PSI Licensing Laws and Regulations 4 — Questions and Answers
Question 1: A real estate license applicant omits a prior misdemeanor conviction on their application. If discovered later, this could result in:
- Denial, suspension, or revocation for making a false statement on the application (Correct answer)
- A small administrative fine with no other consequences
- Automatic approval because misdemeanors are not disqualifying
- A mandatory three-year waiting period before reapplication
Correct answer: Denial, suspension, or revocation for making a false statement on the application
Providing false or incomplete information on a license application is a serious violation that can result in denial or revocation.
Question 2: Under real estate license law, 'commingling' refers to:
- Mixing client funds with the broker's personal or business operating funds (Correct answer)
- Representing both buyer and seller in the same transaction
- Advertising one price publicly while negotiating a different price privately
- Failing to disclose a dual agency relationship
Correct answer: Mixing client funds with the broker's personal or business operating funds
Commingling is the illegal mixing of clients' funds (such as earnest money) with the broker's own funds.
Question 3: A broker who allows their license to expire and continues to conduct real estate transactions is:
- Guilty of practicing real estate without a license (Correct answer)
- Subject only to a late renewal fee
- Protected if clients were fully aware of the expiration
- Permitted to continue if they file for reinstatement within 90 days
Correct answer: Guilty of practicing real estate without a license
Practicing real estate after a license expires is illegal and can result in criminal charges in addition to administrative penalties.
Question 4: Which entity is typically responsible for establishing and enforcing real estate licensing requirements?
- State real estate commission or licensing board (Correct answer)
- National Association of REALTORS®
- Federal Housing Administration (FHA)
- Department of Housing and Urban Development (HUD)
Correct answer: State real estate commission or licensing board
Real estate licensing is regulated at the state level by a state real estate commission or similar licensing board.
Question 5: A real estate licensee is accused of 'conversion.' This means the licensee allegedly:
- Used client funds for their own personal benefit (Correct answer)
- Represented both parties without disclosure
- Advertised a property without the seller's permission
- Failed to present all offers to the seller
Correct answer: Used client funds for their own personal benefit
Conversion is the illegal use of client-held funds (such as escrow deposits) for the licensee's personal use.
Question 6: A salesperson receives an earnest money deposit from a buyer. The salesperson must:
- Promptly deliver the deposit to their sponsoring broker (Correct answer)
- Deposit the funds in the salesperson's personal account until closing
- Hold the funds in the salesperson's office safe
- Return the funds to the buyer pending broker approval
Correct answer: Promptly deliver the deposit to their sponsoring broker
Salespersons have no authority to hold trust funds; they must promptly deliver all deposits to their sponsoring broker.
Question 7: A non-resident licensee in a state must agree to:
- Appoint the state real estate commission as their agent for service of process (Correct answer)
- Maintain a physical office within the state
- Pass the full licensing exam again each renewal period
- Hire a resident broker to co-sign all contracts
Correct answer: Appoint the state real estate commission as their agent for service of process
Non-resident licensees typically must designate the state licensing commission as their agent for service of legal process as a condition of licensure.
PSI Licensing Laws and Regulations 4
A real estate license applicant omits a prior misdemeanor conviction on their application.
If discovered later, this could result in: