Free Real Estate Practice Exam: 25 Questions with Answers
This free real estate practice exam has 25 multiple-choice questions modeled on the national portion of PSI real estate salesperson exams, plus a few general license-law questions. Answer each question to see whether you're right and why.
Most PSI real estate exams have about 80 scored national questions and 30–50 state questions, and require a scaled score of 70 on each portion. Aim for 80% or better here before you book your exam.
Questions
25
Time
~25 min
Aim for
80%+
Sign-up
Not needed
- 1Property Valuation
Direct capitalization uses the formula V = I / R. In this formula, V represents value, I represents net operating income, and R represents the:
Answer: A. Rate of capitalization (cap rate)
V = I/R is the direct-capitalization formula. R (the cap rate) reflects market-derived rate of return for similar properties; higher rates indicate higher risk and lower value at the same NOI.
- 2National Portion
A buyer's parcel needs to cross a neighbor's land to reach the public road. The right is deeded to the buyer's parcel and runs with the land. This is:
Answer: B. An easement appurtenant
An easement appurtenant benefits a particular parcel (the dominant tenement) and burdens another (the servient tenement). It runs with the land regardless of subsequent owners.
- 3State Laws
A broker holds escrow funds in a trust account. State law generally requires the account to be:
Answer: C. Separate from the broker's operating accounts
Trust accounts must be separate from operating funds. Many states require non-interest-bearing accounts or 'IOLTA-style' accounts where interest goes to a state housing fund.
- 4Property Management
A property manager hires a new staff member. The manager's compliance with anti-discrimination employment law is typically governed by:
Answer: D. EEOC and state employment-discrimination laws
Hiring and employment decisions fall under EEOC (Title VII, ADA, ADEA) and state equivalents. Fair housing covers occupancy and services, not employment within the property management business.
- 5Property Management
A tenant signs a one-year lease that expires September 30 and continues to pay rent monthly after expiration. The tenancy becomes a:
Answer: A. Periodic tenancy (month-to-month)
Continued payment and acceptance after lease expiration usually creates a month-to-month periodic tenancy. Either party may terminate with statutory notice (often 30 days).
- 6National Portion
A bank refuses to make mortgage loans in a particular zip code based on the racial composition of that neighborhood. This practice is:
Answer: B. Redlining
Redlining is geographically discriminatory lending or insurance underwriting based on protected characteristics of a neighborhood, prohibited by the Fair Housing Act and ECOA.
- 7National Portion
A landowner sold the right to extract oil and gas from beneath his property. He retains the surface but has separated the:
Answer: C. Subsurface (mineral) rights from his ownership
Real-property rights can be vertically divided (air, surface, subsurface). The owner can convey or lease subsurface (mineral) rights independently of the surface estate.
- 8Property Valuation
An apartment building generates $120,000 of annual NOI and recently sold for $1,500,000. Its capitalization rate is:
Answer: D. 8% (NOI ÷ Sale Price)
Cap rate = NOI ÷ Sale Price = $120,000 ÷ $1,500,000 = 0.08 = 8%.
- 9National Portion
A property is described as 'stigmatized' because a violent crime occurred there. Disclosure rules vary by state, but in most jurisdictions:
Answer: A. Stigmas are not material defects requiring disclosure
Most state laws treat stigmas (deaths, crimes, paranormal claims) as non-material and not requiring affirmative disclosure. Some states bar inquiries about HIV/AIDS history of occupants.
- 10State Laws
Under most state real estate laws, a licensee has an affirmative duty to disclose:
Answer: B. Known material facts about the property
Licensees must disclose known material facts (defects, hazards, conditions affecting value) to buyers and sellers. Confidential client information must NOT be disclosed.
- 11Finance & Contracts
A borrower's monthly P&I is computed at $1,798 for a $300,000 loan at 6% for 30 years. The first month's interest is approximately:
Answer: C. $1,500 ($300,000 × 6% ÷ 12)
Monthly interest = balance × annual rate ÷ 12 = $300,000 × 0.06 ÷ 12 = $1,500. The remaining $298 of the payment reduces principal.
- 12National Portion
A buyer is buying a condominium and asks about reserves. Reserves are:
Answer: D. Funds set aside for future capital repairs
Reserves are HOA funds set aside for major future repairs (roofs, elevators, paving). A reserve study identifies funding adequacy. Inadequate reserves can mean future special assessments.
- 13National Portion
A licensee finds himself representing both the buyer and the seller in a transaction. State law allows this dual-agency arrangement only with:
Answer: A. Informed written consent from both parties
Dual agency requires informed written consent from both parties because of the inherent conflict. Some states have moved to designated agency to manage this conflict.
- 14State Laws
A licensee discovers her license expired one week ago. The most likely immediate consequence is that she:
Answer: B. Must stop practicing until the license is renewed
Practicing real estate without a current active license is unlawful in every state. The licensee must stop until the license is properly renewed or reinstated.
- 15National Portion
Two brokerages agree to cooperate on a sale, splitting commission per the terms in the MLS. This is a:
Answer: C. Co-broker (cooperative) arrangement
Co-broker arrangements split commission between the listing brokerage (representing seller) and the cooperating brokerage (often representing buyer). Splits are typically published in the MLS.
- 16Finance & Contracts
A senior age 65+ converts the equity in her home into monthly payments without selling. The loan amount grows; principal is repaid when she sells, moves, or dies. This is a:
Answer: D. Reverse mortgage (e.g., HECM)
A reverse mortgage (most commonly the FHA-insured HECM) lets eligible seniors borrow against home equity without monthly payments. The loan is repaid when the borrower no longer occupies the home.
- 17National Portion
A seller tells her listing agent the lowest price she will accept is $350,000, although the listing is at $399,000. The agent must:
Answer: A. Keep the seller's reserve price confidential
The seller's reservation price is confidential information that the listing agent owes a duty to protect. Disclosing it would undermine the seller's negotiation leverage.
- 18National Portion
A buyer's lender requires lender's title insurance. This policy:
Answer: B. Protects only the lender's interest in the property
Lender's (mortgagee's) policy protects only the lender for the loan amount, declining with principal balance. Owner's policy is a separate, optional policy protecting the buyer's equity.
- 19Land Use & Environmental
A property is bordered by a non-navigable stream. The landowner's water rights typically extend:
Answer: C. To the center thread of the stream (riparian rights)
Riparian owners on non-navigable streams generally hold rights to the thread of the stream. Navigable waters belong to the state; the public has navigation rights up to the high-water mark.
- 20Land Use & Environmental
A property is in a designated flood zone. The seller should disclose to the buyer:
Answer: D. The flood zone status and any history of flooding
Most states require disclosure of known material facts including flood history and zone designation. The federal flood insurance requirement for federally-backed loans is a separate but related concern.
- 21Property Management
A property manager prepares a market analysis to set rent on a vacant unit. The most relevant data source is:
Answer: A. Recently leased comparable units in the area
Market rent is established by comparing recently leased comparable units. Comparable size, condition, amenities, and location drive rent — not the owner's debt service or the tax bill.
- 22National Portion
Two parties own a property as 'tenants in common.' One co-owner dies. The decedent's interest:
Answer: B. Passes to the heirs or devisees of the decedent
Tenancy in common allows each co-owner to transfer her interest by deed, will, or intestate succession. There is no right of survivorship (that is the joint tenancy feature).
- 23Finance & Contracts
In a state with statutory redemption, after a foreclosure sale the former borrower may, within a specified period:
Answer: C. Reclaim the property by paying the debt and costs
Statutory redemption gives the former owner a fixed period after the foreclosure sale to reclaim the property by paying the sale price (or the debt) plus statutory costs and interest.
- 24Property Valuation
An appraiser using band of investment derives a cap rate from the weighted cost of mortgage and equity financing. This technique is also called the:
Answer: D. Mortgage-equity (Ellwood) technique
Band of investment derives the overall cap rate as the weighted average of the mortgage constant and equity dividend rates. The Ellwood technique extends it to account for value change.
- 25Land Use & Environmental
A purchaser is buying property in an area with previous heavy industrial use. To preserve a defense under CERCLA, the purchaser should:
Answer: A. Conduct an All Appropriate Inquiries (AAI) Phase I ESA
Conducting AAI (typically a Phase I ESA before purchase) can preserve the Bona Fide Prospective Purchaser (BFPP) defense under CERCLA. Skipping inquiry waives the defense.
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