rule: California DRE, Agency: general agency principles.

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Correct answer: D. Intestate succession determines the heir's share

"The government condemns the parcel" would require a separate taking proceeding; death does not itself condemn the land. "The lender takes title" does not acquire ownership merely because a borrower dies. "The assessor sells the parcel" does not sell the parcel merely because there is no will. "Intestate succession determines the heir's share" governs the recognized heir's entitlement, subject to estate administration and applicable law. Change the facts: If no legally entitled heir or other taker existed, escheat could become relevant under the governing succession law.

What to remember: A person dying without a will does not necessarily leave property without lawful heirs.

Check the rule: Cornell Legal Information Institute, escheat.

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Correct answer: C. The assumption does not by itself prove a novation

"The contract is automatically void" does not follow merely because another person assumed performance. "The assignor is automatically discharged" assumes a discharge the obligee has not granted. "The assumption does not by itself prove a novation" is correct because assumption and release are separate questions. The original obligor can remain liable. "The assignee receives title by deed immediately" confuses contractual rights and duties with delivery of a conveyance. Change the facts: An agreed valid substitution that also releases the assignor could establish novation.

What to remember: An assumption may add an obligor without releasing the original one.

Check the rule: California DRE, Transfer of Interests: general contract principles.

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Correct answer: A. CMA

"CMA" is a comparative market analysis used to advise a seller about listing price. It is not automatically an appraisal. "Title policy" addresses title-insurance coverage rather than competitive asking-price advice. "Survey" addresses location and boundaries rather than market pricing. "Condemnation award" is compensation associated with a taking rather than a brokerage pricing product. Change the facts: If the lender required an appraisal by a qualified appraiser, supplying a CMA would not by itself meet that assignment.

What to remember: A CMA supports brokerage pricing decisions. It should not be represented as a formal appraisal.

Check the rule: California DRE, Appraisal and Valuation: valuation methods.

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Correct answer: C. $87,000

"$72,000" omits the $15,000 closing costs from the correct calculation. "$81,000" deducts the $6,000 seller credit a second time from the correct result. "$87,000" is correct: $450,000 + $15,000 - $360,000 - $12,000 - $6,000 = $87,000. "$105,000" is the amount before subtracting the buyer's deposit and seller credit. Change the facts: If the seller credit were $4,000 rather than $6,000 and everything else stayed the same, buyer cash to close would be $89,000.

What to remember: Subtract financing, deposits, and permitted credits from the stated buyer obligations.

Check the rule: CFPB, Closing Disclosure explainer.

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Correct answer: B. Police power

"Escheat" addresses succession to property, not land-use regulation. "Police power" supports public-health, safety and welfare regulation such as zoning. "Eminent domain" is the taking power, which differs from ordinary zoning regulation. "Intestate succession" determines succession without a will rather than permissible land uses. Change the facts: If a government acquired a parcel for a public project, eminent domain and condemnation would be the relevant concepts.

What to remember: Police power regulates use; eminent domain takes property for public use with required compensation.

Check the rule: California DRE, Planning and Zoning: general land-use concepts.

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Correct answer: B. The affected property owner

"The listing broker" does not initiate the owner's claim merely by holding a listing. "The affected property owner" brings the claim alleging a compensable government taking without the ordinary compensation process. Success is not automatic. "The local assessor" performs assessment work rather than bringing this owner's claim. "A title insurer" does not become the claimant merely by issuing a title policy. Change the facts: In an ordinary condemnation action, the condemning authority starts the taking process.

What to remember: Inverse condemnation starts with the owner seeking compensation for an alleged government taking.

Check the rule: California DRE general teaching: owner-initiated inverse condemnation.

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Correct answer: A. Record the change in an amendment signed by the parties

"Record the change in an amendment signed by the parties" documents the fee change using the signed-amendment method the contract requires. "Change a number in an unrelated deed" changes the wrong document and does not evidence this service-contract amendment. "Alter the original secretly" conceals an unauthorized alteration rather than obtaining assent. "Assume an unsigned advertising caption changes the fee" is not the signed amendment required by the stated contract. Change the facts: If the parties never agreed to a different fee, preparing a draft amendment alone would not change their contract.

What to remember: Follow the amendment procedure stated in the agreement.

Check the rule: California DRE, Transfer of Interests: general contract principles.

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Correct answer: B. Provide objective public property information

"Reveal the seller's confidential minimum" would expose the seller client's protected bargaining position without authorization. "Provide objective public property information" provides factual assistance without promising the buyer conflicting advocacy. "Promise buyer-first loyalty" promises a priority inconsistent with representing the seller. "Choose the buyer's negotiation strategy" undertakes bargaining advocacy for the unrepresented buyer rather than objective customer assistance. Change the facts: A buyer needing personal negotiation advice should obtain appropriate representation or independent advice under a lawful arrangement.

What to remember: Public factual information is different from private negotiating strategy.

Check the rule: California DRE, Agency: general agency principles.

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Correct answer: B. Professional land surveyor

"Home inspector" evaluates property components and does not establish the legal boundary merely by inspecting the home. "Professional land surveyor" is the appropriate professional for locating the boundary and assessing the fence against survey evidence. This identifies the professional assignment, not a final encroachment remedy. "Mortgage loan processor" processes loan information rather than establishing parcel boundaries. "Appraiser acting outside the appraisal assignment" does not have a boundary-survey assignment merely because the person can appraise value. Change the facts: If the question concerned the furnace's operating condition, an appropriate inspector or equipment specialist would be relevant instead.

What to remember: A survey addresses boundaries and location matters within its scope, not hidden building defects.

Check the rule: California DRE glossary: survey and boundary location.

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Correct answer: C. 40%

"25%" would require $1,750 in qualifying monthly obligations at this income. "35%" would result from $2,450 in obligations, not $2,800. "40%" is correct: $2,800 / $7,000 = 0.40 = 40%. The supplied qualifying total is the numerator. "250%" reverses income and obligations. DTI divides qualifying debt obligations by qualifying gross income. Change the facts: If the qualifying monthly obligations fell to $2,450 and income stayed $7,000, DTI would be 35%. This calculation alone does not establish loan approval.

What to remember: Total debt-to-income uses the specified recurring debt divided by gross income for the same period.

Check the rule: California DRE, Real Estate Finance: notes and security instruments.

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Correct answer: D. Riparian

"Littoral" is the usual exam term for land along a lake or sea. "Cooperative" describes a form of organization or ownership, not river frontage. "Avigation" concerns aviation-related use, not river frontage. "Riparian" is the usual national vocabulary for rights associated with land along a river or stream. Actual water-use rights depend on governing law. Change the facts: For land bordering a lake, the conventional exam term is littoral.

What to remember: Riparian rights concern land adjoining a watercourse. Their scope depends on applicable law.

Check the rule: California DRE, Title to Real Property: general ownership principles.

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Correct answer: D. Buying a farm in another county

"Leasing office space in that municipality" matches both the office-space transaction and the stated municipality. "Leasing a suite there at a lower rent" stays within the stated type and area; lower rent alone does not take it outside those boundaries. "Touring another office in that municipality" is activity concerning the same type of space in the specified municipality. "Buying a farm in another county" differs in transaction type, property type and geography, making it the clearest outside-scope example. Change the facts: If the written agreement also covered farm purchases in that other county, its actual expanded scope would control.

What to remember: Representation scope comes from the engagement, not every future transaction the client considers.

Check the rule: California DRE, Agency: general agency principles.

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Correct answer: C. An owner sale for less than the secured obligations require, subject to necessary creditor approval

"A court sale after every lien has disappeared" confuses an owner-negotiated transaction with a court sale and assumes liens disappeared. "A transfer that never needs title work" ignores the need to verify title and obtain necessary releases. "An owner sale for less than the secured obligations require, subject to necessary creditor approval" describes the owner's sale for less than the obligations require, with creditor approval needed for the agreed release treatment. "An automatic deficiency waiver" assumes that approval to release a lien also forgives any remaining personal liability, which must be separately established. Change the facts: If the creditor released the lien but expressly preserved a lawful deficiency claim, the seller could still face that remaining obligation.

What to remember: A short sale needs the relevant creditor approvals. It does not automatically waive a deficiency.

Check the rule: CFPB, What is a short sale?.

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Correct answer: C. Metes and bounds

"Lot and block" identifies a parcel by a recorded subdivision map rather than this boundary traverse. "Street address" can help find a property but is not the described boundary method. "Metes and bounds" matches the bearings, distances and closing point in the question. "Tax index number" identifies a tax record rather than tracing the boundary. Change the facts: If the description instead names a subdivision, lot and block with a recorded plat reference, use lot and block.

What to remember: Metes and bounds follows distances and directions around a parcel to a closing point.

Check the rule: BLM 2017 Specifications for Descriptions of Land: parcel descriptions and nominal subdivisions.

