What is the exam-ready answer?
| Official syllabus topic | Foreclosure, Short Sale, and Probate Transfers |
|---|---|
| Official PSI area | Transfer of Title |
| Published area weight | 6% of the 100-question 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
These ideas work together. On the exam, the wrong answers usually describe a nearby concept, so learn where each one stops.
Foreclosure and REO
Judicial or nonjudicial procedures vary by state. Notice, sale, reinstatement, redemption, possession, surplus, deficiency, and title consequences must be analyzed under local law. REO is property acquired by a lender or investor after the process.
Short sale
The seller remains owner until closing, but lienholder approval is needed when proceeds cannot deliver required releases. Approval can address price, net proceeds, costs, timing, deficiency, and seller contributions.
Probate authority
A personal representative acts for the estate within the will, court appointment, statute, and any order. Beneficiaries or heirs do not necessarily have individual power to sign a sale before proper administration.
Transaction controls
Special transfers require careful title search, authority documents, property-condition expectations, disclosures, approval contingencies, closing timing, and protection against unauthorized promises.
Decision rule
Georgia-specific distinction
Worked example
Scenario. A homeowner accepts a buyer's price, but sale proceeds are $40,000 short of the loan payoff.
Reason it through. The owner can sign a contract, but closing cannot ordinarily deliver a release unless the lender approves the shortage or funds cover it.
Answer. Use a short-sale approval contingency and obtain the lienholder's written terms before relying on closing.
Common exam traps
- Calling short sale foreclosure
- Assuming lender approval releases deficiency
- Accepting an heir's signature without authority
- Promising foreclosure timelines
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 homeowner owes $310,000 on a loan secured by a security deed and accepts an offer that will net $270,000. What must happen before closing can deliver clear title?
- A. The appraiser must confirm the $270,000 price
- B. The seller's broker must reduce the commission
- C. The lender must agree in writing to release for less
- D. The buyer must assume the $40,000 shortfall
Show answer and explanation →
Answer: C. The lender must agree in writing to release for less
In a short sale the owner can sign a contract, but only the lienholder can agree to release its lien for less than the payoff, and that approval should be in writing. An appraisal may support the price, but it does not bind the lender to accept the shortage.
Question 2A homeowner dies, and the adult daughter named in the will wants to list the house right away. No one has been appointed to administer the estate. What is the main concern?
- A. No one has shown her authority to sign for the estate
- B. Georgia makes heirs wait one year before any sale
- C. The house must go to a public foreclosure auction
- D. The listing must go through a lender's REO department
Show answer and explanation →
Answer: A. No one has shown her authority to sign for the estate
A personal representative acts for the estate within the will, the court appointment, and any order, and being named as a beneficiary does not by itself give power to sign a sale. The listing should wait until proper authority is shown, with the closing attorney reviewing the estate's title.
Question 3A Georgia borrower defaults on a loan secured by a security deed with a power of sale. The lender buys the house at the foreclosure sale and later lists it. What is the property called while the lender owns it?
- A. Short sale inventory
- B. Deed-in-lieu property
- C. Judicial sale property
- D. REO property
Show answer and explanation →
Answer: D. REO property
Property a lender or investor acquires through the default process, such as a Georgia power-of-sale foreclosure, is REO, or real estate owned. A short sale is a sale by the owner, with lender approval, before any foreclosure, so calling this a short sale confuses the two.
Ready to move on?
You are ready for the next lesson when all of these are true.
- Explain Foreclosure, Short Sale, and Probate Transfers in one clear answer without notes.
- Separate Foreclosure and REO from Short sale 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 Fair housing principles and exemptions. Next, the fair housing article walks through the seven federal protected classes and the narrow exemptions, including why an exempt private owner still cannot run a discriminatory ad.
Return to the Transfer of Title hub to see every official branch and the complete lesson sequence for this content area.