Form C: 140 practice questions and answers

Correct answer: D. General warranty deed

"Correction deed" corrects a specified instrument issue rather than inherently providing the broad conventional title covenants requested. "Special warranty deed" is the narrower by-through-or-under warranty used for comparison in the question. "Quitclaim deed" conveys the grantor's stated interest without the conventional title covenants requested. "General warranty deed" is the conventional broader warranty category, subject to the actual deed language, exceptions and governing law. Change the facts: A deed expressly limited to claims by, through or under the grantor would require the narrower special-warranty analysis instead.

What to remember: A general warranty ordinarily offers broader title covenants than a special warranty or quitclaim.

Check the rule: Cornell Legal Information Institute, warranty deed.

Study this topicPSI national broker outline IX

Correct answer: B. Current authority under the operating agreement and company records

"The person's home address" does not establish power to convey the company's real estate. "Current authority under the operating agreement and company records" addresses whether the proposed signer can bind the LLC in this transaction. Applicable law, governing documents and required approvals must be checked. "The listing photography" does not establish the signer's legal authority. "The tenant's utility bill" concerns service billing rather than company authorization. Change the facts: A title such as manager on a business card would not replace verification of the actual authority and any required company approval.

What to remember: Verify authority to bind the entity before relying on a signature.

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

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Correct answer: B. $76,000

"$68,000" subtracts the $8,000 deposit twice from the correct result. "$76,000" is correct: $380,000 + $12,000 - $304,000 - $8,000 - $4,000 = $76,000. "$80,000" omits the $4,000 seller credit. "$88,000" omits both the applied deposit and the seller credit. Change the facts: If the permitted seller credit were only $2,000, with the other amounts unchanged, the remaining buyer funds would rise to $78,000.

What to remember: Subtract loan proceeds, the applied deposit and the permitted seller credit once from the stated purchase price and costs.

Check the rule: CFPB Closing Disclosure: cash-to-close components.

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Correct answer: C. Reasonable accommodation

"Redlining" concerns discriminatory area-based service rather than an exception to a housing rule. "Reasonable modification" normally concerns a physical alteration rather than changing the no-pets policy. "Reasonable accommodation" is the request to change a rule or policy for a disability-related need. Classification alone does not decide every eligibility, necessity or reasonableness question. "Blockbusting" concerns inducing sales through protected demographic fears, not the tenant's request. Change the facts: A request to install a ramp would instead raise reasonable-modification questions because it changes the physical premises.

What to remember: A policy exception is an accommodation; a structural change is a modification.

Check the rule: 24 CFR 100.204: reasonable accommodation in housing rules and policies.

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Correct answer: A. 12%

"12%" is correct: $18,000 annual cash return / $150,000 cash invested = 0.12 = 12%. This uses the return measure explicitly defined in the question. "8.33%" approximately expresses the reciprocal cash-investment multiple as if it were a percentage yield. "1.2%" is one-tenth of the correct percentage. "120%" is ten times the correct percentage. Change the facts: If the defined annual cash return fell to $15,000 on the same $150,000 investment, this simple annual cash-on-cash return would be 10%.

What to remember: Simple cash-on-cash return divides the stated annual cash return after debt service by the cash invested. It is not a property cap rate.

Check the rule: California DRE appraisal teaching: income and investment relationships.

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Correct answer: A. The trustee

"The trustee" holds legal title under the stated deed and trust arrangement, with duties governed by the trust and applicable law. "The income beneficiary individually" has a beneficial interest but does not gain individual deeded ownership merely by receiving income. "The mortgage lender solely because it financed the purchase" does not obtain legal title merely because it financed the purchase. "Every beneficiary as a direct tenant in common" assumes a direct conveyance to beneficiaries that the facts do not supply. Change the facts: If the trustee later validly conveyed the property out of the trust to a beneficiary individually, that beneficiary's legal-title position would change.

What to remember: Legal title and beneficial ownership are distinct in a trust arrangement.

Check the rule: IRS IRM 5.17.3.10.24: trustee legal title and beneficial interests.

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Correct answer: B. Trustor, beneficiary, and trustee

"Grantor and grantee only" identifies the conventional parties to a conveyance deed rather than the three deed-of-trust roles. "Trustor, beneficiary, and trustee" identifies the borrower as trustor, the secured lender as beneficiary and the trustee holding the stated security role. "Maker and payee only" identifies note parties rather than all three security-instrument roles. "Landlord and tenant" identifies lease parties rather than loan-security roles. Change the facts: In the conventional two-party mortgage model, distinguish the borrower-mortgagor from the lender-mortgagee instead.

What to remember: Separate the borrower, lender beneficiary, and trustee roles.

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

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Correct answer: D. Price fixing

"Independent pricing" is contradicted by the express agreement among competing firms. "Market allocation" divides markets or customers, not the minimum fee directly stated. "Tying" conditions one transaction on another rather than sets a common minimum price. "Price fixing" is the horizontal agreement to restrict the price each competitor will offer. A minimum price can restrict competition without identical final invoices. Change the facts: If each firm independently chose its own rate with no coordination, similar rates alone would not establish the agreement described here.

What to remember: Agreeing on a minimum fee restricts price competition even without identical final invoices.

Check the rule: U.S. Department of Justice, Price Fixing, Bid Rigging, and Market Allocation.

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Correct answer: A. Normalize both to a consistent expense basis

"Normalize both to a consistent expense basis" allows comparison of the economic occupancy cost rather than two differently defined face rates. "Ignore expenses" would hide operating charges that can change the tenant's actual cost. "Compare only street addresses" does not normalize differences in who pays which expenses. "Convert both into property taxes only" discards rent and other relevant charges instead of putting them on a consistent basis. Change the facts: A lower triple-net face rate can produce a higher total occupancy cost after tenant-paid expenses. The actual lease terms determine which expenses belong in the comparison.

What to remember: Normalize who pays operating costs before comparing gross and net lease quotes.

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

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Correct answer: C. The buyer

"The seller" does not become the represented party merely by providing compensation funds. "Both automatically" assumes dual agency from payment alone, which does not establish representation of both parties. "The buyer" is the expressly represented client. The compensation source alone does not change that role. "Neither party" ignores the buyer-representation relationship stated in the question. Change the facts: A separate lawful, informed dual-agency arrangement where permitted would require its own analysis; compensation alone does not create one.

What to remember: Compensation source alone does not determine representation.

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

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Correct answer: A. Ratification

"Ratification" is the principal's informed adoption of the initially unauthorized transaction, assuming the legal requirements for ratification are met. "Subrogation" concerns succeeding to another's rights rather than adopting an agent's act. "Escheat" concerns succession to the state rather than agency approval. "Recordation" is placing an instrument in public records rather than adopting the transaction. Change the facts: If the principal authorized the act before it occurred, the issue would be advance actual authority rather than later ratification.

What to remember: Ratification follows an unauthorized act; advance authorization precedes it.

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

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Correct answer: A. The transferee and remaining owner generally hold as tenants in common

"The transferee and remaining owner generally hold as tenants in common" states the usual result when one of two joint tenants conveys the entire share to a third person during life. "The transferee automatically owns the entire property" incorrectly transfers the remaining owner's share as well. "The deed is always void without the other owner's signature" overstates a signature requirement; an owner can generally convey that owner's own interest under the stated model. "The remaining owner immediately loses the right to possession" does not follow because the remaining owner still has an ownership and possession interest. Change the facts: If there were three joint tenants, a severance of one share could leave the other two holding their shares in joint tenancy. This question specifically has two owners.

What to remember: A lifetime conveyance differs from a transfer at death under survivorship.

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

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Correct answer: A. The grantor's present interest, if any, without title covenants

"The grantor's present interest, if any, without title covenants" describes the grantor's present interest, if any, without ordinary title covenants. Validity and actual conveyance language still matter. "Guaranteed fee simple in every case" promises an estate and title quality that quitclaim wording does not guarantee. "A lender's mortgage only" incorrectly restricts the instrument to a lender's mortgage. "Perfect title certified by the recorder" attributes a title guarantee to the recording office that it does not supply. Change the facts: If the grantor held no transferable interest, quitclaim wording alone would not create one to convey.

What to remember: The grantor cannot convey an interest it does not have merely by using quitclaim wording.

Check the rule: Cornell Legal Information Institute, quitclaim deed.

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Correct answer: C. $2,350

"$2,250" includes monthly principal, interest and taxes but omits the monthly insurance. "$7,850" adds the annual taxes and insurance directly to a monthly principal-and-interest figure. "$2,350" is correct: $1,850 + ($4,800 / 12) + ($1,200 / 12) = $2,350. "$1,850" includes only principal and interest and omits both tax and insurance amounts. Change the facts: If annual property taxes rose to $6,000 and the other supplied figures stayed unchanged, monthly PITI would become $2,450. Other charges are excluded by the question.

What to remember: PITI combines monthly principal, interest, property taxes and homeowners insurance. Convert annual figures before adding.

Check the rule: CFPB, Loan Estimate explainer.

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Correct answer: B. Title reasonably free from serious doubt and probable litigation

"Title guaranteed to have no recorded document" mistakes an empty record for marketability; recorded instruments can document valid ownership and ordinary rights. "Title reasonably free from serious doubt and probable litigation" states the conventional reasonable-doubt standard. Marketability does not require an absence of every recorded document. "Any title with an insurance exception" does not determine marketability without considering the substance of the exception. "A lender's appraisal conclusion" is a value opinion rather than a title-quality determination. Change the facts: An insurer's willingness to cover a specified risk does not by itself answer whether the title meets a particular purchase contract's marketability requirement.

What to remember: Marketable title is reasonably free from serious legal doubt, not necessarily free from every recorded instrument.

Check the rule: California DRE general teaching: marketable title and reasonable doubt.

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Correct answer: D. Neither party

"The buyer only" would be buyer agency rather than the stated nonagent role. "The seller only" would be seller agency rather than nonagent facilitation. "Both parties" would be dual representation rather than the stated nonagent model. "Neither party" is the defining feature of this permitted facilitator model. The broker assists without representing either party. This does not establish that Illinois permits or uses this model. Change the facts: If the parties lawfully created a buyer-agency relationship instead, the broker would represent that buyer rather than remain a nonagent for the transaction.

What to remember: This is a national role comparison using a permitted nonagent model. It does not state an Illinois representation rule.

Check the rule: Massachusetts real estate board consumer fact sheet: nonagent facilitator definition.

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Correct answer: B. Value decreases

"Value increases" moves in the wrong direction in the stated value = NOI / cap-rate relationship. "Value decreases" follows from dividing the same positive NOI by a larger positive rate. "Value stays identical" ignores the changed denominator. "NOI becomes gross rent" confuses two different income measures. Changing the cap rate does not transform NOI into gross rent. Change the facts: If NOI rose at the same time as the rate, the net value effect would require both changed numbers. The fixed-NOI assumption is essential here.

What to remember: With a fixed numerator, a larger positive denominator produces a smaller quotient.

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

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Correct answer: B. Group boycott

"Independent vendor choice" is inconsistent with the stated agreement among several competing firms. "Group boycott" is the concerted refusal targeting a discount competitor to pressure its fee upward. The question asks for the conduct label; actual legal analysis considers the agreement and context. "Tying" usually conditions access to one product or service on another rather than describes this coordinated refusal. "Property management" does not describe the competitor-pricing pressure in the facts. Change the facts: One firm's independent, uncoordinated business decision presents different facts from a group agreement to pressure a price-cutting competitor.

What to remember: A coordinated refusal to pressure a price-cutting competitor differs from an independent business decision.

Check the rule: FTC antitrust guidance: coordinated refusals targeting price-cutting competitors.

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Correct answer: D. Recorded restrictive covenant

"Municipal zoning ordinance" is a public land-use control. "County building code" is a public construction control. "Federal wetlands permit" is an agency permit under public law rather than a private covenant. "Recorded restrictive covenant" is a private restriction, although enforceability and applicable law still matter. Change the facts: A private covenant permitting a use would not by itself waive a stricter public zoning restriction.

What to remember: Private restrictions may continue to matter even after public zoning approval.

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

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Correct answer: D. Tenancy in common

"Severalty" means a single owner rather than multiple undivided owners. "Life estate" is measured by a life rather than defining the stated co-ownership form. "Joint tenancy" has survivorship under the standard model, unlike the facts asked about. "Tenancy in common" permits unequal undivided interests without an automatic right of survivorship. Change the facts: A valid unsevered joint tenancy would change the survivorship analysis. An unequal contribution alone does not physically divide a parcel.

What to remember: Unequal undivided shares do not create automatic survivorship.

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

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Correct answer: D. The optionor grants the right and the optionee may exercise it

"The county recorder is always the optionor" incorrectly assigns the grantor role to a recording official in every transaction. "The optionee grants the right and the optionor must buy" reverses who grants and who holds the right, then adds a purchase duty not established before exercise. "Both parties must buy before exercise" does not follow because granting an option is not a requirement that both parties purchase. "The optionor grants the right and the optionee may exercise it" correctly identifies the grantor of the option and the holder who may exercise the right under its terms. Change the facts: After valid exercise, the parties' purchase obligations come from the enforceable option and resulting agreement; the initial choice is no longer the only issue.

What to remember: The optionor grants the right; the optionee decides whether to exercise it.

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

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Correct answer: A. A quitclaim deed does not itself prove the title is defective

"A quitclaim deed does not itself prove the title is defective" separates the absence of title covenants from the actual condition of the grantor's title. "The deed automatically creates a mortgage" does not follow because conveying by quitclaim does not automatically grant loan security. "The recorder guarantees the roof’s condition" confuses recordation with physical-condition certification. "The grantor has made every general-warranty covenant" contradicts the absence of general-warranty covenants in an ordinary quitclaim. Change the facts: If a title search revealed an unresolved lien, that actual claim would need attention regardless of whether the deed was quitclaim or warranty.

What to remember: A lack of covenants is different from proof of bad title.

Check the rule: Cornell Legal Information Institute, quitclaim deed.

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Correct answer: B. Sales comparison

"Cost only" discards the direct comparable-sales evidence without an assignment-based reason. "Sales comparison" directly uses recent similar sales with supported adjustments, which best fits the supplied evidence. "Income only" would need relevant income evidence, not just owner-occupied competitive sales. "Book value" is an accounting measure rather than the appraisal approach supported by these transactions. Change the facts: For an income-producing property with reliable income and capitalization evidence, the income approach may deserve substantial weight.

What to remember: Comparable sales work best when relevant transactions and credible adjustments are available.

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

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Correct answer: A. Counteroffer

"Counteroffer" proposes a different material closing term rather than accepts the buyer's offered terms. "Acceptance" would require acceptance of the offered material terms, not the changed date. "Deed" conveys an ownership interest rather than proposes contract terms. "Assignment" transfers a contractual right rather than changes the response to an offer. Change the facts: If the seller accepted the unchanged offer on time using the required method, the response could instead be acceptance.

What to remember: Changing material terms creates a new proposal.

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

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Correct answer: A. Patent

"Patent" describes the visible crack under these facts. Its cause, severity and repair needs still require appropriate evaluation. "Latent" would describe a hidden condition, not the fully visible crack itself. "Nonphysical" does not fit an actual physical crack in a foundation. "Confidential" does not follow from the defect classification and does not authorize concealment. Change the facts: If the defect were concealed behind an intact finished wall and not readily discoverable by ordinary inspection, latent could describe that changed condition.

What to remember: A visible defect can be patent even if its cause is unknown.

Check the rule: Cornell Legal Information Institute, patent defect.

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Correct answer: C. Failure to strictly comply with the required exercise method

"The option has been validly exercised merely because the owner read the text" ignores the express method requirement and the stated absence of waiver or another excusing rule. "The text automatically extends the option period" invents an extension that the owner did not agree to. "Failure to strictly comply with the required exercise method" identifies the missing certified-mail step required by the stipulated option terms. "The specified method is always optional when an optionee acts before Friday" incorrectly treats meeting a deadline as satisfying every separate exercise condition. Change the facts: If the holder timely used the required certified-mail method and met the other option conditions, this particular method defect would be absent.

What to remember: Do not assume a convenient communication method satisfies an expressly required one.

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

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Correct answer: D. Redlining

"Specific performance" is a contractual remedy rather than an area-based lending practice. "Steering" commonly describes channeling housing choices rather than the lender's discriminatory service-area exclusion. "Retaliation" concerns punishment for protected activity rather than the stated area restriction. "Redlining" fits refusing housing-credit service because of the area's racial composition. A neutral map label would not cure that discriminatory basis. Change the facts: A lender evaluating a particular property's supported collateral facts without using racial composition presents different evidence and still must comply with applicable credit laws.

What to remember: Redlining concerns discriminatory denial of service to an area, such as housing credit.

Check the rule: HUD: discriminatory mortgage lending and redlining.

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Correct answer: C. Blockbusting

"Accommodation" is a change in rules, policies, practices or services to address a qualifying need, not this sales pressure. "False availability" misrepresents whether housing is available rather than uses demographic fear to induce sales. "Blockbusting" matches the attempt to induce owners to sell for profit by invoking a protected group's arrival. "Proration" allocates expenses or income between periods rather than pressures owners to sell. Change the facts: If a provider falsely claimed an available dwelling was already rented because of an applicant's protected status, false availability would be the more direct description.

What to remember: Blockbusting seeks transactions for profit using claims about protected demographic change.

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

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Correct answer: A. The private restriction must be reviewed separately even though public zoning allows the use

"The private restriction must be reviewed separately even though public zoning allows the use" recognizes that public permission and an enforceable private prohibition are separate constraints. "Zoning automatically cancels the declaration" does not follow because zoning permission does not automatically release private covenants. "The broker can erase the restriction" assumes power to remove someone else's enforceable property restriction. "The declaration matters only to the assessor" ignores the restriction's effect on the owner's intended use. Change the facts: A valid release or amendment of the private restriction could change that part of the analysis, without supplying every required public approval.

What to remember: Public zoning and private restrictions are separate layers of control.

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

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Correct answer: B. Each brokerage determines its fees independently, and compensation is negotiable

"Federal law sets a uniform commission" invents a federally mandated uniform fee. "Each brokerage determines its fees independently, and compensation is negotiable" correctly separates independent fee decisions and negotiation from coordination among competing firms. "Competitors must agree before one changes its fee" would coordinate competitive pricing rather than preserve each firm's independent decision. "The listing service fixes every seller’s fee" does not lawfully establish a universal seller fee merely by being a listing service. Change the facts: If competing brokerages agreed on a minimum fee, that coordination would raise price-fixing concerns even if individual clients could negotiate other terms.

What to remember: Fees are independently determined and negotiable. Competitors may not set a common minimum.

Check the rule: U.S. Department of Justice, Price Fixing, Bid Rigging, and Market Allocation.

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Correct answer: C. Validity concerns legal sufficiency; execution in this question concerns completed performance

"A valid contract can never be executory" incorrectly treats legal validity as requiring completed performance. "Valid and executed mean the same thing" collapses legal sufficiency and performance into one issue. "Validity concerns legal sufficiency; execution in this question concerns completed performance" correctly separates a legally sufficient agreement from completion of its promised acts. "Only an oral contract can be executed" incorrectly restricts completed performance to oral agreements. Change the facts: An agreement could also be fully performed yet present a separate validity or enforceability issue. One classification does not settle all the others.

What to remember: Validity and stage of performance are different classifications.

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

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Correct answer: A. A facilitator represents neither side, while a dual agent represents both

"A facilitator represents neither side, while a dual agent represents both" states the representation distinction in the permitted models: neither side versus both sides. "A facilitator represents both without consent" confuses nonagency assistance with undisclosed dual representation. "A dual agent holds no license" does not follow because dual agency describes representation, not an absence of a credential. "A facilitator always receives no compensation" confuses compensation with the agency role; payment alone does not define whom the broker represents. Change the facts: If the broker lawfully represented only the seller, that would be single seller agency rather than either of the two roles compared here.

What to remember: Assistance to both parties is different from representation of both. The jurisdiction and lawful engagement matter.

Check the rule: Massachusetts real estate board consumer fact sheet: facilitator versus disclosed dual agent.

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Correct answer: C. The defect generally falls outside the special warranty

"The defect disappears upon recording" incorrectly treats recording as erasing a preexisting title defect. "The deed automatically becomes a general warranty deed" does not follow because the scope does not expand automatically when a prior defect is discovered. "The defect generally falls outside the special warranty" fits the express limitation and absence of an act by this grantor. This concerns the stated warranty's scope, not every possible claim, remedy or insurance coverage. "The grantee becomes the grantor" reverses party labels without resolving the warranty issue. Change the facts: A defect caused by this grantor's own conveyance or encumbrance could raise a different claim within the stated by-through-or-under scope.

What to remember: A special warranty generally covers the grantor’s own period and acts, not every earlier owner’s.

Check the rule: Texas Supreme Court, Chicago Title v. Cochran: special-warranty scope, pages 9-12.

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Correct answer: B. Promissory note

"Mortgage" provides the real estate security rather than the separate personal repayment promise. "Promissory note" states the borrower's debt and repayment promise. "Deed of trust" is a security instrument with its own parties and terms, not the separate note. "Warranty deed" conveys a stated ownership interest with the specified covenants rather than creates the borrower's loan promise. Change the facts: If the lender asked which instrument provides notice of the real estate collateral, examine the recorded mortgage or deed of trust.

What to remember: The note creates the repayment promise; security documents address the collateral.

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

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Correct answer: C. An undivided ownership interest with a right to possess the whole

"An automatic right to inherit the other’s share" does not follow from tenancy in common; succession depends on the deceased owner's estate and applicable law. "Exclusive title to a mapped 70% or 30% physical area" mistakes a percentage interest for a physically partitioned parcel. "An undivided ownership interest with a right to possess the whole" matches undivided co-ownership. The percentages do not by themselves allocate exclusive rooms or physical areas. "Only a lease from the other owner" confuses ownership with a landlord-tenant relationship. Change the facts: If the owners validly partitioned the property into separate parcels, possession and title would then follow that new arrangement.

What to remember: An undivided 70% interest is not the same as exclusive possession of 70% of the land.

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

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Correct answer: B. 7.5%

"13.33%" approximately represents the reciprocal income multiple as if it were a percentage yield. "7.5%" is correct: $75,000 annual NOI / $1,000,000 price = 0.075 = 7.5%. "0.75%" is one-tenth of the correct rate. "75%" is ten times the correct rate. Change the facts: At $90,000 annual NOI and the same $1,000,000 price, the cap rate would be 9%.

What to remember: Divide annual NOI by price and multiply by 100 to express the rate as a percent.

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

Study this topicPSI national broker outline XI

Correct answer: A. Recorded declaration

"Recorded declaration" is the recorded private instrument commonly used to establish development-wide covenants. "Building permit" authorizes specified work under public requirements rather than creating the subdivision's private covenant scheme. "Tax bill" states a tax charge rather than establishes private use covenants. "Zoning map alone" shows public zoning districts rather than independently creates private covenants. Change the facts: A city changing its zoning map would change a public control, not by itself amend the recorded private declaration.

What to remember: Recorded declarations can impose private obligations separate from zoning.

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

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Correct answer: C. Severalty

"Tenancy in common" requires multiple owners of the real estate; twelve shareholders do not make twelve deeded owners. "Joint tenancy" is co-ownership with survivorship rather than one corporation's ownership. "Severalty" describes one legal owner holding the real estate, even when that entity has multiple shareholders. "Tenancy by the entirety" is a spousal co-ownership form, not a corporation's sole ownership. Change the facts: If two separate corporations were grantees as tenants in common, the real estate would have multiple legal owners instead.

What to remember: One corporation is one legal owner, regardless of its shareholder count.

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

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Correct answer: D. Shares in the corporation

"A deeded fraction of the warehouse" confuses ownership of corporate shares with a direct interest conveyed by deed. "The corporation's mortgage" is not acquired merely by buying shares in the borrowing corporation. "A life estate in the warehouse" does not arise merely because the corporation owns real estate. "Shares in the corporation" is the shareholder's entity interest. The corporation separately owns the warehouse. Change the facts: If the corporation validly conveyed a stated warehouse interest to the shareholder by deed, the shareholder would then need to distinguish that direct interest from the shares.

What to remember: A shareholder owns an entity interest, not a direct deeded slice of each corporate asset.

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

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Correct answer: C. The consumer receives representation from the licensee

"The consumer is always the fee source" mistakes the source of compensation for the representation relationship. "The consumer enters the property first" is unrelated to the creation of representation. "The consumer receives representation from the licensee" is the feature that identifies the client in this comparison, subject to a legally sufficient agency arrangement. "The consumer asks the most questions" does not establish whom the licensee represents. Change the facts: A represented buyer remains a client even when an authorized closing arrangement provides some of the broker's compensation from seller funds.

What to remember: A client is represented; a customer may receive services without that agency relationship.

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

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Correct answer: D. The loan can remain fixed rate because escrow changed

"Property taxes are principal" misclassifies a property-tax expense as repayment of loan principal. "The loan automatically became an ARM" does not follow because an escrow change does not convert the note into an adjustable-rate loan. "The note rate must have increased" is contradicted by the stated tax-only reason for the payment increase. "The loan can remain fixed rate because escrow changed" separates the fixed note rate from a changing tax-and-insurance escrow amount. Change the facts: If the note's interest rate actually adjusted under an index-and-margin formula, the rate classification would require the ARM terms instead.

What to remember: Fixed principal and interest can coexist with changing escrow payments.

Check the rule: CFPB, Loan Estimate explainer.

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Correct answer: D. Recommend timely environmental and agency verification before the feasibility deadline

"Guarantee that no permit is needed" draws a permitting conclusion that the observations do not establish. "Guarantee that construction is prohibited" draws the opposite unsupported conclusion. Not every wet area has the same regulatory or buildability result. "Ignore the condition because the visit occurred in spring" ignores a material feasibility concern rather than investigate it. "Recommend timely environmental and agency verification before the feasibility deadline" directs the concern to appropriate environmental expertise and the relevant authority before the contractual decision deadline. Indicators alone do not establish jurisdiction or a permit outcome. Change the facts: A qualified delineation and agency determination could clarify the issue. Their actual scope and any other applicable approvals would still need review.

What to remember: A wetland concern calls for qualified review and the relevant permitting authority.

Check the rule: U.S. Army Corps of Engineers, Wetlands: delineation and review.

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Correct answer: D. Fixed-rate mortgage

"Open-end mortgage" describes the ability to obtain additional advances under stated terms, not the unchanged rate feature asked about. "Adjustable-rate mortgage" has a rate that can adjust under its terms, unlike the unchanged note rate here. "Shared-appreciation mortgage" concerns sharing appreciation rather than classifying the note rate. "Fixed-rate mortgage" fits a note rate fixed for the entire term. Changing tax or insurance charges can still change the total payment. Change the facts: A loan fixed only for its first five years before scheduled rate adjustments would instead be a hybrid ARM.

What to remember: A fixed interest rate does not promise that taxes and insurance will stay fixed.

Check the rule: CFPB, Consumer Handbook on Adjustable-Rate Mortgages.

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Correct answer: A. Steering

"Steering" is channeling the buyer's choices because of religion, a protected characteristic. "Blockbusting" uses protected demographic fears to induce sales for profit, a different pattern. "Redlining" describes discriminatory lending or area-service treatment rather than this agent's listing selection. "Novation" substitutes a contractual obligation rather than describes housing discrimination. Change the facts: If the agent instead offered all matching listings and used the buyer's own lawful property criteria, the religion-based steering facts would be absent.

What to remember: Steering concerns how the agent channels the buyer’s housing choices.

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

Study this topicPSI national broker outline X

Correct answer: D. Injunction

"Escheat" concerns succession to the state rather than a court order enforcing a covenant. "Tax equalization" concerns tax treatment rather than stopping the prohibited use. "Eminent domain" is the taking power rather than this private enforcement remedy. "Injunction" is the requested court order directing the prohibited conduct to stop. The question assumes an enforceable covenant and a beneficiary entitled to seek relief. Change the facts: If the claimant sought money for a proven loss instead of an order stopping the use, damages would describe that different requested remedy.

What to remember: An injunction orders conduct to stop or occur; damages award money.

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

Study this topicPSI national broker outline II

Correct answer: A. Executory

"Executory" describes the outstanding performance before the future closing. "Executed" would mean completed performance in the sense expressly asked about, not merely signatures. "Void" does not follow because the question stipulates a valid agreement. "Unenforceable" does not follow merely because performance is due later. Change the facts: When the parties complete all required performance, the agreement can be called executed in this performance sense.

What to remember: Signing is execution of a document; executed can also describe full contractual performance.

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

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Correct answer: B. Option contract

"Completed sale" requires the sale's performance, which buying a right to elect does not establish. "Option contract" gives the holder the supported choice to purchase on the agreed terms within the option period. "Bilateral purchase promise by the buyer" incorrectly makes the holder already bound to buy, contrary to the stated right without a duty. "Tenancy in common" is a co-ownership form rather than a purchase election. Change the facts: If the holder validly exercised the option, the resulting purchase obligations would need to be analyzed under the option terms and governing law.

What to remember: The optionee has a choice to buy, not an initial promise that purchase must occur.

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

Study this topicPSI national broker outline V

Correct answer: A. Bilateral contract

"Bilateral contract" describes the exchange of promises to convey and pay. "Unilateral contract" would involve a requested act as acceptance rather than these exchanged promises. "Void contract solely because closing is future" confuses future performance with an invalid agreement. "Executed contract solely because both signed" confuses signing with full performance. The future closing separately leaves performance executory. Change the facts: If the offer invited acceptance only by completing a requested act, unilateral formation would be the relevant classification.

What to remember: Bilateral describes exchanged promises, not the number of signatures on one page.

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

Study this topicPSI national broker outline V

Correct answer: D. Similar fees alone do not prove price fixing

"The firms formed a boycott" requires concerted refusal-to-deal facts not established by similar prices. "Price fixing is automatic" incorrectly infers an agreement solely from the same price. "The firms allocated customers" requires an agreement to divide customers or territory, which is not stated. "Similar fees alone do not prove price fixing" preserves the difference between similar independent conduct and a prohibited agreement. Similar fees alone do not prove coordination. Change the facts: Emails agreeing on a shared minimum would add coordination evidence and change the price-fixing analysis.

What to remember: Parallel prices alone are not proof of an agreement. Evidence of coordination matters.

Check the rule: U.S. Department of Justice, Price Fixing, Bid Rigging, and Market Allocation.

Study this topicPSI national broker outline X

Correct answer: C. Unit title together with the common-element interest

"Corporate shares with a proprietary lease" describes the usual cooperative share-and-occupancy arrangement, not the deeded unit in this question. "An undivided share with no separately owned unit" omits the separately owned unit stated in the deed. "Unit title together with the common-element interest" matches the unit ownership together with the allocated common-element interest. "Only a lease for a stated term" describes a limited leasehold rather than the deeded ownership stated. Change the facts: If the buyer instead acquired corporate shares and a proprietary lease, the cooperative description would fit.

What to remember: Condominium ownership differs from owning corporate shares with a right of occupancy.

Check the rule: California DRE general teaching: condominium and common-interest ownership.

Study this topicPSI national broker outline I

Correct answer: C. Appraisal

"BPO" is a broker price opinion rather than the formal appraisal product requested. "CMA" is a comparative market analysis for brokerage pricing rather than the stated formal assignment. "Appraisal" is the valuation product identified by the appraisal assignment, applicable credentials and standards. "Active listing" is an asking-price offer to the market rather than an appraisal conclusion. Change the facts: A broker recommending a listing range from competitive sales should accurately identify a CMA rather than relabel it as a formal appraisal.

What to remember: An appraisal is a defined opinion of value under the applicable assignment and standards.

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

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Correct answer: C. Land value + cost new - accrued depreciation

"Monthly rent x GRM only" is a gross-rent comparison, not the cost approach. "NOI / capitalization rate" is a direct income-capitalization relationship. "Land value + cost new - accrued depreciation" combines the separately estimated land value with cost new less accrued depreciation of the improvements. "Sale price - land value" does not include cost new or the improvement depreciation needed for this approach. Change the facts: With $80,000 land value, $300,000 cost new and $20,000 accrued improvement depreciation, the basic indication would be $360,000.

What to remember: Deduct improvement depreciation while valuing land separately.

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

Study this topicPSI national broker outline III

Correct answer: B. The owner's receipt of a bona fide third-party offer the owner is willing to accept

"The holder's demand for an appraisal" does not ordinarily activate a sale-based right of first refusal. "The owner's receipt of a bona fide third-party offer the owner is willing to accept" is the usual proposed-sale trigger in the arrangement described, subject to the actual agreement. "The recording of any unrelated deed" concerns an unrelated record rather than the owner's proposed sale. "The holder's payment of property taxes without permission" does not by itself create the contractual triggering event. Change the facts: If the agreement used a different express trigger, its terms would need to be read rather than assuming every ROFR activates the same way.

What to remember: A right of first refusal is triggered by the stipulated opportunity, rather than an unrestricted option to force a sale.

Check the rule: Cornell Wex secondary definition: options distinguished from rights of first refusal.

Study this topicPSI national broker outline V

Correct answer: A. Express authority

"Express authority" is authority directly communicated in words by the principal. "Apparent authority arising only from a stranger’s assumption" requires manifestations attributable to the principal and reasonable third-party reliance; a stranger's assumption alone is insufficient. "Title by adverse possession" is an ownership concept, not the principal's grant of agency power. "A tenancy in severalty" is not a classification of verbally granted agency authority. Change the facts: Authority reasonably incidental to carrying out an express appointment may instead raise implied-authority questions. Required formalities must still be satisfied.

What to remember: Express authority uses words; implied authority may arise from conduct or what is necessary to carry out authority.

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

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Correct answer: B. $1,200,000

"$768,000" multiplies NOI by 8 rather than divides by the decimal cap rate. "$1,200,000" is correct: $96,000 / 0.08 = $1,200,000. "$120,000" uses 0.80 rather than 0.08 as the divisor. "$12,000" divides by 8 instead of converting 8% to 0.08. Change the facts: At a 10% market cap rate with the same NOI, indicated value would be $960,000.

What to remember: Use 0.08, not 8, as the rate in the capitalization formula.

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

Study this topicPSI national broker outline XI

Correct answer: C. The buyer must follow the required approval process and should not assume approval

"The use is automatically permitted" ignores the ordinance's special-use approval requirement. "A home inspection grants approval" confuses a building-condition service with land-use approval. "The buyer must follow the required approval process and should not assume approval" preserves the required local review and the risk that permission or acceptable conditions may not be obtained. "The seller may waive zoning" does not follow because a seller cannot privately waive public zoning requirements. Change the facts: If the buyer already had valid written approval covering the proposed use, the buyer would then need to verify its conditions, scope and continuing effect.

What to remember: Check the written approval and its conditions rather than assuming the advertised use is permitted.

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

Study this topicPSI national broker outline VII

Correct answer: B. Bid rigging

"Price comparison" would involve comparing genuine competing offers rather than arranging the winner. "Bid rigging" describes the secret agreement on who will win, supported by noncompetitive cover bids. "Open competition" is contradicted by the prearranged result. "Commission negotiation" does not legitimize a secret arrangement of supposedly competing bids. Change the facts: Truly independent bids, without an agreement to suppress competition, would not show this bid-rigging pattern.

What to remember: Cover bids create the appearance of competition after the winner has been arranged.

Check the rule: U.S. Department of Justice, Price Fixing, Bid Rigging, and Market Allocation.

Study this topicPSI national broker outline X

Correct answer: C. 6.35%

"2.25%" is the margin alone and leaves out the index. "4.10%" is the index alone and leaves out the margin. "6.35%" is correct: 4.10% + 2.25% = 6.35% before caps, floors or rounding. "1.85%" subtracts the margin from the index instead of adding it. Change the facts: If the index fell to 3.25% with the same 2.25% margin, the fully indexed rate before constraints would be 5.50%.

What to remember: Index plus margin gives the fully indexed rate before applicable caps or floors.

Check the rule: CFPB, Consumer Handbook on Adjustable-Rate Mortgages.

Study this topicPSI national broker outline IV

Correct answer: D. It still involves an offeror and an offeree

"It is automatically unenforceable" does not follow from acceptance by performance; unilateral arrangements can be enforceable. "It has only one legal party" confuses the number of promised obligations before acceptance with the existence of an offeror and offeree. "It never requires consideration" ignores the requested act that can supply consideration. "It still involves an offeror and an offeree" correctly recognizes the two sides of the offer-and-acceptance relationship even though acceptance takes the form of performance. Change the facts: An agreement formed by exchanging promises would be bilateral rather than unilateral in this formation sense.

What to remember: Unilateral does not mean there can be only one person involved.

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

Study this topicPSI national broker outline V

Correct answer: A. The surviving joint tenant's right of survivorship

"The surviving joint tenant's right of survivorship" is the feature that ordinarily transfers the deceased joint tenant's interest to the survivor under the stated valid, unsevered model. "The fact that any deed was recorded" does not alone create survivorship; recorded deeds can establish different ownership forms. "The fact that both had possession before death" is shared possession, which also occurs in tenancy in common. "The fact that both paid expenses" does not determine the survivorship effect of the valid joint tenancy. Change the facts: If the owners instead held as tenants in common, there would be no automatic survivorship and the deceased owner's estate would govern that share.

What to remember: Both forms involve co-ownership; survivorship is the critical difference.

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

Study this topicPSI national broker outline I

Correct answer: D. Weigh each indication according to its relevance and reliability

"Automatically average all three" substitutes arithmetic for a judgment about the evidence's quality and relevance. "Eliminate every assumption" is unrealistic; valuation requires identifying and evaluating relevant assumptions. "Change the conclusion to the contract price" turns the contract price into an unsupported target instead of weighing the indications. "Weigh each indication according to its relevance and reliability" uses the strength and applicability of each indication to reach a supported conclusion. Change the facts: If one approach relied on weak or inapplicable data, it could deserve less weight rather than an equal share in an average.

What to remember: Reconciliation weighs reliability and relevance; it is not automatically an arithmetic average.

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

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Correct answer: C. $450

"$600" counts the $500 units but does not multiply them by the $0.75 charge. "$225" uses $1,000 units instead of the specified $500 units. "$450" is correct: $300,000 / $500 = 600 units; 600 x $0.75 = $450. This is a supplied hypothetical rate, not a statement of Illinois transfer taxes. "$2,250" uses $100 units rather than the specified $500 units. Change the facts: At a hypothetical $1.00 per $500 rate with the same taxable consideration, the fee would be $600. Actual transaction charges require the applicable jurisdiction's current rules.

What to remember: The jurisdiction and rate are hypothetical. Divide taxable consideration by the stated unit, then apply the stated charge.

Check the rule: CFPB, Closing Disclosure explainer.

Study this topicPSI national broker outline XI

Correct answer: A. A recent verified lease with known concessions

"A recent verified lease with known concessions" provides current verified transaction terms and identifies the concession affecting economic rent. "An unverified stale listing" has both verification and timing weaknesses. "An owner's target with no market support" is an unsupported desired result rather than market transaction evidence. "A rumor about another building" is unverified and lacks the detail needed for a reliable comparison. Change the facts: A recent lease with materially different space, expense obligations or use could still need adjustments. Recent does not mean directly comparable in every respect.

What to remember: Use verified economic terms, including concessions, rather than a bare advertised asking rent.

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

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Correct answer: A. Mortgage or deed of trust

"Mortgage or deed of trust" is the recorded security instrument that connects the debt to the real estate under the applicable system. "Promissory note only" contains the repayment promise but is not the ordinary recorded collateral instrument asked about. "Loan application" requests credit and does not itself place a lien on the real estate. "Credit report" provides credit information and does not itself grant real estate security. Change the facts: A deed from the seller to the buyer serves a different purpose: conveying the stated ownership interest.

What to remember: A mortgage is recorded as a security instrument, not as a conveyance deed from seller to buyer.

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

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Correct answer: C. Initial adjustment cap

"Loan-to-value cap" limits a loan-to-value relationship, not an interest-rate adjustment. "Subsequent adjustment cap" generally limits adjustments after the first one rather than the first change asked about. "Initial adjustment cap" limits the first change following the initial fixed-rate period, according to the loan terms. "Escrow cap" does not identify the ARM interest-rate cap described. Change the facts: For the next scheduled adjustment after the first, check the subsequent adjustment cap and the lifetime limit as applicable.

What to remember: The initial cap limits the first adjustment, not necessarily every later one.

Check the rule: CFPB, Consumer Handbook on Adjustable-Rate Mortgages.

Study this topicPSI national broker outline IV

Correct answer: A. The buyer’s ability to complete that prerequisite sale

"The buyer’s ability to complete that prerequisite sale" is the prerequisite transaction addressed by the stated contingency. "Automatic removal of every title defect" does not follow because a home-sale contingency does not cure the purchased property's title. "A guarantee of the buyer’s resale price" overstates the clause; a condition tied to selling does not guarantee a resale price. "A promise that interest rates will fall" is unrelated to completing the prerequisite sale. Change the facts: If the buyer's existing home sold and the contractual condition was properly satisfied, that particular obstacle could be removed. Other purchase conditions would remain.

What to remember: A home-sale contingency addresses a prerequisite transaction, not a guarantee of its outcome.

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

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Correct answer: B. Its documented nonconforming status and the local rules for alteration, rebuilding, and abandonment

"Whether the paint color is popular" does not establish lawful status or the right to rebuild. "Its documented nonconforming status and the local rules for alteration, rebuilding, and abandonment" addresses the historical lawful use, physical nonconformity and current local limits. An old garage is not automatically entitled to every proposed alteration. "Only the property's list price" does not resolve legal status or setback requirements. "Whether the neighbor likes it" is not a substitute for applicable law, permits or documented status. Change the facts: If the garage was unlawful when built, its age alone would not establish the lawful nonconforming status assumed here.

What to remember: Past use is evidence to investigate, not proof of lawful nonconforming status.

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

Study this topicPSI national broker outline VII

Correct answer: B. Authority to sign a purchase contract for the owner

"Authority to advertise" is ordinarily within the marketing engagement, subject to its actual limits. "Authority to sign a purchase contract for the owner" requires appropriate separate authority; the ordinary listing appointment alone does not automatically let the broker bind the owner to a sale. "Authority to arrange showings" is ordinarily part of marketing services within the agreed scope. "Authority to present offers" is ordinarily part of the listing service rather than authority to accept for the owner. Change the facts: An owner could grant legally sufficient express signing authority for a defined transaction. Its existence and limits would need verification.

What to remember: A listing appointment does not itself give power to sign a binding sale contract for the seller.

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

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Correct answer: D. The private prohibition may still control the owner

"Zoning erases the declaration" incorrectly treats public permission as cancellation of a separate enforceable private obligation. "The association becomes a government agency" does not follow because enforcing a private declaration does not turn an association into a government. "The declaration rezones the parcel" confuses a private restriction with an amendment to the zoning ordinance. "The private prohibition may still control the owner" recognizes that both layers must be satisfied under the stated facts. A permitted use can still breach an enforceable private restriction. Change the facts: If the declaration were validly amended to permit the use, the private obstacle could change, while public requirements would still need review.

What to remember: A permitted public use can still conflict with a valid private restriction.

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

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Correct answer: B. Discoverability

"Repair price" concerns cost rather than whether a defect is apparent. "Discoverability" is the core distinction: a patent defect is apparent through reasonable observation, while a latent defect is concealed or not readily discoverable by ordinary inspection. "Property age" does not determine whether a particular defect can be observed. "Broker compensation" has no bearing on whether the condition is hidden. Change the facts: A visible crack can be patent while an underlying concealed structural cause remains unknown. Classification does not by itself decide every disclosure duty.

What to remember: Latent and patent describe discoverability, not whether repair will be expensive.

Check the rule: Cornell Legal Information Institute, latent defect.

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Correct answer: A. Proprietary lease

"Proprietary lease" is the usual cooperative occupancy document for the tenant-stockholder. The corporate shares and the lease have different functions. "Warranty deed to the unit" would convey a stated real-property interest rather than grant the cooperative resident's occupancy rights. "Tax deed" results from a tax-sale process rather than the ordinary cooperative occupancy arrangement. "Easement by necessity" addresses necessary access across land rather than the cooperative resident's right to occupy a unit. Change the facts: A deed to a condominium unit would involve direct unit ownership rather than this ordinary cooperative lease structure.

What to remember: The cooperative owns the real estate; the resident’s shares and occupancy agreement serve different roles.

Check the rule: Fannie Mae Selling Guide glossary: proprietary lease.

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Correct answer: D. Additional authority from the owner

"The size of the leasing commission" does not establish an additional grant of authority. "The fact that both activities involve real estate" does not turn limited leasing authority into authority to sell. "The broker’s own preference" does not enlarge the appointment granted by the principal. "Additional authority from the owner" addresses the missing authorization. The owner must grant the necessary sale authority through a legally sufficient arrangement. Change the facts: If the owner had already expressly authorized both leasing and sale, the scope question would follow that broader actual appointment.

What to remember: Authority to lease does not automatically include authority to sell.

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

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Correct answer: A. Treat it as unenforceable and follow fair housing law

"Treat it as unenforceable and follow fair housing law" recognizes that an unlawful racial restriction gains no enforceability from being recorded. Follow applicable law and any proper process for addressing the historical record. "Use it only for cash sales" does not cure racial discrimination by changing the financing method. "Enforce it until amended" mistakes the continued presence of historical text for a lawful restriction. "Ask the association to select buyers" would use association approval to implement the same unlawful racial selection. Change the facts: A lawful restriction on a property's permitted use raises a different enforceability question. Its existence would not authorize selection of occupants by race.

What to remember: A racially restrictive covenant does not become enforceable merely because it appears in an old deed.

Check the rule: California DRE general teaching: unlawful racial restrictions are unenforceable.

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Correct answer: B. Option

"Right of first refusal" usually gives an opportunity tied to the owner's proposed sale or other stated trigger, rather than an unrestricted right to initiate the purchase. "Option" provides the agreed right to elect during the option period, subject to its terms. "Listing agreement" creates a brokerage engagement rather than this purchase election. "Lis pendens" gives notice of pending litigation rather than an option to buy. Change the facts: If the right became available only when the owner was ready to accept a qualifying third-party offer, it would follow the stated right-of-first-refusal pattern instead.

What to remember: An option fixes a right to act on agreed terms for the stated period.

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

Study this topicPSI national broker outline V

Correct answer: B. A listing agreement

"A buyer-seller purchase contract" would be an agreement with a buyer, not the owner-brokerage service engagement. "A listing agreement" creates the seller-side marketing engagement and defines its scope and terms. "A promissory note" creates a debt repayment promise rather than the marketing appointment. "A home inspection agreement" governs an inspection service rather than seller representation. Change the facts: If a buyer instead engaged a brokerage to represent that buyer in a search, a buyer-representation agreement would describe that engagement.

What to remember: A listing agreement establishes the seller-side engagement and its scope.

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

Study this topicPSI national broker outline VI

Correct answer: D. Market allocation

"Lawful specialization" is an independent business focus, unlike the competitors' express agreement to divide clients. "Bid rigging" coordinates bids rather than divides customers by territory. "Unilateral refusal" is independent action by one firm, not the stated agreement. "Market allocation" is allocation of customers by geographic area among competitors. Change the facts: Each firm's independent decision to focus its own marketing in a neighborhood would present a different situation without the agreement to divide customers.

What to remember: Dividing customers geographically is market allocation, not merely independent specialization.

Check the rule: U.S. Department of Justice, Price Fixing, Bid Rigging, and Market Allocation.

Study this topicPSI national broker outline X

Correct answer: B. CMA

"Appraisal" would misidentify this stated brokerage pricing assignment as a formal appraisal. "CMA" is a comparative market analysis using relevant sales and competition to advise a listing range. "AVM" uses a computational valuation model rather than naming this broker-prepared comparative analysis. "Tax assessment" is a governmental assessment rather than the stated brokerage product. Change the facts: If a qualified appraiser instead completed a formal appraisal assignment under the applicable standards, the product label would change.

What to remember: A CMA serves brokerage pricing decisions and should be identified as such.

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

Study this topicPSI national broker outline X

Correct answer: C. September 30

"October 5 because inspection always controls" confuses the inspection date with the explicitly stated as-of date. "The appraiser's license-renewal date" concerns the appraiser's credential rather than the valuation date. "September 30" is the date for which the value opinion is expressed. Inspection and report signing are separate dates. "The next deed-recording date" concerns a later record event rather than the value opinion's stated effective date. Change the facts: If the assignment valued the property as of October 5 instead, that date would control even if the report was signed October 12.

What to remember: An effective date anchors the opinion to a particular market and property condition.

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

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Correct answer: A. Bylaws

"Bylaws" normally addresses internal association governance, including meeting and officer procedures, subject to law and the other governing documents. "Flood map" identifies flood-related geographic information rather than association governance. "Warranty deed" conveys a stated interest and covenants rather than serving as the association's procedural rules. "Building code" sets public construction requirements rather than internal meeting procedures. Change the facts: For the recorded restrictions on owners' use of their units or lots, examine the declaration and applicable covenants as well.

What to remember: Bylaws govern association operations; they do not replace every recorded property restriction.

Check the rule: California DRE glossary: bylaws govern internal organizational affairs.

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Correct answer: B. False availability

"Blockbusting" requires the demographic sales-inducement pattern, which is not stated here. "False availability" directly describes the false rented claim made because applicants have children under the covered, nonexempt facts. "Lawful occupancy screening" does not fit a false statement of availability based on familial status. "ADA barrier removal" addresses accessibility barriers rather than this false availability claim. Change the facts: If the apartment truly was unavailable and the same accurate information was given to everyone, the false protected-basis representation described here would be absent.

What to remember: False availability hides an available dwelling from a protected applicant.

Check the rule: 24 CFR 100.80: discriminatory representations about housing availability.

Study this topicPSI national broker outline X

Correct answer: D. 120

"10" uses annual rent of $48,000 instead of the monthly rent specified in the question. "120" is correct: $480,000 / $4,000 monthly gross rent = 120. "0.0083" approximately reverses the fraction by dividing monthly rent by price. "1,200" is ten times the correct monthly multiplier. Change the facts: At $3,000 monthly gross rent and the same price, the monthly GRM would be 160. Using $48,000 annual rent instead would produce an annual multiplier of 10.

What to remember: Match the period in the rent denominator. Monthly and annual gross-rent multipliers have different numerical values.

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

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Correct answer: B. Add $12,000 to the comparable

"Subtract $12,000 from the subject" adjusts the subject instead of the comparable used to estimate the subject's value. "Add $12,000 to the comparable" raises the inferior comparable to reflect the subject's superior feature by the supported $12,000. "Subtract $12,000 from the comparable" moves the inferior comparable in the wrong direction. "No adjustment can ever be made" incorrectly rules out supported adjustments entirely. Change the facts: If the comparable's feature were superior to the subject by $12,000 instead, subtract $12,000 from that comparable's price.