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Correct answer: B. Voidable

"Automatically void" does not follow from the stipulated inducement fraud; the purchaser understood the document being signed. "Voidable" fits the protected purchaser's ability to avoid an agreement induced by actionable fraud, subject to governing law and available remedies. "Executed" concerns completed performance, which is not established by discovering the fraud. "Unilateral" concerns an exchange of a promise for performance, not the defect in consent described. Change the facts: Deception about the very nature of the document could raise fraud in the execution, a different validity issue that this question excludes.

What to remember: Fraud in the inducement can make an agreement voidable. Deception about the nature of the document is a different issue.

Check the rule: California DRE, Transfer of Interests: general contract principles.

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Correct answer: A. The agent exceeded the stated authority

"The agent exceeded the stated authority" identifies the price change beyond the buyer's stated authorization. "Every buyer agent has unlimited signing authority" incorrectly treats a representation role as unlimited power to bind the buyer. "The extra $20,000 is automatically a gift" invents a gift rather than addressing unauthorized action. "An appraisal retroactively grants authority" does not follow because an appraisal cannot enlarge an agent's authority. Change the facts: If the buyer later validly ratified the $440,000 agreement with knowledge of the material facts, the binding-effect analysis could change.

What to remember: Presenting an offer does not automatically authorize signing a different offer for the buyer.

Check the rule: California DRE, Agency: general agency principles.

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Correct answer: B. Public notice that can affect priority

"That the grantor certainly owned it" assumes ownership that the recording office did not establish merely by recording the deed. "Public notice that can affect priority" describes recording's notice function and potential priority effect under applicable law. Recording does not cure a grantor's missing interest. "A replacement for the purchase contract" confuses a conveyance record with the parties' purchase agreement. "A warranty of the building's condition" promises physical-condition protection that recording does not provide. Change the facts: If the deed also failed a legal validity requirement, recording alone would not repair that defect.

What to remember: Recording creates notice under the recording system; it does not cure every defect in a deed.

Check the rule: California DRE, Title to Real Property: general ownership principles.

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Correct answer: A. The seller has not given one broker an exclusive listing

"The seller has not given one broker an exclusive listing" is the defining feature of the competing open listings described. "Every broker automatically earns the full fee" ignores the stated compensation condition and assumes payment merely for holding a listing. "The seller must accept every offer" confuses employing brokers with being bound to accept offers. "All brokers become joint owners" confuses an agency-service agreement with conveyance of ownership. Change the facts: A later valid exclusive listing could change the seller's contractual obligations. Existing rights and protection clauses would still need review.

What to remember: Open listings are nonexclusive; they do not promise a fee to every participating broker.

Check the rule: California DRE, Agency: general agency principles.

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Correct answer: D. Parcel Y

"Parcel X" benefits from the crossing and is the dominant estate. "Neither parcel" ignores the burden specifically placed on Parcel Y. "Both automatically dominant" confuses the benefiting estate with the burdened one. "Parcel Y" carries the burden of the easement and is the servient estate. Change the facts: If the easement instead benefited Y by crossing X, X would be servient.

What to remember: The servient parcel bears the burden; the dominant parcel receives an appurtenant benefit.

Check the rule: California DRE, Title to Real Property: general ownership principles.

Study this topicPSI national broker outline I

Correct answer: A. The lowest level that could be used regularly

"The lowest level that could be used regularly" matches EPA guidance to test the lowest level suitable for regular use, including a basement the buyer plans to occupy. "Only the attic" does not evaluate the lowest planned occupied level. "Only the existing main-floor bedroom" can miss the planned lower-level exposure. "A neighbor’s basement instead" does not establish this property's radon level. Change the facts: If the basement would never be suitable for regular use and the first floor were the lowest suitable level, test placement would follow that changed use and the testing instructions.

What to remember: The test location should reflect the buyer’s intended regular use, including a basement.

Check the rule: EPA, Home Buyer’s and Seller’s Guide to Radon, March 2024.

Study this topicPSI national broker outline VII

Correct answer: A. 7%

"7%" is correct: annual NOI of $84,000 / $1,200,000 price = 0.07 = 7%. "6%" would fit annual NOI of $72,000 at this price. "8.4%" does not follow from the supplied income-to-price ratio. "14.29%" approximately expresses the reciprocal income multiple as though it were a yield percentage. Change the facts: If annual NOI fell to $72,000 at the same price, the capitalization rate would be 6%. Financing costs do not enter this cap-rate formula.

What to remember: Cap rate equals annual NOI divided by value or price, expressed as a percentage.

Check the rule: California DRE, Appraisal and Valuation: valuation methods.

Study this topicPSI national broker outline XI

Correct answer: C. AVM

"Mechanics lien" is a lien for qualifying work, not a valuation product. "Life estate" is an ownership interest measured by a life, not a computational estimate. "AVM" means automated valuation model: a computer model uses property and market data to estimate value. "Special assessment" is a charge for an improvement, not a valuation algorithm. Change the facts: A broker's manually prepared comparative market analysis is a different product even when software assists the work.

What to remember: An AVM is a model’s estimate, not a physical inspection or a guaranteed sale price.

Check the rule: CFPB: automated valuation models use property data and comparable sales.

Study this topicPSI national broker outline III

Correct answer: B. Lien

"Easement" usually permits a use of another parcel rather than securing a debt. "Lien" secures a monetary obligation against property and is the best answer. "License" is permission to use land, generally without an estate in it. "Encroachment" describes an intrusion across a boundary rather than debt security. Change the facts: A right for a neighbor to cross the parcel would point to an easement instead.

What to remember: A lien secures an obligation rather than granting the right to occupy the property.

Check the rule: California DRE, Title to Real Property: general ownership principles.

Study this topicPSI national broker outline I

Correct answer: C. Reinstatement of the loan under those terms

"A transfer of the lender’s title policy" does not result from curing the borrower's missed payments. "Automatic forgiveness of all principal" does not follow because principal remains owed under the restored loan. "Reinstatement of the loan under those terms" matches curing the stated default within the instrument's conditions. Exact rights and deadlines depend on the instrument and governing law. "Conversion of the mortgage into a lease" does not follow because a restored mortgage remains a loan arrangement. Change the facts: If the borrower paid the entire debt and all required payoff charges, the issue would be satisfaction and release rather than reinstatement alone.

What to remember: Reinstatement cures the default; redemption or payoff can involve the full debt.

Check the rule: California DRE, Real Estate Finance: notes and security instruments.

Study this topicPSI national broker outline IV

Correct answer: A. Notify tenants and vendors who dealt with the manager and update public information

"Notify tenants and vendors who dealt with the manager and update public information" addresses third parties who might reasonably rely on the principal's earlier presentation of the manager's authority. "Tell only the former manager" ends internal uncertainty but may leave outside parties unaware. "Keep the manager on the website" continues a public representation of authority rather than correcting it. "Allow the manager to keep collecting rent" permits conduct that can reinforce the apparent ongoing relationship. Change the facts: If affected tenants and vendors had already received clear notice and public references were removed, the remaining apparent-authority risk would require those new facts to be considered.

What to remember: Notice may be needed to prevent third parties from reasonably relying on former authority.

Check the rule: California DRE, Agency: general agency principles.

Study this topicPSI national broker outline VI

Correct answer: A. No contract formed because the response was a counteroffer

"No contract formed because the response was a counteroffer" recognizes that the material change proposed a counteroffer, which the seller did not accept. "The original contract is voidable by either party" assumes a contract formed even though the parties never assented to the changed terms. "The contract is executed" requires completed performance, not merely a changed offer. "The Statute of Frauds automatically supplies acceptance" incorrectly treats a writing rule as a substitute for assent. Change the facts: If the seller timely accepted the counteroffer using the required method, an agreement could form on those changed terms.

What to remember: Acceptance must respond to the offer actually on the table.

Check the rule: California DRE, Transfer of Interests: general contract principles.

Study this topicPSI national broker outline V

Correct answer: D. Valid delivery and present intent

"The tenant's security deposit" does not determine whether the grantor intended the deed to transfer an interest now. "The service-contract deductible" concerns a different contract and does not establish deed delivery. "The appraisal approach" addresses value rather than the grantor's present conveyance intent. "Valid delivery and present intent" identifies the unresolved conveyance requirement. Signing while retaining exclusive control with instructions against present use does not by itself establish valid delivery. Change the facts: If the grantor validly delivered the deed with present intent to transfer the stated interest, the delivery analysis would change even before recording.

What to remember: Signing, delivery, acceptance, and recording are related but distinct steps.

Check the rule: California DRE, Title to Real Property: general ownership principles.

Study this topicPSI national broker outline IX

Correct answer: A. $15,000 added to the whole property's value

"$15,000 added to the whole property's value" is the supported market contribution of the feature to the whole property. "$40,000 solely because it was spent" is installation cost. Spending that amount does not establish an equal value increase. "The property's annual tax rate" is a rate used in taxation, not the feature's contribution. "The broker's fee" is compensation for brokerage service rather than the feature's market effect. Change the facts: If evidence supported a $45,000 value increase, contribution would be $45,000 even though installation still cost $40,000.

What to remember: An improvement’s cost and its contribution to market value may differ.

Check the rule: California DRE, Appraisal and Valuation: valuation methods.

Study this topicPSI national broker outline III

Correct answer: C. Acceleration clause

"Subordination clause" addresses priority between interests rather than early maturity of the debt. "Defeasance clause" addresses ending the security interest upon the performance described in that clause. "Acceleration clause" permits the full balance to become due after the qualifying default, subject to applicable terms and law. "Habendum clause in a deed" describes the estate granted in a deed rather than a mortgage default remedy. Change the facts: A clause permitting a borrower to cure overdue amounts and restore the loan concerns reinstatement instead.

What to remember: Acceleration makes the unpaid balance due following a contractual trigger.

Check the rule: California DRE, Real Estate Finance: notes and security instruments.

Study this topicPSI national broker outline IV

Correct answer: D. The late response requires the buyer's agreement to form a new bargain

"An assignment transferred the offer" would transfer a contractual right, which is not what a late signature does. "A binding amendment changed an existing contract" requires an existing binding agreement to amend; none is established here. "The expired offer was automatically accepted" ignores the express expiration and stipulated absence of an extension or exception. "The late response requires the buyer's agreement to form a new bargain" recognizes that a late response cannot accept the expired offer. The buyer must agree to a new bargain on the returned terms. Change the facts: If timely acceptance occurred before noon using the required method, the expiration issue would be different.

What to remember: An expired offer ordinarily cannot be accepted. A late response needs new assent under the applicable facts.

Check the rule: California DRE, Transfer of Interests: general contract principles.

Study this topicPSI national broker outline V

Correct answer: C. None automatically; the seller makes a lawful choice

"The first delivered" does not gain mandatory acceptance merely by arriving first. "The highest price" does not require acceptance merely because the offered price is highest. "None automatically; the seller makes a lawful choice" fits the stated absence of a binding acceptance obligation. The seller must still make lawful decisions, including compliance with fair housing law. "The one recommended by the broker" is advice the seller can consider, not authority to compel acceptance. Change the facts: If the seller had granted a valid option that was properly exercised, that separate obligation could change the analysis.

What to remember: Compare all terms and respect fair housing law. Price or arrival order alone does not compel acceptance.

Check the rule: California DRE, Transfer of Interests: general contract principles.

Study this topicPSI national broker outline V

Correct answer: B. Defeasance

"Acceleration" makes the secured balance due early under qualifying conditions. "Defeasance" names the traditional payoff condition described in this question. Commercial defeasance using substitute collateral is a different arrangement. "Alienation" concerns a sale or transfer, rather than full performance of the debt. "Forbearance" is an agreement to delay or limit enforcement rather than terminate security upon full performance. Change the facts: If the lender agreed to pause collection while arrears remained, forbearance would be the relevant term.

What to remember: Read the described clause. Do not confuse this payoff concept with a commercial substitution-of-collateral arrangement.

Check the rule: California DRE glossary: traditional mortgage defeasance clause.

Study this topicPSI national broker outline IV

Correct answer: B. Confidentiality

"Recordation" concerns public recording of instruments rather than handling the client's private information. "Confidentiality" fits safeguarding the client's financial information when disclosure is neither authorized nor legally required. "Subrogation" concerns succeeding to another's rights, often after an insurer pays a claim. "Accession" concerns an addition to property rather than a confidence. Change the facts: If governing law required disclosure of the information, a confidentiality instruction could not override that legal duty.

What to remember: Confidentiality has exceptions for authorized or legally required disclosure.

Check the rule: California DRE, Agency: general agency principles.

Study this topicPSI national broker outline VI

Correct answer: A. Commingling

"Commingling" is mixing client or other entrusted funds with brokerage business funds. A short duration does not change the classification. "Novation" substitutes and discharges an obligation by the required agreement, not by mixing money. "Subrogation" concerns succeeding to another's rights rather than mixing entrusted funds. "Accession" concerns an addition to property rather than a trust-account issue. Change the facts: A permitted small brokerage contribution kept in a trust account solely for bank charges is a different fact pattern governed by the applicable account rules.

What to remember: Commingling mixes another person’s funds with business or personal funds.

Check the rule: California DRE, Trust Funds: accounting and reconciliation principles.

Study this topicPSI national broker outline X

Correct answer: A. Delegation

"Delegation" transfers performance of a duty, subject to applicable restrictions. It does not itself release the original obligor. "Assignment" transfers a contractual right rather than naming the transfer of performance asked about. "Recording" places an instrument in public records rather than arranging another person's performance. "Ratification" is approval of an act, often one initially unauthorized, rather than this transfer of duty. Change the facts: If the buyer transferred the right to receive the seller's deed, assignment would describe that right transfer.

What to remember: Delegating performance is different from assigning a right to receive performance.

Check the rule: California DRE, Transfer of Interests: general contract principles.

Study this topicPSI national broker outline V

Correct answer: D. Decline the unsupported claim and seek appropriate expert evaluation

"Assume a high appraisal is a structural certificate" mistakes a value opinion for structural-condition certification. "Use the claim if the seller accepts responsibility" does not make an unsupported factual certification accurate or relieve the agent of the issue. "Hide the inspection and invent a certificate" would conceal the concern and fabricate evidence. "Decline the unsupported claim and seek appropriate expert evaluation" avoids the unsupported statement and directs the unresolved condition to appropriate expert evaluation. Change the facts: A qualified specialist's actual written finding could support an accurate description of that finding, without expanding it into a broader guarantee.

What to remember: A broker cannot turn an unresolved physical concern into an invented professional assurance.

Check the rule: CFPB, Schedule a home inspection.

Study this topicPSI national broker outline X

Correct answer: A. The assignor's position, subject to the transferred right's existing limits and defenses

"The assignor's position, subject to the transferred right's existing limits and defenses" states the ordinary assignment rule: the transferee receives the assigned right with its existing limitations and defenses. "A position with greater rights than the assignor" overstates the effect of an ordinary assignment; it does not automatically improve the transferred right. "The position of a county recorder" confuses a contract transferee with a public recording official. "The position of an automatic title owner" assumes a deed transfer that the assignment itself does not establish. Change the facts: If the assigned contract right had already expired, assignment alone would not revive it.

What to remember: An assignee generally receives the assignor’s rights, not greater rights than the assignor held.

Check the rule: California DRE, Transfer of Interests: general contract principles.

Study this topicPSI national broker outline V

Correct answer: C. Keep it confidential unless authorized to disclose

"Publish it with the listing" exposes the client's bargaining position rather than protecting it. "Tell only unrepresented buyers" still discloses the confidence to a negotiating counterparty. "Keep it confidential unless authorized to disclose" preserves the seller's protected negotiating information unless disclosure is authorized or legally required. "Share it after the first showing" invents an automatic disclosure point that a showing does not create. Change the facts: If the seller specifically authorized advertising that minimum, the authorized disclosure would present different facts.

What to remember: The seller’s minimum is not the same as the published list price.

Check the rule: California DRE, Agency: general agency principles.

Study this topicPSI national broker outline X

Correct answer: A. $152,000

"$152,000" is correct: $500,000 - $30,000 brokerage compensation - $310,000 payoff - $8,000 other costs = $152,000. "$162,000" is $10,000 above the result and does not follow the stated deductions. "$190,000" subtracts only the $310,000 payoff and omits both the fee and the other seller costs. "$462,000" subtracts the $30,000 fee and $8,000 costs but omits the loan payoff. Change the facts: At an agreed 5% fee instead, compensation would be $25,000 and the seller's net before prorations would be $157,000. The example does not establish a standard fee.

What to remember: The stated compensation rate is an assumption for this problem, not a standard or mandated rate.

Check the rule: CFPB, Closing Disclosure explainer.

Study this topicPSI national broker outline XI

Correct answer: B. The agent has substituted a term the parties did not agree to

"Every closing date is automatically flexible" ignores the parties' agreed date and the need for an authorized change. "The agent has substituted a term the parties did not agree to" identifies the unauthorized alteration. An agent's access to the document is not consent to new terms. "Recording is required before any contract can be changed" is incorrect because recording is not a universal prerequisite to a contractual amendment. "A typed alteration always overrides signatures" confuses text editing with the parties' assent. Change the facts: If both parties validly approved a signed amendment extending the date, the revised date would rest on their agreement.

What to remember: An agent’s unauthorized edit does not establish the parties’ mutual assent.

Check the rule: California DRE, Transfer of Interests: general contract principles.

Study this topicPSI national broker outline V

Correct answer: D. The liens' relative priority

"Whether the debt must ever be repaid" does not follow from agreeing to a lower lien position; the debt remains. "Whether foreclosure is guaranteed" is not guaranteed by a priority agreement. "Whether the borrower has a lease" does not follow because subordination does not create a landlord-tenant relationship. "The liens' relative priority" is the stated change: the existing lien becomes junior to the new mortgage. Change the facts: If the lender instead accepted full payoff and released the lien, that would end the security interest rather than merely subordinate it.

What to remember: Subordination changes priority by agreement. It does not cancel the debt.

Check the rule: California DRE, Real Estate Finance: notes and security instruments.

Study this topicPSI national broker outline IV

Correct answer: C. Legal access, survey location, title records, and any maintenance agreement

"Only the driveway color" does not establish any right to cross another parcel. "Whether the seller has a home warranty" does not establish access rights under land records or an agreement. "Legal access, survey location, title records, and any maintenance agreement" addresses whether physical use has a legal basis and where it lies. A visible driveway alone does not prove an enforceable access right. "Only the property's assessed value" does not resolve ownership, access or maintenance duties. Change the facts: If a valid recorded easement expressly covered the driveway, its route, users, conditions and maintenance terms would still need review.

What to remember: A driveway’s existence does not prove a legal right to cross someone else’s land.

Check the rule: California DRE, Title to Real Property: general ownership principles.

Study this topicPSI national broker outline VII

Correct answer: A. It has no legal effect and cannot be ratified

"It has no legal effect and cannot be ratified" describes the legal-nullity classification intended here. A void agreement cannot be made effective merely by ratifying it. "Only the protected party can rescind it" describes a voidable agreement, where the protected party may elect a remedy. "It is enforceable after any oral promise" incorrectly treats any later oral promise as curing a void agreement. "It means performance is incomplete" describes executory performance status rather than legal validity. Change the facts: If a valid agreement simply awaited closing, it could be executory without being void.

What to remember: Legal validity, enforceability and performance status are different classifications.

Check the rule: California DRE, Transfer of Interests: general contract principles.

Study this topicPSI national broker outline V

Correct answer: A. Special assessment

"Special assessment" fits the government project charge allocated to specially benefited parcels. "General property tax" is a general revenue levy rather than this specifically described improvement charge. "Escheat" is succession to the state, not a sewer project charge. "Police-power license" is not the monetary improvement assessment described. Change the facts: An association's extra repair assessment involves a different setting. Here the charge is for a public sewer extension.

What to remember: A special assessment funds a particular public improvement rather than general property-tax operations.

Check the rule: California DRE glossary: special assessment for public improvements.

Study this topicPSI national broker outline II

Correct answer: A. Closing Disclosure

"Closing Disclosure" summarizes the final terms, payments and costs for the covered loan. Its timing and content are governed by the applicable disclosure rules. "Quitclaim deed" conveys the grantor's stated interest without supplying the covered loan-cost disclosure. "Title policy endorsement" modifies title-insurance coverage rather than giving the borrower's final loan figures. "Certificate of occupancy" concerns authorized use or occupancy rather than the final mortgage costs. Change the facts: For the initial covered loan terms and estimated costs, the corresponding form is the Loan Estimate.

What to remember: The Closing Disclosure gives final loan terms and settlement costs for covered transactions.

Check the rule: CFPB, Closing Disclosure explainer.

Study this topicPSI national broker outline IX

Correct answer: C. Refuse because obedience is limited to lawful instructions

"Follow the instruction because loyalty controls" misuses loyalty to justify disobeying the stipulated disclosure law. "Tell only the home inspector" does not satisfy a duty to disclose to the required transaction party merely by telling an inspector. "Refuse because obedience is limited to lawful instructions" recognizes that an agent's obedience is limited to lawful instructions. "Wait until after closing" delays compliance rather than satisfying the stated disclosure duty. Change the facts: If the fact were a protected client confidence with no applicable disclosure duty, confidentiality would require separate analysis. The stem expressly states a legal duty here.

What to remember: Obedience does not extend to unlawful client instructions.

Check the rule: California DRE, Agency: general agency principles.

Study this topicPSI national broker outline VI

Correct answer: D. $3,200

"$320" is 0.1% of the loan, one-tenth of a point. "$1,600" is half a point, or 0.5% of the loan. "$32,000" is 10% of the loan, or ten points. "$3,200" is correct: one point is 1% of $320,000, which equals $3,200. The loan amount is the base. Change the facts: At half a discount point, the charge would be $1,600. The actual rate reduction for points depends on the lender's offer.

What to remember: A point is calculated from principal. Convert the percentage before multiplying.

Check the rule: California DRE, Real Estate Finance: notes and security instruments.

Study this topicPSI national broker outline IV

Correct answer: B. Physical possibility

"Legal permissibility" asks whether law permits the use, not whether the building physically fits. "Physical possibility" addresses dimensions, shape, access and other physical site constraints. "Financial feasibility alone" asks whether expected returns justify the required costs. "Maximum productivity after passing all other tests" selects the use yielding the greatest supported value among uses that pass the other tests. Change the facts: If zoning prohibits the building even though it fits, the legal-permissibility test fails.

What to remember: Highest and best use must also be legally permissible, financially feasible, and maximally productive.

Check the rule: California DRE, Appraisal and Valuation: valuation methods.

Study this topicPSI national broker outline III

Correct answer: D. Loyalty

"Accurate information" is not limited to advocacy for represented clients; information supplied to customers must also be accurate. "Honesty" is also required in dealings with customers. "Good faith" also applies to dealings beyond loyal client advocacy. "Loyalty" is the fiduciary advocacy duty that distinguishes the represented client's position in this question. Change the facts: If the buyer became the agent's represented client under a lawful arrangement, client duties would apply to that relationship.

What to remember: An agent must put the client’s lawful interests ahead of an undisclosed personal advantage.

Check the rule: California DRE, Agency: general agency principles.

Study this topicPSI national broker outline VI

Correct answer: B. The property or an interest is sold or transferred without required consent

"The borrower paints the kitchen" does not itself describe a transfer of an interest in the property. "The property or an interest is sold or transferred without required consent" is the transfer event addressed by a due-on-sale clause. Applicable federal protections can restrict enforcement for specified transfers. "The borrower pays the debt in full" satisfies the debt rather than triggering a transfer restriction. "The tax assessor lowers the assessment" does not by itself transfer the property. Change the facts: If a transfer falls within a statutory protection, the existence of a due-on-sale clause alone does not settle whether acceleration is permitted.

What to remember: A due-on-sale clause concerns a transfer; federal law also protects certain transfers from enforcement.

Check the rule: California DRE, Real Estate Finance: notes and security instruments.

Study this topicPSI national broker outline IV

Correct answer: C. 40

"20" is half of the nominal quarter-quarter acreage. "80" is half of a nominal quarter section. "40" is correct: 640 acres divided by 4 and then by 4 equals 40 acres. "160" is the nominal acreage of a quarter section, before the second division. Change the facts: A nominal half of a quarter section is 80 acres. Actual surveyed acreage can differ from nominal subdivisions.

What to remember: A quarter of a quarter section is one-sixteenth of a nominal 640-acre section.

Check the rule: BLM 2017 Specifications for Descriptions of Land: parcel descriptions and nominal subdivisions.

Study this topicPSI national broker outline I

Correct answer: C. 18,000 square feet

"540 square feet" is the numerical perimeter, 2 x (120 + 150), with the wrong unit attached. "27,000 square feet" does not equal the product of the two supplied dimensions. "18,000 square feet" is correct: 120 x 150 = 18,000 square feet. "43,560 square feet" is the number of square feet in one acre, not this lot's area. Change the facts: If the same lot were 120 feet by 180 feet, its area would be 21,600 square feet.

What to remember: Area uses length times width. Adding the dimensions calculates part of a perimeter instead.

Check the rule: BLM 2017 Specifications for Descriptions of Land: parcel descriptions and nominal subdivisions.

Study this topicPSI national broker outline I

Correct answer: D. $445,000

"$442,000" adds only $2,000 to the competing price, not the stated $5,000. "$453,000" does not follow the formula and exceeds the cap. "$450,000" is the ceiling, but the qualifying offer plus $5,000 is still below it. "$445,000" is correct: $440,000 + $5,000 = $445,000, subject to the stated qualifying conditions. Change the facts: With a qualifying competing offer of $448,000, the uncapped result would be $453,000, so the $450,000 cap would control.

What to remember: Apply the increment first, then check the cap and every stated qualifying condition.

Check the rule: California DRE, Transfer of Interests: general contract principles.

Study this topicPSI national broker outline V

Correct answer: C. It is credited against the buyer's remaining settlement obligation

"It reduces the contract sale price" confuses paying part of the agreed price with reducing the price itself. "It is always paid to the lender as interest" does not describe how an applied purchase deposit is credited. "It is credited against the buyer's remaining settlement obligation" recognizes that these buyer funds were already paid and reduce what remains to be funded. "It increases the seller's mortgage payoff" does not follow because applying the buyer's deposit does not change the seller's payoff figure. Change the facts: If the deposit were lawfully returned before closing rather than available as a closing credit, it could not also be deducted as funds already applied at settlement.

What to remember: An earnest-money deposit already paid reduces the remaining cash due; do not pay it twice.

Check the rule: CFPB, Closing Disclosure explainer.

Study this topicPSI national broker outline XI

Correct answer: B. Secure disposal of the report and information from it

"Leaving it in an open recycling bin" leaves sensitive information exposed instead of securely disposing of it. "Secure disposal of the report and information from it" matches the duty to dispose of consumer-report information securely when its use is finished and no retention duty requires keeping it. "Posting it for future landlords" discloses information rather than securely destroying it. "Selling the applicant’s data to neighbors" is unrelated to permissible secure disposal and exposes the applicant's information. Change the facts: If a legal retention duty still applied, preserve the required record securely for that period rather than destroying it prematurely.

What to remember: Protect information during retention and dispose of it securely when no longer needed.

Check the rule: FTC, Using Consumer Reports: What Landlords Need to Know.

Study this topicPSI national broker outline VIII

Correct answer: B. A survey locates land and improvements, while an inspection evaluates property components

"A survey evaluates the furnace and an inspection establishes boundaries" reverses the two assignments. "A survey locates land and improvements, while an inspection evaluates property components" correctly distinguishes location evidence from evaluation of building components. Each service has its own assignment and limits. "They are identical services" ignores the distinct questions each service addresses. "Neither requires specialized professional judgment" dismisses the specialized judgment involved in both services. Change the facts: A buyer with both a suspected encroachment and a faulty furnace may need both services, rather than assuming one report answers everything.

What to remember: Inspection and survey reports answer different questions; neither replaces the other.

Check the rule: California DRE glossary: survey; CFPB home-inspection guidance; CFPB: schedule a home inspection.

Study this topicPSI national broker outline VII

Correct answer: D. Retaliation

"Accretion" is an addition to land, not punishment for asserting housing rights. "Substitution" is a valuation principle rather than protected activity. "Contribution" is a value principle rather than a housing-rights protection. "Retaliation" identifies punishment for exercising fair housing rights. The underlying complaint need not result in a successful case for retaliation concerns to arise. Change the facts: Threatening a person for helping another tenant file a complaint can also implicate the protections against interference and retaliation.

What to remember: Retaliation can be unlawful even when it follows, rather than accompanies, the original complaint.

Check the rule: HUD, Housing Discrimination Under the Fair Housing Act.

Study this topicPSI national broker outline X

Correct answer: A. Steering

"Steering" is channeling the buyer's housing choices based on a protected characteristic. "Blockbusting" uses protected demographic fears to induce owners to sell for profit, a different pattern. "Redlining" concerns discriminatory lending or service-area treatment rather than this agent's neighborhood selection. "Partition" divides co-owned property rather than channels a buyer's search. Change the facts: If the agent instead pressured owners to sell by invoking a protected group's arrival, blockbusting would be the relevant pattern.

What to remember: Steering changes a person’s housing choices because of a protected characteristic.

Check the rule: HUD, Housing Discrimination Under the Fair Housing Act.

Study this topicPSI national broker outline X

Correct answer: B. Bank, book, and total individual-ledger balances

"List price, appraisal, and loan amount" compares transaction pricing and financing figures rather than entrusted-fund records. "Bank, book, and total individual-ledger balances" connects the adjusted bank balance, the trust-account book balance and the total of the individual beneficiary or transaction ledgers. "Commission, tax, and insurance" lists expenses that do not establish the amount held for each beneficiary. "Rent, deposit, and late fee" lists charges rather than reconciling the bank and accounting records. Change the facts: If one transaction ledger were negative while total balances appeared to agree, the apparent reconciliation would not excuse that separate shortage or accounting problem.

What to remember: Reconcile bank, control account, and individual ledgers after legitimate timing adjustments.

Check the rule: California DRE, Trust Funds: accounting and reconciliation principles.

Study this topicPSI national broker outline X

Correct answer: C. A 10-day lead inspection or risk-assessment opportunity, unless changed by mutual written agreement or waived in writing

"A guarantee that a visual inspection proves no lead exists" is not a federal guarantee of a lead-free property. "A mandatory seller-funded removal of all lead before signing" overstates the disclosure rule; it does not generally impose seller-funded removal before every covered sale. "A 10-day lead inspection or risk-assessment opportunity, unless changed by mutual written agreement or waived in writing" describes the separate buyer evaluation opportunity, with the permitted mutual written agreement or written-waiver qualification. "A right that applies only to commercial warehouses" misstates the covered residential housing context. Change the facts: If the buyer validly waived the evaluation opportunity in writing, the opportunity could be waived. The other applicable disclosure duties would remain.

What to remember: The lead-evaluation period may be changed by mutual written agreement or waived in writing.

Check the rule: EPA, Real Estate Disclosures about Potential Lead Hazards.

Study this topicPSI national broker outline VII

Correct answer: D. Authority ends, but the seller may still face contractual liability

"The broker may continue marketing because the term remains" ignores the end of the agent's actual authority following revocation. "The purchase contract automatically forms" confuses a service relationship ending with formation of a buyer-seller contract. "Revocation is impossible in ordinary agency" confuses the power to revoke ordinary authority with the contractual right to do so without liability. "Authority ends, but the seller may still face contractual liability" separates the two issues: authority ends, but unjustified early revocation can breach the service agreement. Change the facts: If the parties mutually terminated the agreement and settled their obligations, the potential breach question would be different.

What to remember: The power to revoke authority and liability for breaking a contract are separate questions.

Check the rule: California DRE, Agency: general agency principles.

Study this topicPSI national broker outline VI

Correct answer: A. Price

"Price" is the actual amount paid in the transaction. "Value opinion" is an estimate or opinion of worth and need not equal that price. "Contribution" is a feature's effect on the whole property's value. "Utility" concerns usefulness, which can affect demand but is not the amount paid. Change the facts: An appraiser's supported estimate of what the property is worth would be a value opinion.

What to remember: Price is an amount in a transaction; value is an opinion under a stated definition and date.

Check the rule: California DRE, Appraisal and Valuation: valuation methods.

Study this topicPSI national broker outline III

Correct answer: C. License

"Fee simple" is an ownership estate, not merely personal permission. "Mortgage" is a security instrument rather than temporary permission. "License" fits generally revocable personal permission to use the land. "Mechanics lien" is a potential lien for qualifying labor or materials, not permission to enter. Change the facts: A permanent right benefiting neighboring land would ordinarily raise an easement question, rather than a simple license.

What to remember: A license is permission to use, not a permanent ownership estate.

Check the rule: California DRE, Title to Real Property: general ownership principles.

Study this topicPSI national broker outline I

Correct answer: A. Blockbusting

"Blockbusting" describes inducing sales for profit through fears about a protected group's entry. The prediction is the pressure tactic, not a supported valuation conclusion. "Redlining" is a different discriminatory service or lending pattern. "Reconciliation" weighs value indications rather than pressures owners through protected-class fears. "Appraisal" is a value opinion, not a label that legitimizes discriminatory sales pressure. Change the facts: A lender denying credit because of the neighborhood's protected demographic composition would raise a different discrimination analysis, commonly associated with redlining.

What to remember: Blockbusting induces sales for profit through claims about protected demographic change.

Check the rule: HUD, Housing Discrimination Under the Fair Housing Act.

Study this topicPSI national broker outline X

Correct answer: A. Describe the observation and recommend timely evaluation by the appropriate licensed professional

"Describe the observation and recommend timely evaluation by the appropriate licensed professional" reports the observed concern without inventing a structural diagnosis and directs timely evaluation to the appropriate qualified professional. "Guarantee that the foundation is failing" states a conclusion the observation alone does not establish. "Patch the crack before the inspection" can conceal evidence rather than inform the parties and investigate the concern. "Remove the inspection contingency" removes protection rather than addressing the unresolved condition. Change the facts: A qualified engineer's completed evaluation could support a more specific description, within the report's actual findings and limits.

What to remember: A visible crack may need expert diagnosis even when an agent can see it clearly.

Check the rule: CFPB, Schedule a home inspection.

Study this topicPSI national broker outline VII

Correct answer: D. $120,200

"$111,200" omits the $9,000 other income from the otherwise correct calculation. "$131,000" omits the $10,800 vacancy and collection deduction. "$122,000" omits both the loss deduction and the other income: $180,000 - $58,000. "$120,200" is correct: $180,000 - (6% x $180,000) + $9,000 - $58,000 = $120,200. Debt service and income tax are not operating expenses in this NOI calculation. Change the facts: If other income were zero, NOI would be $111,200, with the same rent potential, vacancy rate and operating expenses.

What to remember: Deduct vacancy and operating expenses as stated; exclude debt service from NOI.

Check the rule: California DRE, Appraisal and Valuation: valuation methods.

Study this topicPSI national broker outline XI

Correct answer: B. 80%

"75%" would fit a $253,125 loan at this value, not $270,000. "80%" is correct: $270,000 / $337,500 = 0.80 = 80%. "90%" would require a $303,750 loan at this value. "125%" comes from reversing the fraction, $337,500 / $270,000. Change the facts: At the same property value, reducing the loan to $253,125 produces 75% LTV.

What to remember: Use the loan amount as the numerator, not the down payment.

Check the rule: California DRE, Real Estate Finance: notes and security instruments.

Study this topicPSI national broker outline IV

Correct answer: D. Choosing a winner without lawful authority

"Reviewing the signed contract" is appropriate because the contract helps identify release conditions, though an actual dispute may require further authority. "Keeping an audit trail" preserves accountability for the entrusted funds. "Seeking legal guidance" is appropriate when authority or the dispute procedure is unclear. "Choosing a winner without lawful authority" is the step to avoid. Holding the deposit does not authorize the escrow holder to adjudicate the parties' dispute. Change the facts: If a valid court order directed disbursement, the holder would evaluate and follow that authority rather than choose a winner independently.

What to remember: A disputed deposit does not give the holder authority to decide who deserves it.

Check the rule: California DRE, Trust Funds: accounting and reconciliation principles.

Study this topicPSI national broker outline X

Correct answer: B. Conditioning the incentive on positive sentiment is prohibited

"A payment disclosure always makes the offer lawful" is incorrect because disclosure does not cure an incentive conditioned on a favorable consumer review. "Conditioning the incentive on positive sentiment is prohibited" matches the rule's prohibition on compensation conditioned expressly or implicitly on a particular review sentiment. "The offer is lawful whenever the customer really used the service" confuses a genuine customer relationship with permission to buy a favorable sentiment. "The rule applies only to reviews purchased from strangers" misstates the rule; it is not confined to reviews bought from people who never used the service. Change the facts: An incentive for an honest review with no sentiment condition removes this particular condition, but disclosure, platform rules and other applicable requirements still need review.

What to remember: Incentivizing an honest review without requiring positive sentiment is a different issue from buying a five-star review.

Check the rule: 16 CFR 465.4: incentives conditioned on positive or negative consumer reviews; FTC: consumer-review rule questions and answers.

Study this topicPSI national broker outline X

Correct answer: C. Clearly disclose the paid relationship with the endorsement

"Call the promotion an independent review" misrepresents a paid promotion as independent. "Put the relationship only in an unrelated terms page" hides the material connection away from the endorsement. "Clearly disclose the paid relationship with the endorsement" makes the paid relationship clear where viewers encounter the endorsement. Format and placement must make the disclosure understandable and noticeable. "Rely on viewers to guess the payment" does not provide the disclosure merely because some viewers might suspect payment. Change the facts: If the influencer received a free service rather than cash, that material connection could still require disclosure.

What to remember: A paid endorsement should not be presented as an independent, unpaid opinion.

Check the rule: FTC, Endorsement Guides: what people are asking.

Study this topicPSI national broker outline X

Correct answer: B. The contingency’s notice and deadline terms

"The agent’s preferred lender’s opinion alone" does not replace the parties' signed contingency or determine contractual termination by itself. "The contingency’s notice and deadline terms" identifies the contract provisions that establish available remedies and how to exercise them. "Whether the seller has packed" does not determine the financing condition or notice requirements. "The listing’s original price" does not determine whether the buyer preserved a termination right. Change the facts: If the parties validly extended the loan-approval date in writing, use the amended deadline and terms rather than the original date alone.

What to remember: Contingencies have conditions and deadlines. Do not assume a universal automatic outcome.

Check the rule: California DRE, Transfer of Interests: general contract principles.

Study this topicPSI national broker outline V

Correct answer: D. A limited potential compensation right

"Every agency duty" overstates a protection clause's usual function. Continuing duties can have other legal bases. "Unlimited marketing authority" incorrectly treats a compensation provision as renewed marketing permission. "Authority to accept an offer for the seller" grants contract-signing authority that a compensation clause does not itself supply. "A limited potential compensation right" matches a defined potential fee right for a qualifying later sale. The clause's conditions and exceptions decide whether it applies. Change the facts: A new valid listing would create a new representation term; a protection clause alone ordinarily does not do that.

What to remember: A protection clause concerns specified post-expiration compensation conditions, not an indefinite listing.

Check the rule: California DRE, Agency: general agency principles.

Study this topicPSI national broker outline VI

Correct answer: B. The promissory note

"The deed conveying title to the buyer" conveys the grantor's stated property interest rather than the borrower's repayment promise. "The promissory note" contains the personal promise and repayment terms. The separate mortgage provides security. "The appraisal report" offers a value opinion rather than promising repayment. "The listing agreement" governs brokerage services rather than the loan debt. Change the facts: If the question asked which instrument places the property behind the debt as security, the mortgage would be the answer.

What to remember: The note evidences the debt; the mortgage or deed of trust provides security.

Check the rule: California DRE, Real Estate Finance: notes and security instruments.

Study this topicPSI national broker outline IV

Correct answer: C. Unenforceable

"Executed" means performance is complete, which an oral agreement alone does not establish. "Void for illegal purpose" confuses a writing defect with an illegal objective. The facts do not state an illegal purpose. "Unenforceable" matches the stipulated signed-writing requirement and absence of an exception. Enforceability is different from performance status. "Ratified automatically" assumes an automatic cure that the facts expressly do not supply. Change the facts: If a legally recognized exception applied, the enforceability analysis could change. This question deliberately excludes that possibility.

What to remember: The statute of frauds concerns required written evidence. Check applicable exceptions before declaring an outcome.

Check the rule: California DRE, Transfer of Interests: general contract principles.

Study this topicPSI national broker outline V

Correct answer: D. Obtain authorization from that sponsoring broker and identify the listing broker as required.

The rule requires authorization from the sponsoring broker with the exclusive agreement and identification of the listing broker. Access to a listing or its photos is not, by itself, the authorization described in this rule. If the facts change: Permission alone does not complete the advertising requirement. The sponsoring broker with the exclusive listing must also be identified.

Check the rule: 68 Ill. Adm. Code 1450.715: advertising.

Study this topicPSI broker outline II.B

Correct answer: B. Two bedrooms, step-free entrance, near the train station.

Describe the home's features and location without excluding people based on protected characteristics. The other options signal a preference involving familial status or religion. The same fair housing principles apply online and in print. If the facts change: Replacing an ad with neutral wording does not make discriminatory applicant screening lawful. The selection process also has to comply with fair housing law.

Check the rule: 775 ILCS 5/3-102: fair housing practices.

Study this topicPSI broker outline III.G

Correct answer: D. No later than the beginning of work as the designated agent for the consumer.

Section 15-35(a) requires the notice no later than beginning work as a designated agent. It may be part of the brokerage agreement or a separate retained document, with a copy to the consumer or client. If the facts change: If the buyer has not paid a retainer, the deadline is unchanged. Beginning designated-agent work, rather than collecting money, triggers this notice.

Check the rule: 225 ILCS 454/15-35: agency disclosure.

Study this topicPSI broker outline IV.A

Correct answer: D. Remove the outdated listing advertising within a reasonable time, considering control over the ad and ease of removal.

Rule 1450.715(a)(3) requires removal within a reasonable time after closing or the listing agreement ends, whichever occurs first. The nature of the ad, control over removal, ease of removal and knowledge that it is still running all matter. The rule does not give every ad the same fixed number of days. If the facts change: If the listing expires before a sale closes, expiry starts the reasonable-time removal analysis. Closing is not the only trigger.

Check the rule: 68 Ill. Adm. Code 1450.715: advertising.

Study this topicPSI broker outline II.B

Correct answer: C. Offering negotiation services for another for valuable consideration.

The broker definition reaches offering or attempting covered acts for another in return for compensation or valuable consideration. A rent discount can be consideration. Neither a completed negotiation nor a cash payment is needed for this concern. If the facts change: Being paid with a gift card rather than a rent discount would still involve valuable consideration. Changing the payment label does not remove the licensing concern.

Check the rule: 225 ILCS 454/1-10: definitions.

Study this topicPSI broker outline I.A

Correct answer: D. Do not impose the pet fee for the assistance animal; actual animal damage can still be charged as allowed.

Section 10(f) bars a pet-related fee, deposit or assessment for an assistance animal. It allows repair costs for animal damage to the dwelling or common areas, excluding reasonable wear and tear, on the same basis as damage caused by other residents. The accommodation does not require disclosure of a specific diagnosis. If the facts change: If the animal causes damage beyond reasonable wear and tear, permitted repair charges remain possible. Calling an upfront pet fee a damage charge does not make it permissible.

