Where this fits on the exam
| Official syllabus topic | Due Diligence and the Boundaries of Real Estate Practice |
|---|---|
| Official PSI area | Practice of Real Estate |
| Published area weight | 12% of the national portion |
| Exam portion | National salesperson portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes the weight for the complete content area, not a fixed question count for this lesson. Learn the rule well enough to apply it when PSI changes names, numbers, or parties in a new scenario.
The lesson
Reasonable investigation
Review the property, public and provided records, prior disclosures, contracts, permits, title items, reports, and obvious inconsistencies within the licensee's role. Do not ignore a red flag because the client did not ask the perfect question.
Source hierarchy
Use the authority responsible for the fact: recorder and attorney for title, surveyor for boundaries, building department for permits, planning office for zoning, inspector or engineer for condition, environmental professional for contamination, and tax adviser for tax consequences.
Practice boundaries
Licensees can fill approved forms and explain business terms within their training, but custom legal drafting, legal interpretation, engineering diagnosis, tax advice, and regulated appraisal opinions belong to qualified professionals.
Documentation and deadlines
Write down the question, source, date, response, limitation, referral, client choice, notice, and deadline. A referral made after the due-diligence period has little protective value.
Decision rule
Georgia-specific distinction
Worked example
Scenario. A buyer asks whether an unpermitted basement apartment is legal and will qualify for rental income.
Reason it through. The question combines zoning, building permits, safety, appraisal, lending, landlord rules, and tax considerations beyond a broker's unilateral conclusion.
Answer. Document the intended use, obtain written government and lender answers, recommend appropriate specialists, and protect the buyer with a timely contingency.
Common exam traps
- Guaranteeing legal use
- Diagnosing a structure
- Drafting custom legal remedies
- Referring experts after deadlines
Original practice questions with detailed explanations
These questions were written for instruction and mapped to the current outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.
Question 1A buyer asks the agent whether the backyard fence marks the true property line. What should the agent do?
- A. Pace off the lot and compare it to the plat
- B. Explain that fences usually sit on the line
- C. Check the county tax map and give an opinion
- D. Recommend a survey by a licensed surveyor
Show answer and explanation →
Answer: D. Recommend a survey by a licensed surveyor
Locating a legal boundary is licensed survey work, so the agent should recommend a surveyor rather than offer an opinion. Checking the tax map feels thorough, but a tax map is not a survey, and the agent would still be giving a boundary opinion outside the license.
- A. Incorrect. Pacing measures an approximate distance and cannot locate the legal boundary.
- B. Incorrect. Fence placement is not proof that the structure follows the property line.
- C. Incorrect. Tax maps are assessment references, not a substitute for a survey establishing boundaries.
- D. Correct. A licensed surveyor can locate the boundary using the relevant records and field evidence.
Question 2The buyer's due diligence period ends Friday. On Wednesday, the inspector notes signs of possible foundation movement. What is the best next step?
- A. Let the closing attorney address it at closing
- B. Recommend a structural engineer right away
- C. Tell the buyer small cracks are normal in older homes
- D. Ask the listing agent whether the foundation is sound
Show answer and explanation →
Answer: B. Recommend a structural engineer right away
Recommend a structural engineer promptly so the buyer can evaluate the concern before Friday and consider any inspection, termination, negotiation, or extension rights the contract provides. Waiting until closing may forfeit rights tied to the due diligence deadline. The exact consequences depend on the contract; the deadline does not erase every possible legal claim.
- A. Incorrect. Waiting until closing risks losing the buyer's opportunity to act within the inspection deadline.
- B. Correct. Prompt engineering review can clarify the concern while contract options may still be available.
- C. Incorrect. The agent should not diagnose foundation movement as normal without qualified evaluation.
- D. Incorrect. The listing agent's reassurance does not replace a structural specialist's evaluation.
Question 3A buyer wants to run a daycare from a house zoned residential and asks whether the county will approve it. Which response stays within a licensee's role?
- A. Assure the buyer that home daycares are usually approved
- B. Read the zoning code and give the buyer a legal opinion
- C. Refer the buyer to the planning office and a written contingency
- D. Advise the buyer to close first and apply for approval later
Show answer and explanation →
Answer: C. Refer the buyer to the planning office and a written contingency
Zoning approval is a discretionary public decision, so a licensee cannot promise it and should send the buyer to the planning office while protecting the buyer with a written contingency. Reading the code and offering a legal opinion feels helpful, but legal interpretation belongs to an attorney.
- A. Incorrect. A general approval pattern cannot guarantee approval for this parcel and proposed operation.
- B. Incorrect. Explaining a published requirement is different from providing the legal opinion proposed here.
- C. Correct. The planning authority can address the specific use, and a written contingency can protect the buyer.
- D. Incorrect. Closing before approval transfers the risk that the intended business use will be denied.
Ready to move on?
You are ready for the next lesson when all of these are true.
- Explain Due Diligence and the Boundaries of Real Estate Practice in one clear answer without notes.
- Separate Reasonable investigation from Source hierarchy using a fresh example.
- Apply the decision rule to a new fact pattern and name the fact that controls the result.
- State the Georgia-specific point or explain why the national rule applies unchanged.
- Answer every practice question and explain the rule each rejected option misapplies.
- Revisit this topic later in mixed practice without category labels.
Recommended next lesson
Continue with Mixed national practice questions. The mixed practice set draws questions from every national content area, so you can check whether the refer-early habit from this page holds up next to agency, contracts and math items.
Return to the Practice of Real Estate hub to see every official branch and the complete lesson sequence for this content area.