What to remember: Raise an inferior comparable’s price to make it comparable to the superior subject feature.

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

Study this topicPSI national broker outline III

Correct answer: C. Agent

"Appraiser" identifies a valuation role rather than the seller-representation relationship. "Broker license" is a credential, not the relationship created in this engagement. "Agent" identifies acting for the seller in dealings with third parties. "Escrow account" is an account for funds, not a representation role. Change the facts: A licensed broker engaged only to provide lawful nonagency services would still hold a credential, but that credential alone would not create the seller agency described here.

What to remember: Agent describes a relationship; holding a license does not create every possible agency relationship.

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

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Correct answer: C. The buyer as the new offeree

"The seller as the person making the counteroffer" is the counterofferor rather than the recipient who can accept it. "The listing agent solely because the agent delivered it" does not acquire acceptance authority merely by delivering the seller's proposal. "The buyer as the new offeree" is the recipient who can accept while the counteroffer remains available, subject to its terms. "The buyer's lender solely because it will finance the purchase" does not gain power to accept the purchase counteroffer merely by providing financing. Change the facts: If the buyer countered again, the seller would become the offeree of that new proposal.

What to remember: The person receiving a counteroffer becomes its offeree.

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

Study this topicPSI national broker outline V

Correct answer: D. 9.00%

"20.00%" multiplies 4% by five rather than adding five percentage points. "5.00%" confuses the amount of the allowed lifetime increase with the final rate ceiling. "4.00%" is the starting rate rather than the permitted ceiling. "9.00%" is correct: 4.00% + 5.00 percentage points = 9.00%. This calculation states the supplied lifetime ceiling. Initial or subsequent caps and the index may produce a lower actual adjustment. Change the facts: If the starting rate were 3.50% with the same five-point lifetime increase limit, the ceiling would be 8.50%.

What to remember: A five-percentage-point lifetime cap added to 4% produces 9%, not 4.2%.

Check the rule: CFPB, Consumer Handbook on Adjustable-Rate Mortgages.

Study this topicPSI national broker outline IV

Correct answer: C. Servicer

"Original payee" is not established merely by collecting payments; the company need not be the original lender or payee. "Property owner" is not established by servicing another person's loan. "Servicer" is the payment-administration role established by the facts. Servicing does not alone show who owns the loan. "Trustee in every case" overstates the role; collecting payments does not make the company a deed-of-trust trustee in every case. Change the facts: If the original lender retained servicing, the same company could hold more than one role. The roles would still be different concepts.

What to remember: The servicer collects and administers payments; it need not own the loan.

Check the rule: CFPB: mortgage lender versus mortgage servicer.

Study this topicPSI national broker outline IV

Correct answer: D. Define the appraisal problem

"Average three values" assumes results and a mechanical method before defining the assignment. "Choose a target value" sets an unsupported result to work toward rather than identifying the valuation problem. "Select the highest sale" selects evidence for its desired price before evaluating relevance. "Define the appraisal problem" establishes the property, interest, intended use and other assignment parameters needed to choose appropriate methods. Change the facts: If the effective date or property interest changed, the assignment would need to address that revised problem rather than reuse the old conclusion automatically.

What to remember: Define the problem and assignment before selecting methods or collecting unrelated data.

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

Study this topicPSI national broker outline III

Correct answer: C. $1,650

"$1,500" would result from only ten paid months at $1,800 spread over twelve months, not eleven. "$1,800" is the face monthly rent and ignores the free month. "$1,650" is correct: 11 paid months x $1,800 = $19,800; $19,800 / 12 = $1,650. "$1,950" exceeds the face rent and does not reflect the concession. Change the facts: With two months free on the same twelve-month, $1,800 lease, the simplified effective monthly rent would be $1,500, ignoring other charges and timing effects.

What to remember: Spread total contracted rent over the entire occupancy period when comparing effective rent.

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

Study this topicPSI national broker outline VIII

Correct answer: D. Price and the other material terms together

"A nationally fixed rule requiring cash offers" invents a nationwide cash-priority rule that the facts do not supply. "Only the largest headline price" ignores conditions affecting the likelihood, timing and costs of closing. "Only the order of arrival" does not account for the material terms or the stipulated lack of another acceptance obligation. "Price and the other material terms together" allows the seller to compare price, financing, timing and other lawful material terms together. Change the facts: A valid option or other binding obligation could change the seller's freedom to choose. Fair housing duties still constrain a lawful choice.

What to remember: Headline price is only one of the material terms in an offer.

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

Study this topicPSI national broker outline V

Correct answer: A. Customer

"Customer" fits an unrepresented recipient of proper factual or procedural assistance from the seller's agent. "Client" would require a buyer-representation relationship that the facts do not establish. "Principal" identifies someone for whom an agent acts, contrary to the unrepresented-buyer facts. "Designated agent" is a representation role of a licensee, not this consumer's status. Change the facts: If the buyer entered a lawful representation arrangement with a separate agent, the buyer would be that agent's client while the listing agent's seller relationship remained separate.

What to remember: Factual help should not become an undisclosed assumption of representation.

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

Study this topicPSI national broker outline VI

Correct answer: A. Provide objective public tax information

"Provide objective public tax information" supplies objective information without promising personal bargaining advocacy to the customer. "Recommend the exact price needed to beat another offer" undertakes negotiation advice rather than merely giving neutral factual information. "Reveal the seller client's minimum price" reveals the seller client's protected negotiating position without authority. "Promise to put the customer's interests first" promises client-style priority inconsistent with the limited customer role described. Change the facts: If the customer needed personal negotiation advice, a lawful representation arrangement or independent professional advice would address a different role.

What to remember: Objective facts and confidential bargaining information must be treated differently.

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

Study this topicPSI national broker outline VI

Correct answer: C. Leasehold

"Leased fee" is the landlord's ownership interest subject to the lease, not the tenant's interest. "Fee simple automatically" does not automatically pass to a tenant merely by signing a lease. "Leasehold" is the tenant's possessory interest under the lease, subject to its terms. "Remainder" is a future interest taking effect after a prior estate, not the ordinary tenant's present lease interest. Change the facts: An appraisal of the landlord's interest subject to the lease would identify the leased-fee interest instead.

What to remember: Specify the ownership interest being valued; a leasehold is not fee simple ownership.

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

Study this topicPSI national broker outline III

Correct answer: C. By returning the survey as requested

"By asking whether the reward is negotiable" is an inquiry rather than the requested acceptance performance. "By privately intending to search" is an uncommunicated intention rather than return of the survey. "By returning the survey as requested" completes the act requested by the reward offer. "By promising to look next month" substitutes a promise for the requested completed act. Change the facts: If the offer instead expressly invited a return promise to search, the requested method of acceptance would differ.

What to remember: A reward offer can invite acceptance by completing the requested act.

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

Study this topicPSI national broker outline V

Correct answer: B. Executory as to the outstanding conveyance

"Fully executed" ignores the seller's outstanding material performance. "Executory as to the outstanding conveyance" recognizes that completing one side's payment does not complete the promised conveyance. "Automatically void" does not follow from an outstanding duty under an otherwise valid agreement. "Unilateral only" confuses performance status with formation by promise or act. Change the facts: If the seller then delivered the deed and no other required performance remained, the performance classification could become fully executed.

What to remember: One party’s completed payment does not mean the other party has delivered the promised deed.

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

Study this topicPSI national broker outline V

Correct answer: B. The deed conveys ownership; the mortgage secures debt

"Both documents promise repayment" confuses a conveyance with the note's repayment promise. "The deed conveys ownership; the mortgage secures debt" separates the seller's ownership conveyance from the buyer's grant of debt security. Actual instruments and governing law determine their precise effects. "The mortgage conveys the seller's title to the buyer" mistakes the buyer's security grant for the seller's conveyance. "The deed is never recorded" is incorrect because conveyance deeds are ordinarily recorded to provide notice. Change the facts: If the question asked which document contains the buyer's personal repayment promise, the promissory note would be the answer.

What to remember: A deed transfers an interest; a mortgage secures an obligation.

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

Study this topicPSI national broker outline IV

Correct answer: D. The buyer paid and the seller delivered the deed as required

"The lender ordered an appraisal" is a preparatory loan step rather than completion of the purchase agreement. "The buyer submitted an offer" begins negotiation rather than completes the sale. "The parties scheduled an inspection" is an intermediate transaction step rather than completion. "The buyer paid and the seller delivered the deed as required" shows the central promised exchange has occurred: payment and delivery of the deed. Determine whether any other required performance remains. Change the facts: If the seller still owed delivery of the deed, the contract would remain executory as to that outstanding obligation.

What to remember: A contract is fully executed in the performance sense only when required performance is complete.

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

Study this topicPSI national broker outline V

Correct answer: D. Deed type sets warranty scope, while title quality depends on the actual estate and claims

"Recording guarantees property condition" confuses notice from recording with physical-condition assurance. "Quitclaim always proves defective title" incorrectly turns the lack of covenants into proof that an actual title defect exists. "General warranty eliminates every lien automatically" confuses a warranty promise with discharge of a lien. "Deed type sets warranty scope, while title quality depends on the actual estate and claims" distinguishes contractual title assurances from the actual interests and adverse claims affecting the property. Change the facts: A grantor can give a broad warranty while an undisclosed lien still exists. The promise can create a remedy without making the lien vanish automatically.

What to remember: A strong covenant does not itself erase a lien.

Check the rule: Cornell Legal Information Institute, quitclaim deed.

Study this topicPSI national broker outline IX

Correct answer: C. The document is signed, but the lease is executory because future duties remain

"The lease is void until the final month" confuses future lease performance with invalidity. "The lease is fully executed because signatures end every obligation" mistakes signing the document for completing all future duties. "The document is signed, but the lease is executory because future duties remain" distinguishes a signed document from a contract whose rent, possession and other future duties remain. "The tenant already owns legal title" confuses a leasehold with acquisition of the landlord's legal title. Change the facts: After all required lease performance was completed, executed could describe that performance status. In other contexts, an executed document can simply mean a signed document.

What to remember: A newly signed lease usually still has future rent and possession obligations.

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

Study this topicPSI national broker outline V

Correct answer: D. The holder did not match material terms

"The third-party offer became a mortgage" confuses an offer's payment terms with creation of a security instrument. "The holder paid too much option consideration" does not address whether the required offer terms were matched. "The owner created a life estate" does not follow because a conditional purchase right does not create a life estate. "The holder did not match material terms" identifies the changed financing and closing terms. Matching price alone does not satisfy this agreement's express all-material-terms requirement. Change the facts: If the holder timely matched the cash terms and closing date as well as price, the mismatch described here would be removed, subject to the agreement's other conditions.

What to remember: A right of first refusal can require matching material terms beyond price.

Check the rule: California DRE general contract teaching; stipulated matching terms control this example.

Study this topicPSI national broker outline V

Correct answer: B. Did the offer request a return promise or completed performance?

"How many pages were signed?" does not determine whether acceptance is a promise or an act. "Did the offer request a return promise or completed performance?" identifies the requested form of acceptance and therefore the key formation distinction. "Was the property residential?" does not determine this contract classification. "Did the deed record?" concerns a later public record rather than how the contract forms. Change the facts: Two parties can sign a document that grants an option without making the optionee an already bound purchaser. Count the promised exchange, not just signatures.

What to remember: Ask whether the requested acceptance is a promise or completed performance.

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

Study this topicPSI national broker outline V

Correct answer: C. It protects a licensee from a failure-to-disclose claim for that specified nonphysical history.

Section 15-20(ii) protects a licensee from a failure-to-disclose claim for an event with no effect on the property's physical condition, structures or environment. This protection concerns nondisclosure of the stated history. It does not authorize hiding a known physical defect or making a false statement. If the facts change: If the event caused a known physical defect, the facts no longer fit this particular protection. Evaluate the physical condition under the applicable disclosure duties.

Check the rule: 225 ILCS 454/15-20: nonphysical property history.

Study this topicPSI broker outline II.A

Correct answer: B. $250.50.

Divide $250,001 by $500 to get 500.002 units. A fraction counts as another unit, so use 501 units. Multiplying by $0.50 gives $250.50. Round up the unit count before applying the rate. If the facts change: At exactly $250,000, there are 500 units and state tax is $250. One more taxable dollar adds a unit and $0.50.

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

Study this topicPSI broker outline III.C

Correct answer: C. The LLC membership still triggers the stated disclosure requirement.

Rule 1450.765 includes an LLC manager or member and direct or indirect interests. It does not create a 50% or controlling-interest threshold for this disclosure. The licensee must disclose status in writing to all parties before initiating the transaction. If the facts change: Increasing the interest above 1% does not create the duty for the first time. LLC membership already triggers this status disclosure in the stated transaction.

Check the rule: 68 Ill. Adm. Code 1450.765: disclosure of licensee status; 225 ILCS 454/10-27: licensee status.

Study this topicPSI broker outline IV.B

Correct answer: C. Promoting the client's interests rather than the broker's self-interest.

Section 15-15 requires acting consistently with the client's best interests and timely presenting offers when that duty applies. Wanting a faster commission does not justify suppressing required information about another offer. If the facts change: A competing offer that pays the broker less still has to be presented when the presentation duty applies. The broker's preferred compensation does not decide which offers the seller sees.

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

Study this topicPSI broker outline II.A

Correct answer: C. The booklet's two-year validity period for the prelicense education has elapsed.

The PSI booklet states that prelicense education is valid for two years after satisfactory completion. Twenty-five months is beyond that period. Confirm the required new eligibility steps instead of assuming the certificate remains valid indefinitely. If the facts change: At 23 months after satisfactory completion, this two-year period has not yet elapsed. The candidate still needs to satisfy the other scheduling requirements.

Check the rule: PSI Illinois Candidate Information Booklet, June 24, 2026.

Study this topicPSI broker outline I.E

Correct answer: C. $114,000.

Equalized assessed value is assessed value multiplied by the applicable equalization factor: $120,000 x 0.95 = $114,000. This is the value before exemptions in the stated exercise. Do not treat it as the property's sale price or the amount of tax owed. If the facts change: With a factor of 1.05 instead, the same $120,000 assessed value produces $126,000 before exemptions. Multiply by the supplied factor rather than applying a memorized reduction.

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: A. The agreed basis or amount of compensation and time of payment.

The current buyer-agreement rule requires the agreed compensation basis or amount and payment timing, along with the other required terms and signatures. These items should not be left for an assumption at closing. If the facts change: Calling the agreement nonexclusive does not remove the compensation-content requirement. Subsection (c) covers both exclusive and nonexclusive buyer or tenant agreements.

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

Study this topicPSI broker outline II.D

Correct answer: B. The beneficial interest still requires written licensee-status disclosure.

Rule 1450.765(b) expressly includes a licensee's beneficial interest in a land trust that sells, leases or buys the subject real estate. The licensee must disclose their licensed status in writing to all transaction parties before initiation. Having the trustee named on the deed does not remove that duty. If the facts change: Waiting until sale proceeds reach the beneficiary misses the pre-initiation timing. The required disclosure concerns licensed status, rather than only the name shown on the deed.

Check the rule: 68 Ill. Adm. Code 1450.765: disclosure of licensee status; 225 ILCS 454/10-27: licensee status.

Study this topicPSI broker outline IV.B

Correct answer: A. As personal property.

The statutory land-trust definition treats the beneficiary's interest as personal property, while legal and equitable title to the real estate sits with the trustee. Do not assume that every interest connected with land is itself title to the land. If the facts change: A small beneficial percentage is still a beneficial interest. Its size does not turn it into the trustee's legal or equitable title to the real estate.

Check the rule: 765 ILCS 405/1: land trusts.

Study this topicPSI broker outline III.A

Correct answer: D. The list price and identification of the real property.

The rule requires the list price and property identification by address and/or legal description. It also requires compensation, parties, designated agents, signatures, duties, and duration terms. A marketing nickname alone does not reliably identify the listed property. If the facts change: The rule permits identification by address, legal description or both. A neighborhood nickname alone is not the listed method of identifying the real property.

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

Study this topicPSI broker outline II.D

Correct answer: D. The licensee may not serve as dual agent in that transaction.

The rule prohibits dual agency when the licensee, or an entity in which the licensee has or will have a direct or indirect ownership interest, is a party. Written consent does not override this ownership-based prohibition. If the facts change: Waiving the commission does not remove the ownership-based prohibition. The rule addresses any direct or indirect ownership interest in the entity that is a party.

Check the rule: 68 Ill. Adm. Code 1450.820: dual agency.

Study this topicPSI broker outline IV.A

Correct answer: B. As nonexclusive.

The rule expressly treats omission or waiver of the statutory minimum-services language as making the agreement nonexclusive under the Act's definition. The heading cannot preserve exclusivity while the text waives those services. If the facts change: An agreement that includes the minimum services still needs the other elements of an exclusive brokerage agreement. Including those services alone does not establish exclusivity.

Check the rule: 68 Ill. Adm. Code 1450.770: brokerage agreements; 225 ILCS 454/15-75: minimum services.

Study this topicPSI broker outline II.D

Correct answer: B. Retake the 75-hour broker education and the entire examination.

The booklet states that after the fourth failed attempt, a nonexempt broker candidate must retake the 75-hour education and the entire examination. This differs from the usual earlier-attempt rule of repeating only the failed portion. If the facts change: After an earlier failed attempt, a candidate still within eligibility ordinarily repeats only the failed portion. The fourth-failure rule requires the stated education and exam reset.

Check the rule: PSI Illinois Candidate Information Booklet, June 24, 2026.

Study this topicPSI broker outline I.E

Correct answer: D. Decline to reveal the buyer's confidential maximum.

A dual agent cannot use one client's confidential bargaining information for the other client merely because both consented to dual agency. The statutory disclosure explains these limits, including limits on confidential price information. If the facts change: If the buyer later permits disclosure of that maximum, the broker may disclose within that permission. Consent to dual agency alone is not permission to share the price.

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

Study this topicPSI broker outline IV.A

Correct answer: D. The percentages stated in the declaration.

Section 9(a) generally bases each unit's common-expense share on its percentage of ownership in the common elements in the declaration. The number of units alone does not prove equal shares. Special statutory allocations should also be checked where relevant. If the facts change: Special statutory allocations can alter particular expenses. Check those provisions before applying the ordinary percentage rule to every charge.

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

Study this topicPSI broker outline III.A

Correct answer: D. In the same advertisement or offer.

Section 20-20(a)(35) prohibits offering something as free without disclosing the necessary conditions or obligations in the same ad or offer. A listing-signature requirement is a condition the consumer needs to see. If the facts change: Calling the warranty a no-charge benefit does not avoid the rule. The necessary condition still belongs in the same advertisement or offer.

Check the rule: 225 ILCS 454/20-20: grounds for discipline.

Study this topicPSI broker outline II.B

Correct answer: B. No. Like new is not the never-occupied new-construction exemption.

Section 15(9) exempts newly constructed residential property that has never been occupied and expressly excludes rehabilitation of existing residential property. A renovated, previously occupied home does not qualify merely because its listing says Like new. The question rules out other exemptions. If the facts change: Never-occupied new construction is the separate category named in the exemption. New finishes in an existing home do not establish those facts.

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

Study this topicPSI broker outline IV.D

Correct answer: B. Steering that promotes racial segregation.

Section 20-20(a)(30) prohibits conduct that promotes or tends to promote racially segregated housing. Selecting neighborhoods for a client on racial assumptions is steering. Use the client's lawful property criteria and make suitable choices available without substituting assumptions about where the family belongs. If the facts change: A family's budget or commute preferences are lawful search criteria. The broker should use those criteria without limiting choices by race.

Check the rule: 225 ILCS 454/20-20: grounds for discipline; 775 ILCS 5/3-102: fair housing practices.

Study this topicPSI broker outline III.G

Correct answer: B. Accepting the signed document with the intention of filling that blank afterward.

The rule prohibits soliciting, accepting, or executing a transaction document containing blanks intended to be filled after signing or initialing. It does not mean every unused space in a form is unlawful; the intended later completion is the key fact. If the facts change: An unused field that is not intended to be completed after signing is different. The rule does not declare every empty space on a form unlawful.

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

Study this topicPSI broker outline II.J

Correct answer: C. No. The written-agreement safeguards also apply electronically.

Rule 1450.775(b) requires written consent or direction from all signatories for an alteration. The change must also be signed or initialed by all signatories when made before the licensee processes the altered document. Subsection (e) applies these safeguards to electronic agreements. An editing account or version history supplies neither consent nor approval. If the facts change: A true corrected copy is also due within 24 hours after the person signs or initials the correction. Keeping the edit history alone does not deliver that copy.

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

Study this topicPSI broker outline II.J

Correct answer: B. No. Adequate documentation cannot be rejected solely for not using that form.

Section 10 permits a provider to supply a form, but not to deny an otherwise adequately supported request solely because that form was not used. Evaluate the documentation under the statutory requirements rather than treating a preferred template as decisive. If the facts change: If the submitted documentation does not meet the statutory requirements, the provider may request permitted supporting information. This question says the documentation is adequate.

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

Study this topicPSI broker outline III.H

Correct answer: C. Disclose the known tank and avoid claiming unverified contamination or safety.

The statutory report asks about awareness of underground fuel storage tanks. The known tank should not be omitted merely because contamination has not been established. At the same time, the seller should not invent a test result or guarantee the soil's condition. If the facts change: A later test showing contamination supplies additional information to evaluate and disclose as required. Lack of a test does not justify either omitting the tank or claiming the soil is safe.

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

Study this topicPSI broker outline IV.D

Correct answer: A. The broker license number.

Rule 1450.790(a) requires the broker or managing-broker name and license number, not the appraiser license number, on the initial page of a BPO or CMA. Identify the professional role used for this report. If the facts change: For a CMA prepared in the same brokerage role, the rule uses the same initial-page credential requirement. Holding an appraiser license does not change the report's role.

Check the rule: 68 Ill. Adm. Code 1450.790: BPO and CMA license identification.

Study this topicPSI broker outline II.L

Correct answer: D. Before the second broker renewal deadline after receiving the license.

A first license issued within 180 days before the next broker renewal deadline qualifies for the statutory second-renewal timing exception for post-license education. This exception concerns education timing; it should not be read as permission to ignore other renewal obligations. If the facts change: If the first license arrives more than 180 days before the next renewal deadline, this exception does not apply. The courses and exams are then due before the first renewal.

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

Study this topicPSI broker outline I.G

Correct answer: D. The plat must be recorded.

Section 1(c) says that when a registered surveyor makes a plat of a parcel otherwise exempt under subsection (b), the plat must be recorded. An exemption from having to create a subdivision plat is different from the treatment of a plat that is actually made. If the facts change: If no plat is made, subsection (c) does not itself command creation of one. Check the other Plat Act provisions and local requirements before deciding what is needed.

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

Study this topicPSI broker outline III.E

Correct answer: A. A permitted CMA or BPO purpose.

Section 10-45(a) permits a BPO or CMA for an existing or potential seller. The report must meet the written-content requirements and cannot be represented as an appraisal. The mortgage-origination restriction does not ban ordinary listing-price analysis. If the facts change: Using the report as the primary mortgage-origination market-value basis is a different purpose. Section 10-45(a)(4) excludes that use; a listing-price purpose does not authorize it.

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

Study this topicPSI broker outline II.L

Correct answer: A. Deliver a written supplement correcting the earlier report.

Section 30 requires a written supplemental disclosure when, before closing, the seller becomes aware of an error, inaccuracy or omission in a report already delivered to the buyer. Deliver the correction by a method allowed in Section 50. An honest original answer or concern about losing the sale does not remove this later duty. If the facts change: A supplement does not automatically give every buyer a cancellation right. Section 40 sets conditions for termination after supplemental disclosure.

Check the rule: 765 ILCS 77/30: supplemental disclosure; 765 ILCS 77/50: delivery methods; 765 ILCS 77/40: conditions for termination.

Study this topicPSI broker outline IV.D

Correct answer: A. An allowed payment method that avoids that transaction fee.

Section 3.5 requires a way to avoid the third-party portal's transaction charge, such as delivering a paper check or cash to the landlord or business office, or another method without that charge. The rule applies to agreements executed after January 1, 2025, so this 2026 lease is covered. If the facts change: A second portal with the same charge does not solve the fee problem. The tenant must have an allowed way to pay without that transaction charge.

Check the rule: 765 ILCS 705/3.5: rental payment portals.

Study this topicPSI broker outline III.I

Correct answer: C. No later than Thursday, the next business day.

Thursday is the next business day after the broker receives the last required written direction. Rule 1450.750(g)(6) sets that outside deadline for this authorized pre-closing disbursement. The question establishes cleared funds and agreement by all required principals, so there is no unresolved release dispute. If the facts change: If Thursday is not a business day, use the next business day for the outside deadline. A commission claim does not justify withholding an otherwise authorized payment.

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

Study this topicPSI broker outline II.I

Correct answer: B. Required information and disclosures still apply, but the Act does not itself require a new test or mitigation.

For a covered sale, Section 10 requires the approved radon pamphlet and prescribed disclosure before the buyer is obligated. It does not itself require the seller to test or mitigate. Without a test, the seller cannot certify a radon-free result and must still give the required materials. If the facts change: If the seller possesses records showing elevated radon, the prescribed disclosure requires that information. No general duty to commission a new test excuses withholding existing results.

Check the rule: 420 ILCS 46/10: radon disclosure.

Study this topicPSI broker outline IV.E

Correct answer: B. Entrusted client funds are being mixed with and used as business funds.

Section 20-20(a)(17) requires entrusted escrow money to remain separate from personal and other business funds. Subsection (a)(22) also addresses commingling. Depositing earnest money into the operating account and using it for rent violates those duties. A plan to replace it next week does not authorize the use. If the facts change: Restoring the balance before closing does not undo the earlier mixing and use. Keep entrusted funds separate throughout the required holding period.

Check the rule: 225 ILCS 454/20-20: grounds for discipline; 68 Ill. Adm. Code 1450.750: escrow money.

Study this topicPSI broker outline II.I

Correct answer: C. Construction requirements and applicable sale disclosures are separate.

Section 20 of the Radon Resistant Construction Act addresses construction features. Section 10 of the Radon Awareness Act separately requires information and disclosures for covered sales. Passive features do not replace those duties. The question expressly establishes that the sale is covered. If the facts change: The presence of passive features does not prove a safe radon measurement. Construction compliance and what a test shows are different facts.

Check the rule: 420 ILCS 52/20: passive radon construction; 420 ILCS 46/10: radon disclosure.

Study this topicPSI broker outline III.K

Correct answer: A. No. An unlicensed assistant may not show property.

Rule 1450.740 distinguishes administrative access tasks from licensed activity. Having keys made or obtaining entry codes can be permitted, but taking a prospect through the property as a showing is prohibited for an unlicensed assistant. If the facts change: Having a key made or obtaining an entry code is an allowed administrative task under the rule. Taking a prospect through the property remains a prohibited showing for this assistant.

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

Study this topicPSI broker outline I.C

Correct answer: A. No. The covered transaction still requires the lead disclosures.

The federal rule applies to most pre-1978 housing, subject to its specific exemptions. An as-is contract clause alone is not one of those exemptions and does not replace the required disclosures, pamphlet, and applicable purchase inspection opportunity. If the facts change: A written waiver of the buyer's lead inspection opportunity does not waive the separate required disclosure package. An as-is clause is not that waiver either.

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: D. Refer the interpretation question to the supervising licensee.

An assistant may handle administrative inquiries but may not explain or interpret contracts. Passing the question to an appropriate licensee respects that boundary. The licensee should involve legal counsel when the issue requires legal advice. If the facts change: An assistant may quote directly from published information under the rule. Interpreting whether a clause gives this buyer a cancellation right is different.

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

Study this topicPSI broker outline II.G

Correct answer: A. The commercial broker lien remedy does not authorize this residential commission lien.

Section 20-20(a)(47) identifies recording compensation-related liens or instruments on noncommercial residential property as a disciplinary ground. The Commercial Real Estate Broker Lien Act should not be applied to an ordinary residential commission dispute. If the facts change: A qualifying commercial transaction has a different statutory lien framework. An unpaid fee alone does not establish the Commercial Broker Lien Act's conditions either.

Check the rule: 225 ILCS 454/20-20: grounds for discipline; 770 ILCS 15/10: commercial broker liens.

Study this topicPSI broker outline III.J

Correct answer: D. No. The claim paid to this owner still must be disclosed.

Section 3 concerns claims paid to the transferor. With no waiver, this owner must disclose the paid claim to the transferee and lender at the transfer agreement, as part of that written agreement. Repairs alone do not remove the duty. If the facts change: A waiver of disclosure or its timing must be in writing and signed by both transferee and lender under Section 3(c). The seller's repair invoice alone is no waiver.

Check the rule: 765 ILCS 95/3: mine subsidence disclosure.

Study this topicPSI broker outline IV.E

Correct answer: C. The restriction on direct negotiation with a person known to be exclusively represented.

Section 20-20(a)(33) makes this a disciplinary ground unless the other broker specifically authorizes it. Do not confuse direct transaction negotiation with a rule-permitted discussion of a possible future brokerage agreement. If the facts change: Discussing a possible future brokerage agreement under Rule 1450.770 is a separate issue. A permitted future-agreement discussion does not itself authorize direct purchase negotiation.

Check the rule: 225 ILCS 454/20-20: grounds for discipline.

Study this topicPSI broker outline II.F

Correct answer: D. It is a ground for discipline.

The Act bars a licensee who is also an attorney from acting as attorney for either buyer or seller in the same transaction in which the licensee acts or has acted as broker or managing broker. Holding two credentials does not permit this combination. If the facts change: Waiting until the brokerage work ends does not cure the same-transaction problem. The statute also reaches a transaction in which the licensee has already acted as broker.

Check the rule: 225 ILCS 454/20-20: grounds for discipline.

Study this topicPSI broker outline II.K

Correct answer: A. A right to terminate annually with 30 days' prior written notice.

The rule requires the agreement's duration, including an automatic expiration date or, for a term longer than one year, the right to terminate annually with 30 days' prior written notice. A longer term is not permission to bind the buyer indefinitely without the specified exit. If the facts change: A shorter agreement still needs a stated duration and the applicable expiration term. The longer-term annual exit is not a substitute for every other agreement requirement.

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

Study this topicPSI broker outline II.D