Check the rule: 310 ILCS 120/10: assistance animals.

Study this topicPSI broker outline III.H

Correct answer: B. That the property is broker-owned or agent-owned.

The owner-sale provision requires broker-owned or agent-owned wording in the advertising or sign. It also bars using the name of a sponsoring broker that is not involved. Inactive status does not remove this advertising disclosure. If the facts change: The separate broker-advertising provision in Section 10-30(c)(1) treats a broker's yard sign differently. Do not apply this By Owner wording requirement to every form of licensee-owned listing.

Check the rule: 225 ILCS 454/10-30: advertising.

Study this topicPSI broker outline II.B

Correct answer: A. No. Give it in time to prevent disclosure of the customer's confidential information.

The no-agency rule has both a protective timing requirement and an outside deadline. Preparation of an offer is the latest allowed point, not permission to accept customer confidences before then without the notice. If the facts change: If no confidential discussion happens first, preparation of an offer is still the outside deadline for written no-agency notice. It cannot be postponed to acceptance.

Check the rule: 225 ILCS 454/15-35: agency disclosure.

Study this topicPSI broker outline IV.A

Correct answer: B. The bill also depends on rates, exemptions, and other applicable tax factors.

An assessment is one input into the tax calculation. Taxing-district levies, applicable rates, equalization, and exemptions can also affect the final bill. A lower assessment alone does not establish an identical percentage reduction in the bill. If the facts change: With the same tax rate and exemptions, a lower taxable assessed value lowers the calculated tax. A prediction about the actual bill still needs the other inputs.

Check the rule: Illinois Department of Revenue: The Illinois Property Tax System, January 2026 (pp. 6, 18, 22).

Study this topicPSI broker outline III.F

Correct answer: C. Property is a listed misleading term unless followed by Team.

The rule lists property among terms considered inherently misleading unless followed by the word Team. Sponsor approval does not override that requirement. The whole advertisement must also identify the sponsoring brokerage appropriately. If the facts change: Adding Team after Partners still leaves Property without the required following word. Sponsor approval alone does not cure the proposed name.

Check the rule: 68 Ill. Adm. Code 1450.715: advertising.

Study this topicPSI broker outline II.H

Correct answer: B. No. Compensation alone does not determine the agency relationship.

Section 15-40 separates compensation from agency. The payment source alone neither creates nor proves the claimed seller representation. Look to the actual brokerage relationship and required disclosures. If the facts change: A buyer paying the brokerage directly also does not, by payment alone, establish agency. Examine the relationship and the required agreements and disclosures.

Check the rule: 225 ILCS 454/15-40: compensation and agency.

Study this topicPSI broker outline IV.C

Correct answer: A. No. A commission claim does not justify withholding authorized escrow funds.

Rule 1450.750(g)(4) prohibits withholding an authorized escrow disbursement because of a licensee's commission or compensation claim. Pursuing compensation and handling entrusted funds are separate duties. If the facts change: A genuine dispute between the transaction parties over entitlement to the deposit raises the separate disputed-escrow rules. This question states that release is already authorized.

Check the rule: 68 Ill. Adm. Code 1450.750: escrow money.

Study this topicPSI broker outline II.I

Correct answer: A. No. That licensee's referral fees are limited to residential lease or rental transactions.

Rule 1450.780(b)(2) restricts referral fees for residential leasing agents to a lease or rental of residential real estate. A home purchase is outside that permission even if another broker performs the sale work. If the facts change: A referral for a residential rental fits the stated license category. The other referral-fee and sponsorship requirements still apply.

Check the rule: 68 Ill. Adm. Code 1450.780: referral fees.

Study this topicPSI broker outline I.C

Correct answer: C. Keep the price confidential unless the seller permits its disclosure.

Section 15-45(a) distinguishes consent to dual representation from permission to disclose a client's confidential information. The seller's undisclosed minimum price is not available to the buyer merely because both signed a dual-agency consent. Obtain the seller's permission before disclosing it. If the facts change: If the seller later permits disclosure of that price, the broker may disclose within that permission. The dual-agency consent itself is not that authorization.

Check the rule: 225 ILCS 454/15-45: dual agency.

Study this topicPSI broker outline IV.A

Correct answer: C. $200.

Section 31-10 excludes the mortgage still outstanding when the transferring document states that the property transfers subject to it. Taxable value is $300,000 - $100,000 = $200,000. At $0.50 per $500 or fraction, 400 units cost $200. This is the state tax only. If the facts change: If the $100,000 mortgage is paid off at closing instead, this outstanding-mortgage deduction is unavailable. With the same $300,000 taxable value and no other deduction, state tax would be $300.

Check the rule: 35 ILCS 200/31-10: state transfer tax.

Study this topicPSI broker outline III.C

Correct answer: B. The licensee remains responsible for compliance with the Act and rules.

Rule 1450.750(n) expressly preserves the licensee's responsibility when a third-party service collects, manages, transmits, or disburses earnest money. Outsourcing the mechanics does not outsource the legal duty. If the facts change: Using a different payment platform does not change the result while the licensee is still acting as escrow agent. Check compliance rather than relying on the vendor's assurances.

Check the rule: 68 Ill. Adm. Code 1450.750: escrow money.

Study this topicPSI broker outline II.I

Correct answer: A. Refer that client to another designated agent.

Rule 1450.830 and Section 15-15(b) require the referral when an affected client requests it. Giving written notice is one step; honoring the requested referral is another. Continue to protect each client's confidential information. If the facts change: Two offers on different homes do not meet this rule's same-parcel or same-unit definition. The agent must still protect each client's confidential information.

Check the rule: 68 Ill. Adm. Code 1450.830: contemporaneous offers; 225 ILCS 454/15-15: duties to a client.

Study this topicPSI broker outline IV.A

Correct answer: A. $2,000.

Section 9(a) generally allocates common expenses in the same ratio as the ownership percentage in the common elements stated in the declaration. Here 2% of $100,000 is $2,000. The question excludes special allocations that could change the calculation. If the facts change: At a 3% declaration share with the same $100,000 expenses and assumptions, the unit's share would be $3,000. Occupant count is not the stated allocation basis.

Check the rule: 765 ILCS 605/9: condominium common expenses.

Study this topicPSI broker outline III.A

Correct answer: A. Compensation for an unlicensed assistant cannot be transaction based.

Rule 1450.740(a) prohibits transaction-based compensation for unlicensed assistants. Permitted clerical duties do not make a per-closing payment plan acceptable. The brokerage should use a lawful compensation arrangement for the administrative work. If the facts change: A flat administrative wage unrelated to closings removes this transaction-based-pay problem. The assistant's duties must still stay within the unlicensed role.

Check the rule: 68 Ill. Adm. Code 1450.740: unlicensed assistants.

Study this topicPSI broker outline II.G

Correct answer: D. The intended purpose, methodology, assumptions, and the required not-an-appraisal statement.

Section 10-45(b) requires these elements along with the property interest description, applicable interest disclosure, and the broker's identifying information and signature. A bare price is not a compliant substitute. If the facts change: If a lender wants the report as the primary basis for a mortgage-origination market value, Section 10-45(a)(4) does not permit that use. A disclaimer cannot cure an impermissible purpose.

Check the rule: 225 ILCS 454/10-45: BPO and CMA requirements.

Study this topicPSI broker outline II.L

Correct answer: A. Both tenants must sign an effective lease of the homestead.

Section 1c requires both tenants' signatures for an effective lease of homestead property held in tenancy by the entirety. One spouse's signature in their own capacity does not supply the other's. The question rules out anyone signing on the other spouse's behalf. If the facts change: If both tenants sign the lease, this missing-signature problem is resolved. That alone does not establish that every other lease requirement has been met.

Check the rule: 765 ILCS 1005/1c: tenancy by the entirety.

Study this topicPSI broker outline III.A

Correct answer: D. No. The Act requires disclosure of known material defects but no specific investigation to complete the report.

Section 25 requires actual-knowledge disclosure and says the seller need not make a specific investigation or inquiry to complete the statement. This does not allow concealment of a known defect or replace a buyer's inspection. If the facts change: If the seller already knows of a material defect behind the wall, the duty to disclose that knowledge applies. Not opening the wall is no excuse to withhold a known defect.

Check the rule: 765 ILCS 77/25: actual knowledge.

Study this topicPSI broker outline IV.D

Correct answer: C. Yes. The consumer-initiated contact is one of the rule's permitted conditions.

The rule allows a discussion of a possible future agreement when the consumer initiates contact. This is not permission to induce a breach of the current exclusive agreement or pretend it has already ended. If the facts change: If the broker initiates the contact, the consumer-initiated exception no longer applies. The rule has a separate route with written requests and other conditions; it is not unrestricted solicitation.

Check the rule: 68 Ill. Adm. Code 1450.770: brokerage agreements.

Study this topicPSI broker outline II.D

Correct answer: C. The high-school credential and 75-hour prelicense education requirements are waived; the other broker application requirements remain.

Section 5-27(b) exempts this applicant from the high-school credential and 75-hour prelicense education requirements. It does not waive the broker exam, application or applicable fees. This question concerns applying for a broker license, rather than an attorney acting within a separate statutory exemption for legal work. If the facts change: An applicant whose Illinois law license is no longer in active standing cannot rely on this exemption merely because they once practiced law.

Check the rule: 225 ILCS 454/5-27: broker qualifications.

Study this topicPSI broker outline I.D

Correct answer: C. The stated division fits the five-acre-or-more exemption, while local requirements still need review.

Section 1(b)(1) exempts divisions into parcels of at least five acres that involve no new streets or access easements. The Act also preserves certain local authority, so a state exemption should not be described as universal permission to ignore local requirements. If the facts change: If the division adds a new access easement, the facts no longer fit this particular exemption. Review the other provisions before deciding whether a plat is required.

Check the rule: 765 ILCS 205/1: subdivisions and exemptions.

Study this topicPSI broker outline III.E

Correct answer: B. It prohibits this interference with the existing agency relationship.

The rule bars inducing termination or amendment of another licensee's exclusive agency agreement to obtain a referral fee. Merely communicating relocation benefits is different when it does not advise or encourage breaking the agreement. If the facts change: Communicating relocation benefits without advising or encouraging termination or amendment is treated differently under subsection (b)(5). The coaching in this question crosses that line.

Check the rule: 68 Ill. Adm. Code 1450.780: referral fees.

Study this topicPSI broker outline II.F

Correct answer: B. The report communicates the seller's required knowledge; it is not a warranty or a substitute for inspections.

The statutory report explains its limits and encourages inspections. A seller must disclose required known conditions, but completing the form does not certify every concealed component or guarantee future performance. If the facts change: An as-is sale can still be subject to the Act. An as-is term does not turn the report into a warranty or automatically excuse required disclosure.

Check the rule: 765 ILCS 77/35: disclosure report.

Study this topicPSI broker outline IV.D

Correct answer: B. The landlord may not require electronic funds transfer as the payment method.

Section 4(b) prohibits a landlord from requiring electronic funds transfer for amounts due under the residential agreements it covers. Subsection (d) applies the rule to agreements executed after January 1, 2024, which includes this 2026 lease. The tenant may choose an offered electronic option; the landlord cannot make it mandatory. If the facts change: A tenant voluntarily choosing recurring electronic payment is different from a lease that requires it. Signing a mandatory-payment clause does not remove the statutory restriction.

Check the rule: 765 ILCS 705/4: electronic funds transfer.

Study this topicPSI broker outline III.I

Correct answer: D. Use a written amendment signed by the parties to the brokerage agreement.

A change to the amount or timing of compensation must be in writing and signed by the brokerage-agreement parties. The purchase contract may not be used to amend compensation in the brokerage agreement. If the facts change: Changing only the date the commission is payable also requires a signed written amendment. The rule covers payment timing as well as the amount.

Check the rule: 68 Ill. Adm. Code 1450.770: brokerage agreements.

Study this topicPSI broker outline II.D

Correct answer: B. The Act exempts the transfer of new residential property that has never been occupied.

Section 15(9) exempts a transfer of newly constructed residential real property that has never been occupied. It expressly excludes rehabilitation of existing residential property from that category. The exemption is from this Act; other applicable disclosure and construction duties still need attention. If the facts change: Rehabilitating an existing home does not qualify it for this new-construction exemption. A seller must check whether a different exemption applies.

Check the rule: 765 ILCS 77/15: exempt transfers.

Study this topicPSI broker outline IV.D

Correct answer: A. No. The nonprincipal unlicensed person cannot receive that referral fee.

Section 10-15 and Rule 1450.780 prohibit paying a referral fee to an unlicensed person who is not a principal to the transaction. The question deliberately identifies the neighbor as a nonprincipal; a transaction-party incentive raises a different analysis. If the facts change: An incentive offered to a person who is actually a party to the transaction is a different statutory category. It must still comply with applicable law, including RESPA where relevant.

Check the rule: 225 ILCS 454/10-15: referral fees; 68 Ill. Adm. Code 1450.780: referral fees.

Study this topicPSI broker outline II.E

Correct answer: D. The new construction must include passive radon-resistant construction.

Section 20 requires passive radon-resistant construction for the new residential construction covered by the Act. This construction requirement is separate from radon disclosure in a property sale and is not a promise that future radon levels will be zero. If the facts change: A later radon measurement can still show an elevated level. Passive construction is a required preventive feature, rather than a guarantee about every future test.

Check the rule: 420 ILCS 52/20: passive radon construction.

Study this topicPSI broker outline III.K

Correct answer: B. Complete the three 15-hour post-license courses and their required final exams.

Section 5-50(b) requires 45 post-license hours in three 15-hour courses, each with a 50-question provider final exam. Because this first license was issued more than 180 days before renewal, the courses are due before that first renewal. The within-180-days exception instead allows completion by the second renewal. If the facts change: If the first license is issued within 180 days before the next renewal deadline, Section 5-50(b) allows the post-license work by the second renewal.

Check the rule: 225 ILCS 454/5-50: renewal and post-license education.

Study this topicPSI broker outline I.G

Correct answer: D. No. The statute also requires the disclosure in the written renewal lease.

Section 25 expressly addresses the written lease or written renewal lease and requires signatures of both parties. Prior disclosure is not a reason to omit the required information from the renewal. If the facts change: Being outside a mapped floodplain does not eliminate the separate lower-level disclosure of known flooding to the unit or the property within the preceding ten years.

Check the rule: 765 ILCS 705/25: rental flood disclosure.

Study this topicPSI broker outline IV.E

Correct answer: C. No. The new sponsorship must be registered as required before licensed activities begin.

Section 5-27(c) requires valid sponsorship to be registered before an applicant begins licensed activities, and Section 5-40 governs sponsorship changes. A private employment agreement and the required licensing registration are distinct steps. If the facts change: Once a valid sponsorship is registered, that registration gap is resolved. The signed employment agreement is still a separate requirement.

Check the rule: 225 ILCS 454/5-27: broker qualifications; 225 ILCS 454/5-40: sponsorship.

Study this topicPSI broker outline II.C

Correct answer: C. The broker named in the signed instrument, rather than its employee or independent contractor.

Section 10(a) makes the lien available to the broker named in the qualifying instrument, not that broker's employee or independent contractor. The remaining entitlement, recording, and notice requirements still must be satisfied. If the facts change: Being named in the signed instrument does not by itself establish an enforceable lien. The applicable fee entitlement, recording and notice requirements still matter.

Check the rule: 770 ILCS 15/10: commercial broker liens.

Study this topicPSI broker outline III.J

Correct answer: A. Allow a ten-day opportunity unless the parties agree in writing to a different period or the buyer waives it in writing.

The federal rule ordinarily provides a ten-day opportunity for a lead inspection or risk assessment. The period can be changed by written agreement, or the buyer can waive the opportunity in writing. That does not waive the separate disclosure package. If the facts change: A buyer's written waiver of the inspection opportunity does not waive the required lead pamphlet, disclosures and warning for covered housing.

Check the rule: U.S. EPA: lead disclosures for sellers and lessors; 40 CFR 745.110: inspection opportunity and written waiver.

Study this topicPSI broker outline IV.E

Correct answer: C. By 3 p.m. Wednesday, 24 hours after signing.

A true copy is due by 3 p.m. Wednesday. Rule 1450.775(c) measures 24 hours from the person's signing or initialing of the original or corrected document. It does not allow three business days or let the broker wait until closing. If the facts change: A later correction that the buyer initials starts its own 24-hour copy deadline. Deliver the true corrected document, rather than relying on a copy of the earlier version.

Check the rule: 68 Ill. Adm. Code 1450.775: written agreements.

Study this topicPSI broker outline II.J

Correct answer: A. Refuse to carry out the unlawful instruction.

Section 15-15(a)(2)(E) requires obedience to specific client directions only when they are lawful. Subsection (a)(5) also requires compliance with fair housing and civil rights laws. A client's insistence, signature or promise to take responsibility does not authorize discrimination. If the facts change: Putting the instruction in writing does not make it lawful. A discriminatory clause in the listing agreement also conflicts with the fair housing rules.

Check the rule: 225 ILCS 454/15-15: duties to a client.

Study this topicPSI broker outline II.A

Correct answer: D. To protect the public through standards of competence and conduct.

Section 1-5 identifies protection of the public and minimum competence and professional-conduct standards as the purpose of the Act. Licensing is not a guarantee of investment results or a mechanism for setting uniform commissions. If the facts change: A licensed broker's client can still lose money on a transaction. Licensing standards do not insure investment performance.

Check the rule: 225 ILCS 454/1-5: public protection.

Study this topicPSI broker outline II.N